The group, which has its recycling centre at Telford and a distribution base in Stafford, said it decided the move is the "best course of action" after a strategic review launched in January, and warned that the closure will cost it up to £15 million.
It found the German arm had been knocked by "an intensifying competitive landscape, as customers have returned to pre-pandemic levels of online shopping, a substantial increase in digital marketing costs, and a constrained supply chain".
AO said the German business will continue to trade for a short period to allow an orderly closure for its customers, suppliers and employees.
The German business accounts for around 10 per cent of AO's total group-wide revenues each year.
Its demise will see AO focus solely on the UK electricals market at a time when consumer spending on big items is beginning to falter amid general belt-tightening in the face of soaring prices.
AO World issued its third profit warning in six months in April, saying Britons are cancelling repair warranties on their appliances to save money amid rising cost-of-living pressures.
The company said at the time that it is set to post earnings of about £8 million for the year to March, having guided late last year for annual earnings of between £10 million and £20 million.
The alert sent shares tumbling in April, and the stock was down another three per cent on Thursday.