Asos’ Comeback: The 4 Strategies You Need To Know
How did Asos bounce back so quickly after a gruelling 2019?
Over the past year, Asos has struggled to fix some operational teething issues. As the complications drove up costs and impacted sales, investors lost confidence in the one-time disruptor of the e-commerce landscape.
Where Did It All Go Wrong?
The company first displayed troubling signs in late 2018, when it issued two profit warnings within just a few months – the first in October, the second before Christmas. Data analysed by Omnilytics reveal that the brand’s sell-out rates for October and December dropped year on year.
October 2017: 49.71% to October 2018: 28.11%
December 2017: 31.6% to December 2018: 27.98%
Then, the operational problems came to light in March. Asos had ambitious plans to shift to a global model, ramping up warehouses in two countries simultaneously.
However, the company had severely underestimated its expansion plans, as more complications arose. Automation issues and a delay in orders ensued, which lead to the third profit warning in July of 2019.
The biggest impact was in its sales forecasting plan (Asos pitched sales to be at £120m for 2019). Stocks were purchased accordingly to reflect the numbers, but the operational issues indefinitely affected newness offerings and product presentation.
Aside from internal setbacks, Asos faced an external issue too: younger competitors rising up the ranks. Boohoo, for example, saw an 83% surge in its pre-tax profits, its share prices far surpassing Asos. The former retailer had the speed too, as it easily manoeuvred according to market demands, delivering trends at a much faster speed.
With Asos battling rising competition and struggling to contain persisting operational woes, Asos’s financial review in 2019 closed at £33.1m – a stark contrast to 2018’s £102m.
Getting Back On Track
The company knew it had to pick up its pace. “This financial year was a pivotal period for Asos,” Beighton admitted. “This [operational challenges] was more disruptive than we originally anticipated.”
Asos promised to deliver better results – and it did.
By early 2020, Asos saw a resurgence, citing a 20% increase in retail sales – beating analysts’ forecasts. The numbers were also lifted by strong customer engagement throughout the last four months of 2019, as well as record Black Friday sales.
How did it get back on track so quickly? We analysed the data closely and uncovered key insights into Asos’s turnaround – and how it signifies a larger consumer shift.
1. Futureproofed Strategy: Sustainability First
2. Paving Its Own Way With Pricing
3. Smarter Discounting
4. Representation At The Forefront
Futureproofed Strategy: Sustainability First
The fashion industry has written off the fast fashion customer as being driven only by speed and value – but this will soon evolve.
Traditional ownership models are disintegrating. In other verticals, younger consumers are leaning more towards subscription-based services – the experience of not owning something physical, and still have full access. For fashion, the same phenomenon can be seen in the rise of the resale market.
There’s a broader consumer shift here – and it came at an opportune time in the topic of climate change.
Retailers that regard sustainability as a trend, or worse, greenwash, will find themselves at an increasing disadvantage. Consumers, especially the younger demographics, are demanding change. They’re environmentally aware of the fashion industry’s high consumption – and are unafraid to publicly call out large corporations for it.
A Wunderman Thompson report shows that 83% of consumers would opt for more sustainable brands. Consumers are still hungry for newness, but not at the expense of extra environmental costs.
Despite its operational setbacks, Asos understood the importance of sustainability and brought it to the fore.
Asos’s Sustainability Promise
Asos has come a long way in its promise for a greener company.
The company came under fire in 2016 when it was revealed employees in Barnsley suffered poor working conditions. The issue resurfaced in 2019, even though Beighton denied the allegations.
Since then, Asos has taken measurable steps in the name of sustainability. Adding a ‘responsible filter’ was one of them, where consumers can search for sustainable brands to shop from. According to data analysed by Omnilytics, the products made of recycled materials and sustainable fibres had a 43.8% sell-out, with 69.5% sold out at full-price – showing clear demand.
One of its biggest power moves was joining the Global Plastic Pact, pledging to reduce its use of plastic in its deliveries. This reduces waste significantly, as Asos’s total orders see an increase every quarter. Its returns policy was updated too, citing that it may investigate serial returners.
The brand-new ‘See My Fit’ tool was also implemented for some products in hopes to curb returns due to wrong sizing.
Asos is still in the early stages of tackling this, it is a step in the right direction. Boohoo may have overtaken the lead in sales in 2019, but the brand scored much lower than Asos in the Fashion Transparency Index of the same year.
Paving Its Own Way With Pricing
When it comes to pricing, Asos isn’t aiming to be the cheapest.
Its pricing architecture differs from its main competitors Boohoo and Missguided. Based on our analysis, the latter retailers price most of their product within the USD 10-30 range, but Asos lean more towards the USD 20-30, USD 30-40 range and USD 40-50 range. For Asos, the key is in its product offerings – not the price factor.
Smarter Discounting in Black Friday
The same approach applies to its discounting, too. While other competitors (most notably, Boohoo) opt for a continual discount model, Asos prefers to focus on its key offerings. On average, Boohoo releases 150-250 products on a first-time discount, daily. Asos, on the other hand, is more reserved.
This was apparent in its Black Friday sales.
Data showed that Asos delivered a strong performance in 2019’s Black Friday (a much better result than 2018), according to our data.
Asos saw a high total sell-out, yet it had the lowest percentage of discounted products. It also had the highest stockout rate in the 10-49% and 80-89% discount range.
There was one thing the consumers wanted that Asos grasped pretty quickly: diversity.
Rihanna’s Savage x Fenty fashion show was a pivotal moment in the industry – the outpour of positive sentiment proved that consumers have long wanted diversity, and if Rihanna can do it, why can’t other brands?
Victoria’s Secret, once the darling of lingerie, still promotes a homogenous view of beauty standards. While racial diversity was up by 50% in its 2017’s Shanghai show, over the past 23 years, models that walked the runways got thinner. Its lack of body diversity has sparked backlash and boycotts, joined by the ranks of Ashley Graham and Robyn Lawley.
The rise of the #MeToo movement has redefined female empowerment, and changed the narrative of how women dress – it’s no longer for the male gaze. Even Bella Hadid, who walked for Victoria’s Secret for 3 years, confessed that she felt ‘sexier’ in Savage x Fenty’s 2019 show.
The final blow came when Ed Razek, Victoria’s Secret Chief Marketing Officer, infamously told Vogue that the show won’t hire transgender models, as the brand “sells the fantasy”. He stepped down soon after, but the damage was done.
Even if fashion retailers “don’t market to the whole world” (a quote by Razek in the same Vogue interview), this fact remains: consumers are drawn to brands that are value-driven – and if it means leaving once-dominant brands behind that don’t change with the times, so be it.
A decade ago Asos was the disruptor of the e-commerce scene, but it understood that just like any other brand, it needed to evolve. In its 2019s annual report, it stated that even though it was one of the early e-commerce retailers, it still needed to “stay ahead of the game” and be “relevant despite customers having more choice in front of them”.
Representation at the Forefront
Back in 2018, Asos was already championing representation by collaborating with Chloe Ball-Hopkins, a Paralympian, to release its disability-friendly collection. That year also marked the second time Asos has worked with GLAAD, an organisation that protects LGBTQ rights.
In 2019, the company launched its third collaboration with the organisation a few months ahead of Pride Month. The collection is also available in plus sizes (both Asos Curve and Asos Plus), delivering its promise in offering a variety of styles to 20-somethings.
Modesty has also been strategised for. Its first-ever Modest Fashion Edit launched in April of 2019, as Asos believes that “everyone should be able to confidently express themselves through fashion.” The website also allows customers to filter by silhouettes, which gives consumers something most mainstream fashion brands withhold: the power of choice.
While Asos still has much to do to stay ahead of the competition, its positive numbers echo its ability for a quick turnaround.
Its tumultuous year is a lesson for all retailers, even online players – the retail storm isn’t just restricted to brick-and-mortar stores.
Build A Futureproof Strategy: Retailers that choose to ignore, or worse, regard sustainability and inclusivity as a trend, will be left behind. Younger consumers will continue to prioritise progressive brands, and it’s essential for retailers to craft future-resistant strategies.
But how does a retailer know which trends work, and which to avoid?
Increasingly, retailers are referring to data. Retailers like Missguided, and Asos too, are now looking to data to enhance accuracy. Having access to data enhances merchandising and buying skills, which helps to avoid overstocking problems that add more environmental costs.
Understand Brand Positioning: Not everyone wants cheaper prices and higher discounts. In a world where consumers are increasingly value-driven, understanding what your audience wants is important. This helps to set clear, defining lines in product, pricing and presentation.
Blindly following the crowd is a surefire way to lose a brand identity.
This article was first published on Inside Retail Australia on the 19th of February 2020.
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