How does this company gain from economies of scale?
The story (and Jo) have basically nothing to do with the benefits Pepper plc will get from economies of scale. As you have stated economies of scale means that the average cost (cost per unit) is less if you produce in large quantities.

An example: Assembling a car with drills and screwdrivers is really difficult and time consuming but a robotized assembly line can do it quite quickly. However, the assembly line costs a lot of money so it will only pay off if a lot of cars are produced.

Since Birmingham, where Pepper plc. is located, is a large city it has a large market for electronic consumer goods. Therefore Pepper plc. can sell a lot of these goods, hence it has reason to produce in bulk, so the unit cost is less. Thus the company may sell its products cheaper or have a higher profit. (This depends on the market environment.)