May 26, 2014 10:52 pm

Electrocomponents: saved by the net

In a large industrial warehouse in Nuneaton, tens of thousands of red, blue and green plastic boxes whizz around on a conveyor belt carrying semiconductors and other components to be shipped to engineers around the world.

The site packs and sends out more than half of the 44,000 global daily parcels for Electrocomponents, the self-styled Amazon for engineers, many of which have been ordered online for next day delivery.

The FTSE 250 company has come a long way from its roots as a catalogue business selling spare parts for radios. Nearly 60 per cent of its £1.27bn yearly sales now come from online – up from nothing 16 years ago.

“Back in the mid 1990s we were told the internet was going to kill us. The word at the time was disintermediation,” explains Ian Mason, chief executive at Electrocomponents.

“Everyone talks about what the internet changes. But what it didn’t change was that someone still has to get two to three products together and put it into a box,” he says.

Electrocomponents, which trades under the RS Components and Allied Electronics brands, offers more than 550,000 electronic parts through the internet, phone, catalogues and over-the-counter. One of its fast-selling products is the Raspberry Pi, a £25 credit-card sized minicomputer aimed at introducing schoolchildren to programming.

Mr Mason was hired by Electrocomponents in 1995 to establish the online business, becoming chief executive in 2001. Its foray into online has paid off: over the past seven years, online sales have grown four times faster than the rest of the business.

The company is now targeting 70 per cent share of group sales in the next two to three years as it aims to become a £1bn ecommerce business.

Its online share of sales already compares favourably to better known British consumer brands. M&S has an ecommerce share of 13 per cent, while Tesco only has 3 per cent.

Mr Mason attributes this to its customer base – of which most are electronic design engineers – and the enhanced experience Electrocomponents offers customers online. It provides a large amount of information about the product on its website, such as health and safety, reference designs and 3D diagrams.

“The internet has enhanced the experience much more than you need in a supermarket,” he explains. “You don’t need to know how to eat a banana. It’s a much richer experience.”

While a lot of Electrocomponents focus for the coming years will be on its online business, including making all of its products available globally, Mr Mason admits its mature UK business, which makes up nearly a third of sales, needs attention.

At its full-year results last week, the group reported a 2 per cent rise in sales to £1.27bn, driven by 4 per cent growth in both Europe and North America. In comparison, UK sales were down 1.8 per cent.

“I think the issue was that we’ve brought a few people in from the outside world to freshen things up and they’ve just been a bit too different,” says Mr Mason. “We know we need to get back to basics. We need to see the top line improve in the UK.”

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