Oracle Retail Week Awards: Asos’ appeal makes it a global star

There are times when a retailer wins plaudits for a flash of creative genius or a groundbreaking innovation, and there are other times when you simply have to stand back and applaud the numbers. What is more unusual is when both apply.

In the case of Asos, as one of the judging panel notes, “it’s hard to argue with the figures”. In its last financial year, revenues rose 46% to £495m and across the Christmas trading period retail sales rocketed 41% to £78m.

The retailer has 5 million active users globally and is the second most visited fashion website in the world.

For a business that won’t enter its ‘teenage years’ until June (having launched in 2000), the growth of Asos has been nothing short of staggering.

There are critics who will no doubt predict those teenage years to be troublesome, yet sceptics have perennially lined up to pick holes in the business model, and every time the business has proved them wrong. At one point, slowing sales growth in the UK sparked debate over whether Asos’ home market is reaching maturity. So what did Asos do? Unveil a 24% hike in UK sales in the first quarter of 2012/13.

Overseas expansion has been a key part of Asos’ growth strategy in recent years, but this has not been to the detriment of the UK business, where the etailer continues to consolidate its market share.

At the heart of its consumer appeal is the continuous improvement of its product offer in terms of range, quality and price - a proposition strengthened in October 2012 by the arrival of Kate Bostock from Marks & Spencer as executive director of product and trading.

Throughout the economic downturn, Asos has invested heavily in price to ensure it has enough entry price point products to fulfil the aspirations of its customers, and has continually introduced new brands that appeal to its core demographic of 20-somethings.

Perhaps most impressively, it has established a strong editorial voice of its own, making it one of the first ports of call for young fashionistas.

Asos Magazine is now the second most widely read fashion magazine in the UK and manages to integrate content with the online store through features such as Scan & Shop, through which consumers can use a smartphone to scan an item featured in an article and be taken directly to its online sales page.

Its fluid pipeline of innovation is part of the reason that Asos continues to set the standard for UK fashion etailing. Recent initiatives include Complete the Look, enabling shoppers to purchase complete outfits being modelled on the site, and Savvy Sundays, when customers received targeted offers in the run-up to Christmas 2012 (such as £50 off Ugg Boots), which drove incremental website traffic and sales.

Such features, aimed at improving the user experience, are core to Asos’ goal of evolving from being merely an online shop into an engaging experience that permeates its customers’ fashion lives. In order to achieve this, Asos knows it must move beyond acting just as a vendor. Customers can access additional brand lines via Fashion Finder, a dedicated website that showcases the latest looks and outfits both from Asos’ own range and rival fashion retailers’ own lines. If the product suggested is not sold on the Asos site, browsers can click through to the store that does sell the item. Marketplace, meanwhile, enables customers to buy and sell their own products on a platform spanning more than 100 countries.

Asos is also at the front of the technological curve. In 2012 it added a click-and-collect service and plans to invest £105m in the next three years, the majority of which will be spent on ensuring that its technology can respond to the evolution of consumer behaviour. Mobile is growing rapidly and accounts for almost 20% of visits.

New mobile apps Fashion Up and Daily Edit condense the choice for customers with relevant offers that can be easily navigated on the move. Daily Edit categories include ‘date night’, ‘going out’ and ‘weekend’, through which users can browse and add items to a hotlist.

Significant investment has also been made in customer service. Customers now receive one-hour ETA notifications of deliveries by text and can choose next-day delivery for £9.95 per year.

If the UK business is Asos’ cash cow, the overseas business is its emerging star. In mid-2012, overseas sales accounted for 65% of the business, compared with just 10% of overall turnover in 2007/08. One judge comments: “Their international expansion has been extremely impressive.”

To date, Asos’s approach to overseas expansion has been to build scale in local markets before making significant investments in infrastructure.

At present, Asos serves customers in the US, Australia and Europe in two days from a distribution warehouse in South Yorkshire. But although the warehouse acts as the global fulfilment centre, Asos has implemented an increasing number of on-the-ground operations in key global locations. In Atlanta and Sydney, for example, the logistics provider Unipart runs processing operations, the plan being that by the end of 2013, the US will be able to fulfil orders from in-country returns.

Asos has operated dedicated websites in the US, France and Germany since 2010 with a further three sites - Spain, Italy and Australia - added in 2011. In a sign of its global ambition, next on the etailer’s agenda is the development of a single platform that will enable it to roll out dedicated websites to key markets including China and Russia, which observers believe could be truly game-changing.

Not only will it be more efficient than developing individual platforms for countries, it will also allow the retailer to include more payment options and give it the ability to price and adjust its merchandising across geographic zones.

The number of countries delivered to from its central distribution centre in the UK is now close to 200, and by this time next year Asos will be in sight of having full-service warehouses in the US and China to help meet its target for £1bn of sales by 2015.

Marketing functions are still predominantly carried out from the UK, but Australia has had an international office for a year in Sydney and others have recently opened in New York, France and Germany. Offices are expected in China and Russia towards the end of the year. Asos will place a focus on introducing market-specific initiatives to its international territories, a process it has already started with Asos In Your World, which will deliver seasonally relevant collections to Australia this spring, which the etailer claims no other international retailer is doing.

If the success of the UK business is anything to go by, Asos can realistically expect to achieve its aim of becoming the number one fashion destination for twenty-somethings globally.

The fact that it has delivered such consistently strong sales in such a tough UK market is testament to its innovation, and bodes well for its continued march into foreign territories.