ASOS: Leveraging Network Effects in High Street Fashion

ASOS closely follows pop culture through social media and is obsessed with understanding their customers’ hobbies, Facebook “likes,” and daydreams. By tapping into their consumers’ digital world, they create value by quickly producing fashion that fits into both their everyday and aspirational lives.

ASOS aims to “be the world’s #1 online fashion destination for twenty somethings,” and they are doing a darn good job!  Many articles claim it is the world’s most visited fashion site, they are in the top 5 “most liked” brands on Facebook, and they are expected to turn around $1.5 billion in sales this year.  ASOS proudly offers fashion forward product that you could easily see on Rita Ora or First Lady Michelle Obama at a price point that the average college student can afford.

Founded in 2000 by Nick Robertson and Quentin Griffiths, As Seen on Screen (ASOS) set out to replicate the designer clothing that celebrities wore on television and in movies – making similar styles available to all.  Over time, their business model became more about curating quality, high street fashion that celebrities want to wear and that average 20 – 30 year olds can afford.  Before ASOS, a 22 year old might see a dress on the red carpet and feel that she could never own the same dress.  ASOS has changed that reality by getting the stars to wear apparel from ASOS.com, but instead of raising the price once a celebrity wears an item, they keep the price low their target consumer while selling mass quantities.

ASOS closely follows pop culture through social media and is obsessed with understanding their customers’ hobbies, Facebook “likes,” and daydreams.  By tapping into their consumers’ digital world, they create value by quickly producing fashion that fits into both their everyday and aspirational lives.  ASOS also creates value for high profile celebrities whose brand depends on them being accessible to their fans.  To illustrate this value creation and capture cycle, check out the series of events between Taylor Swift and her fans – “Swifties”.Picture3

As you can see, ASOS is using network effects to both create and capture value from both Taylor Swift and the “Swifties”.  Given ASOS’ integrated digital platforms, efficient supply chain, and low price strategy, they can deliver this experience to millions daily – let’s take a closer look at this operating model.

Integrated Digital Platforms:  Having a business model that depends on trends and pop culture, ASOS recognizes the importance of getting their brand and channels integrated into the everyday lives of their consumers – this is also how they know what their customers want.  They prioritized investments in information technology so that their fashion magazine not only presents the latest trends, but allows consumers to purchase from their e-commerce site directly from the magazine.  ASOS is also committed to best in class user experience, which is evident by how they engage on social media with their consumers – being super responsive to their questions and concerns.  ASOS has integrated their social media accounts, online fashion magazine, mobile applications, and e-commerce site in ways that are unmatched by competitors.

Efficient Supply Chain:  ASOS gets that millennials want instant gratification, and they are leveraging the fact that they can quickly procure and ship mass quantities of cutting-edge apparel from around the world in their operating model.  They have a short lead time to curate product (6 – 8 weeks compared to 6 months for traditional retailers) because they source local inventory, supporting local communities – a strategy that also appeals to the socially conscious buyer.  ASOS also centrally manages their inventory through one main warehouse – a strategy that allows them to offer FREE same day shipping in the UK and unlimited 2-day shipping to the US for only $29 per year.

Low Price Strategy:  A key component of ASOS’ value proposition is affordable, high quality fashion.  In order to maintain low prices and remain profitable, ASOS focuses on keeping their costs low through tight inventory management, centralized operations (e.g., one warehouse), and strong partner relationships. As a precaution, ASOS should continue to be mindful to balance the nuance of being both an accessible and aspirational brand.  Their wide array of prices has proven effective to date, but they do not want to lose out on consumers with higher willingness to pay because they have over indexed on lower priced product mix.

ASOS is a great example of an organization that has closely aligned their business and operating models.    Their obsession with understanding consumers and delivering best in class service has enabled ASOS to achieve global market share.  Nick Robertson is stepping down after leading the company the last fifteen years as CEO – let’s hope the next CEO doesn’t transform this winning model into a loser.

 

Sources:

http://www.asosplc.com/

http://uk.reuters.com/article/uk-asos-results-idUKKBN0MS3DB20150401

http://www.slideshare.net/Helixa/asos-the-next-online-retail-model

https://www.comscore.com/Insights/Data-Mine/ASOS-Experiences-the-Facebook-Effect

https://econsultancy.com/blog/62038-how-asos-uses-facebook-twitter-pinterest-and-google/

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5 thoughts on “ASOS: Leveraging Network Effects in High Street Fashion

  1. This is a great example of network effects! Price setting is always a challenge, and being able to estimate a willingness to pay, like ASOS is doing through its social media usage is a smart way to go. Moreover, given the quick turnaround in fashion cycles that allows something out of date from last season to remain very catchy for the young and price-sensitive consumer. Social media usage is also an excellent capitalization on a “fashion trend” but my one concern is precisely that it may just be a “fashion trend”, thus presenting a huge risk. We are definitely in a heavy social media usage phase, but I wonder if our generation or the next generations will continue to use social media like we do today, or with the growing privacy concerns and increased aggressive marketing that comes out of users “likes”, if users will scale back how much information they share. In this case, it will be interesting to see how ASOS will then inform its fashion preferences, and how that affects the business and operating model alignment.

  2. I find it very interesting to compare ASOS and Zara — they have such similar business models in terms of delivering fast, on-trend fashion and keeping tight inventory but ASOS, along with its own brand, also seamlessly incorporates products from third-party designers. I wonder if it’s the online-only model that gives them more flexibility to do this, particularly from a margin perspective.

    The point about balancing accessibility vs being aspirational is astute — the two things I wonder about are a) do you think having such well-known partners on the site dilutes the ASOS brand? b) as online fashion (both high and low) moves towards more curated models, I wonder how ASOS will fare.

  3. This is fascinating – as a regular online shopper, I think ASOS is fantastic because of their incredible selection and rapid delivery. As you mentioned, they do offer global shipping and fulfillment services, which has enabled them to tap into a large market base, however as a customer I have often been wary of buying from ASOS.com because I need to pay international shipping charges to return my items. As return rates tend to be relatively high in e-commerce transactions, this is a huge barrier for me and likely for other customers around the world, especially as most retailers in the U.S. offer free returns. I think ASOS will need to invest in shipping and fulfillment centers around the world to make it easier for customers to return items at a low cost (or ideally for free!).

  4. I love ASOS, its probably one of the first international e-commerce companies that started to ship to Peru, so I have been a loyal customer for a long time. One of the best things they did when they started is actually what the name is all about “as seen on screen”. Buying clothing, especially at the beginning of e-commerce was really tricky for customers since you couldn’t fully figure out what how would the clothes look on somebody from a plain picture. They did a great job uploading “catwalk”, which are videos of models walking on the catwalk wearing the clothes. This gives the consumer a clearer view on how the fabric falls, the garment fits, etc. By increasing information available for the customer, they decrease their return rate, which works great for their “fast fashion” business model, where they try to constantly release new SKUS and hold little inventory.

  5. ASOS has clearly created a model that has enabled them to identify and replicate popular trends and get them in the hands of consumers incredibly efficiently. As I think about the popular current culture of ‘fast fashion’ which includes Forever 21, Zara, ASOS, etc. I wonder how long this fashion ‘throw-away’ mindset in twenty-somethings will remain popular, and I can see a world in which the pendulum swings the other way and individuals focus on buying fewer, longer-lasting articles. I’d be curious to know how ASOS is thinking about the future and whether or not their current model is sustainable should fashion culture shift?

    Similarly, I wonder how ASOS thinks and addresses clothing quality. Given their low price point, my guess is that they often have to sacrifice on fabric quality to maintain margins.

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