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”.
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.