Though the construction industry is now back on site, Covid-19 has not left it unscarred. AO.com managing director Anthony Sant speaks to HMM Features Editor Jack Wooler on how the virus has brought supply to the fore, and what the company has learned during the pandemic
As in all areas of life, the Coronavirus pandemic has introduced many challenges to the construction industry during recent months, and has highlighted both strengths and weaknesses across the board.
One of the most discussed has been supply chains, which have been highly disrupted for much of the sector, including landlords and housing associations.
“Let’s make no bones about it, the Covid-19 situation has been an extraordinary challenge for the entire construction sector,” begins Anthony Sant, managing director of AO Business UK – the B2B arm of online electricals retailer AO.com. “Suddenly, when lockdown was introduced, businesses were told they’d have to stop working; for some companies, it was not as easy as just picking back up where they left off.”
AO.com however was in the very “fortunate position” of being deemed essential by the government – “you’ve got to have a fridge,” notes the MD, “you need to wash your clothes, you need to cook” – and as such has been open throughout the pandemic. It’s this position that Anthony believes has provided the company with a “unique insight” into post-Covid supply.
According to Anthony, the experience has highlighted weaknesses in supply right across the industry – and, as he found out from research with potential B2B clients, the ramifications of this on site can have major implications on entire projects. The pandemic has then worsened this greatly in his view, with many suppliers left unable to keep commitments or gain the moment necessary to get projects back on track – even outside of appliances, a chink in the chain at any point can hold up the entire show.
He tells me that working through such times has not been easy, but the lessons that this has taught him have been “invaluable,” and it is these lessons he hopes to share.
Chinks in the chain
Anthony first explains that after discussions with housebuilders, developers, housing professionals and landlords, the company truly began to unravel the extent to which projects rely on speedy supply (even pre-pandemic) – especially when it comes to the products he knows best.
“Appliances are probably the last thing to go in,” he explains. “While anything can happen during the period from start to completion – and anything will – the one thing that’s immovable is the completion date.” This rings true for landlords just as much as builders, he adds: “If there are tenants due to move in, it’s essential that the appliances promised are specified and delivered on time.”
A common issue here that was reported to AO was other suppliers’ inability to be in every postcode every day – it could be a week before the product they need arrives, which means a week’s delay on site.
“What you’ve got to remember is that a house unfinished – missing something as simple as a cooker hood – can hold up the completion of a project that’s worth many hundreds of thousands of pounds,” says Anthony. “And, if a landlord’s got a tenant with a broken appliance, how much rent is at risk while they wait for the appliance to turn up?”
Anthony says that “as Brits, we’re fairly cynical;” he’s always amazed how people are so surprised at the “simple fact” that they do what they say they will, and deliver when they say they say they’ll deliver. He suggests that this is something that may come from experience in other supply chains – noting that of course the pandemic has again introduced even greater problems here, with companies folding or suddenly being unable to keep commitments they’d made pre-lockdown.
One of the biggest challenges for businesses is when there are chinks in their supply chains, Anthony argues. He tells me that when Covid hit there were a huge number of companies who had made commitments they couldn’t make, or had inbound products that they simply couldn’t receive – especially b2b providers who’s customers were suddenly put on hold.
“If your world is just b2b supplying – housebuilders, landlords, whatever – and suddenly lockdown hits, you’re in a position where it’s hard to justify staying open,” laments the managing director. “Because of that, we have seen a number of distressed customers that have come to us out of the blue because they need supplies now, and their existing supplier isn’t back up and running yet.”
Changing the face of white goods
Anthony went on to explain how the company came to be in this position, and the steps it took to offer such stability to both B2B and B2C customers: “20 years on, selling appliances on the internet isn’t such a big deal, but people forget that when John Roberts (CEO and Founder of AO.COM) first came up with the idea, Amazon was still only selling books on the internet through dial up connections.”
He continues: “Back in 2000, when John basically decided to go and change the face of the white goods industry, there’s no question about it – it was a hugely bold statement.”
Anthony remembers how most people would go into an appliance store, make an order, and receive it at least 7 days later. “John’s attitude was different, however,” he says. “To give customers what they really wanted, we needed to do more.”
“He decided that for us to become a differentiator, and to give true customer service, the only way to do that was to own our own logistics business,” says the MD.
AO purchased Expert Logistics from Iceland which, according to Anthony was an “inspired” decision: “About three of four years ago I was at a round table discussion within the industry, and I was chatting to this person who said he sometimes wonders if John realised at the time how significant that was, or was he just lucky.”
“He knew,” says the MD. “Truly, he did.”
With “probably the best two man delivery fleet in the country” – so much so that other companies are now utilizing it – the retailer is able to cover all its own deliveries and be in “every postcode, everyday” as the customers were demanding. This means that buyers can get whatever they want from the company’s over-a-million-square foot of warehousing the very next day – from individuals, to landlords, to large scale developers.
This control over the chain is so important to AO’s ethos that the company even launched its own facility to collect and recycle old appliances – including the largest fridge recycling facility in the country, which covers more than just its own products.
“Why?” he asks, “because we wanted to make sure it was done properly.”
Taking things back to the present pandemic, Anthony tells me that this approach to bringing more and more of the supply chain under the same umbrella has been a “huge help” towards its stability during these uncertain times. Of course, AO did not go wholly untouched during these troubles, but the MD believes it has actually strengthened the company’s position in some respects.
“There have been a lot of changes, and it’s been a really interesting journey – I’ve been blown away by how people have coped and what they’ve done,” he says. “But, while it’s been challenging and thought-provoking, it’s really been one of those proud moments – just the fact that we’ve been open for customers has been really positive for us as a business.”
He tells me how in three days the company immobilised all its offices to home working, including call centres aftercare, “everything,” and introduced all the necessary social distancing measures in its warehouses – even opening new warehouse space in order to accommodate these rules. In doing so, he believes the company has provided an “essential lifeline” to the sector in such times of uncertainty.
Another strengthening the online retailer has found during the pandemic is the general move away from the storefront he has seen: “As John has said, there has been 5 years of market change in 5 weeks – this huge migration from the retail store to internet based solutions. I suspect that now people know how easy and trouble free it is, people will continue to buy on the internet.”
He continues: “I can’t predict the future, but it’s hard to deny that people have changed their shopping habits. When was the last time you went anywhere except the local shop?”
“It takes 66 days to make a habit,” Anthony adds, “and we’re well past that now.”
Message to the industry
Bringing the conversation to a close, AO’s managing director says that looking back he is “very proud” of the company’s approach to these times, celebrating its “can do” attitude.
He explains how this attitude has helped define AO Business, and what it offers over other routes: “Intrinsically, we are selling the same product, but a very different service – a washing machine is a washing machine – but in the business market, what people want to know is that you’ll meet your promises and deliver when you say you will. And, in 20 years, we’ve met all our promises, and we always deliver when we say we will.”
He provides me with a great example of this in action – another matter the company discussed with builders, where in order to meet social distancing measures and spread out their workforces, companies were changing a five day working week into a seven day working week. “What does that mean for AO?” says Anthony. “Well it’s not a problem, because we deliver on Saturday and Sunday anyway; there are so many advantages in working in this retail-esque way of working.”
“Saturdays and Sundays are some of our most popular days in the consumer market, so if a developer wants the same, it’s not a problem.”
The managing director concludes with a message to the industry that, while throughout the purchasing space there are “all sorts of issues like this” with supply currently, from where you can get hold of your brick to your cement, “you can spend your time worrying about that, but when it comes to the appliances you want delivered, there’s no need to worry – we’ve been doing it for 20 years.”