ASOS: Delivering Fast Fashion to Style-Conscious Twenty-Somethings

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Founded in 2000, UK-based ASOS has grown to become one of the world’s most successful online fashion retailers. In 2015, ASOS had ~10 M active customers, 60% of whom were located outside the UK. The site attracted 90 M visits in August 2015 alone, up 20% from August 2014. From last year, revenue increased 18% to £1,119 M, accompanied by a 19% increase in gross profit. It seems that ASOS is well on its way to achieve its goal of becoming the #1 online fashion destination for twenty-somethings.

 

Business Model

ASOS sells its broad range of apparel, accessories and shoe wear strictly through its online channel. The site also hosts a Marketplace through which individual designers can set up boutiques to sell their new and used fashions. ASOS collects £20 monthly rent and 20% commission on sales from these boutiques. Additionally, ASOS receives advertising income from its site and fashion magazine.

 

ASOS’ success stems from its deep understanding of its consumers. The company’s business and operating models allows them to give these young fashionistas exactly what they want, when and how they want it.

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With a presence in 240 countries and territories, ASOS invests heavily in creating a robust delivery system. The company offers free 24/7 worldwide delivery for all orders above £15, and free returns in the US, UK, France and Germany. UK customers also enjoy a comprehensive pick-up/drop-off network and home collection returns.

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ASOS’ broad product mix is another key source of differentiation. Customers can browse through 800 different brands and over 80,000 products, with 3,000 new lines added each week. Product offerings include women’s wear, menswear, swimwear, shoes, accessories and beauty. ASOS also retails its own brand that includes label lines like ASOS Curve, Maternity, Tall and Petite. With such diverse stock, ASOS ensures that every customer is satisfied.

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Importantly, ASOS provides an engaging omni-channel community where fashion lovers worldwide can connect and share. Each of ASOS’ nine local language sites showcase brands tailored to each market and publish daily fashion content. ASOS also publishes a magazine with a circulation of 525,000 (hard-copy and digital). As 60% of traffic and 44% of purchases come from mobile, ASOS offers a mobile-friendly website and convenient Android and iOS apps in certain markets. These apps include personalized product recommendations. Additionally, ASOS boasts 3.8 M Facebook likes, 885K Twitter followers and 3.3 M Instagram followers, as well as YouTube channels in English, French and German. Consumers can follow, read, share and shop ASOS whenever, wherever.

 

Operating Model

ASOS’ comprehensive distribution system allows it to continuously provide efficient delivery and hassle-free returns. Located in Barnsley Yorkshire, UK, the company’s central distribution warehouse is over 450,000 square feet and has a capacity of 22 M units. While most stock is currently stored here, ASOS plans to hold increasingly more items in regional distribution centers around the globe. Specifically, their “Eurohub” warehouse in Berlin presently dispatches about 40% of all EU orders, while a warehouse in Ohio handles about 25% of US orders. They also have warehouses in Sydney, Shanghai and Poland to process local returns. Additionally, offices in North London, New York and Lille, France allow ASOS to remain locally present.

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In 2015, ASOS launched a new “merchandise picking solution”, a warehouse control system that automates the stocking and retrieval processes to improve warehouse efficiency. Under this new system, warehouse employees work in teams within a specific zone of the warehouse. Rather than filling a single order from start to finish, the teams work on a number of orders and retrieve only items from within their zone. This process reduces employee travel time and labor cost per unit, and increases employee utilization, order throughout-put rate and accuracy.

 

To remain competitive in its different markets, ASOS uses a zonal pricing technology. This system helps ASOS price brands in line with local competition.

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Omni-channel customer engagement and service is a strong priority for ASOS. The company has a 200-person customer care staff that is available 24/7. The staff has capabilities in 5 different languages and can communicate with customers via email, Facebook, Twitter, phone, website, Google+, Instagram and YouTube.

ASOS demonstrates that clearly aligning your company’s operational priorities with solutions that address your consumers’ needs is the path to success.

 

Sources:

ASOS.com

ASOSplc.com

ASOS Annual Report

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3 thoughts on “ASOS: Delivering Fast Fashion to Style-Conscious Twenty-Somethings

  1. Hi Nkem – great post! As a user of Asos myself, I certainly buy into its value proposition.

    As you mentioned, one thing that makes Asos so unique is its extremely vast selection of on-trend inventory. In fact, compared to other online retailers, it can sometimes become exhausting to navigate through all of their products. This makes me wonder about their operations strategy around inventory management. I’m curious how they balance consistently updating their SKUs to offer products that appeal to the constantly shifting fashion trends with the costs of holding inventory. Do they stock all inventory in company-owned warehouses or do they force any of their partner brands to maintain inventory risk? Additionally, given that they are entirely digital, how do they dispose of obsolete inventory (i.e. retailers with physical locations have the option of outlet stores or warehouse sales)?

    In any case, it seems like they have truly perfected the online fast fashion model and is certainly a very interesting company to examine!

  2. Great post, Nkem. I’ve shopped on ASOS many a time to get the convenient shopping experience of a mall while avoiding the hellish, miserable experience of an actual mall full of real life humans. Not just humans – shoppers. The worst kind. I digress.

    As I moved away from the UK, I was happily surprised to see that ASOS delivers worldwide and I was once again spared from the malls. But my question to you is this – how the heck (and why) do they do this? Shipping to more countries than Amazon (and for free) just doesn’t make sense to me – there are a lot of tiny markets where courier services are the only viable logistics solution, and yet they still ship there. Are there any other aspects to their operating model that makes this possible? Or does the reason stem from their business model: perhaps they are cross-subsidizing these smaller markets because the image of being a globally present one-stop-shop gives them brand equity worth more than the associated inconveniences?

  3. Awesome post Nkem! I certainly don’t question the ASOS value for customers as they provides a huge selection of fashion items, usually at an affordable price, and with generous shipping & handling terms. I do wonder though, if ASOS’s policy on shipping is too favorable for customers. As 100% of its sales happen online, does ASOS experience higher return rates than a traditional retailer? Especially since the threshold for a free order is only £15, customers may order single items on a whim, at different times, rack up shipping/logistics/inventory charges for ASOS, and then the decision to return them is made so simple. I wonder what kinds of economics/pricing tests have been run on these policies and what the incremental impact of raising minimum order sizes would be for ASOS’s business model.

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