It’s testament to the current instability of the post-Brexit vote pound sterling that when UK retail e-commerce champion ASOS predicts up to 25% year-on-year growth in 2017, that the stock market decides to give it a good kicking for its efforts.
That’s despite CEO Nick Beighton’s confident assertion that a weaker pound would actually benefit the self-styled online ‘global fashion destination for 20-somethings’:
We are an export business. Increased input costs will be more than offset by our international business and we expect to prosper from a weaker sterling.
ASOS this week posted pre-tax profits of £63.7million for the full year, up 37% year-on-year, although a £31 million one-time charge took that down to £32.7 million. Sales grew 26% to £1.4 billion, helped by a 50% rise in US revenue. In the UK and Europe, sales were up 27% and 28% respectively.
The firm is a global success story in online retail, attracting 117.5 million visits during August 2016, up from 90.5 million for the comparable year-earlier period. As of the end of August, it had 12.4 million active customers - defined as those who’ve shopped during the past 12 months - up year-on-year from 9.9 million. Of those customers, 4.7 million come from the UK and 7.7 million from other countries.
Mobile and social
Of particular pride to Beighton is the increased activity around the firm’s mobile app, which is typically used by customers eight times a month, spending 70 minutes online in total. Mobile now accounts for 66% of ASOS’s traffic and 51% of orders:
Our vision remains to fundamentally change the way our customers live and shop fashion on mobile. We’ve now got more than 10 million active downloads with 7.5 million downloads in the last 12 months alone.
The trick is to keep getting better in the mobile space, he adds:
This year we launched a brand new iOS ASOS mobile app incorporating a new home page, new design, easy navigation, more innovative features such as spotlight search and 3D touch…As part of our mobile checkout program, we've also rolled out a brand-new native checkout experience for Android users powered by are new digital platform. This allowed us to remove third-party proxies for language, therefore making the customer experience far more responsive and quicker. This feature was introduced first to our Russian customers in June and are pleased to say that since the year-end, live our across our entire estate.
One of the reasons for customers returning to the site so regularly is that ASOS adds around 4,000 new styles per week, keeping things fresh. Over the past year, it’s added 233 new brands to its ranges, bringing the total number of products on the main site to north of 85,000, with a further 100,000 on the ASOS marketplace. Beighton says:
Each selection brings something new, something different and something relevant for our customers. The edit of brands has evolved to more than just being a selection. We now advice brands on product extensions and product developments, and we work with them to develop exclusives for us and for them. We can do this because our buyers have a unique view of trends in the marketplace backed up by data and customer feedback.
There’s also a drill-down focus on customer service with the retailer setting itself targets of responding to customer emails within one hour, social media contact within 15 minutes and phone calls within 30 seconds.
The other key metric is of course speed of delivery. Here ASOS isn’t at the stage of, for example, Amazon Prime, but Beighton points to ongoing improvements:
We’ve improved the speed of our standard delivery in the UK down from four days to three days. Internationally, where the majority of the change has been, we’ve introduced a limited free next day deliveries for our French, German Premier customers. We now have next day delivery in all 28 EU member states and we launched free returns in the entire EU, as well as launching free returns in Australia.
All of this is paying off in terms of customer engagement, argues Beighton:
We've added a further 1.5 million new customers in the second half [of the year] on top of the million we added in [the first half]. At the same time we've seen increase in frequency up 4%, increasing average basket of 3% and increase in conversion of 10%, all of which I'm delighted about. We’re also up to over 19 million social media followers, which is more than 50% growth and underlying for continuing strength in our consumer engagement.
We published over 60,000 pieces of inspirational fashion and lifestyle content each and every month. This builds brand engagement and brand awareness. With focus on being where our customers are and moving as quickly as they do, we’ve also been testing new formats during the year like Instagram Stories, Facebook Live Video and Snapchat filters and all our customers have responded extremely positively.
Underpinning all this is investment in technology, with over 500 consumer-centric upgrades in the past year and deployment of retail cloud applications from Oracle, says Beighton:
We’ve completed the development of our new micro-service based architecture which deployed in the cloud. This delivers globally consistent high performance, high resilience, high business flexibility and supports complete freedom to innovate and react at the same way and same speed as our customers.
Every aspect of our customer experience, from our identity to content to product to search to price to start to checkout to payment and order processing, is now supported by independently-deployable, independently-enhanceable platform cloud-based services.
This agility will allow us to invest at pace in these new platforms delivering new customer experiences and innovations, and also critically allows us to bolt-in new technologies, like AI payment methods and new tech delivery services, far more easily and far more quickly.
Looking forward, alongside ongoing mobile app investment, there will be a focus on personalization, community and content technologies as well as a global fulfilment program which will optimize global stock management. Investment is also budgeted for core operational systems including a new end-to-end buying and merchandizing system for the retail teams, as well as new finance systems support the ability to buy, sell and account for stock in multiple locations and in multiple currencies.
All of this tech spend is essential in the current e-commerce climate in the fashion industry, insists Beighton, arguing that velocity and nimbleness have always been key features of the ASOS customer experience and are now features of the technology strategy:
The significance of completing the re-platforming of our legacy code into the cloud-based micro-service architecture is huge. Right now, it offers more secure, faster experience for our customers. But going forward, it’s another step in enabling nimbleness in our technology, giving us the ability to fold in new technologies at pace. New technologies such as AI, digital search, voice search, all of this will be key elements to drive our future customer experience.
The ASOS customer experience is already very well connected with its customers and is powered a completely different way for customers to interact with businesses, interact with themselves, interact with ASOS. But we haven't taken the opportunity to connect our end-to-end business, i.e., our supply chain, our upstream side supply chain in the same manner.
We’re now planting the seeds to develop a greater connection with our supply base. This will include: shorter lead times; more UK manufacturing; more mutual manufacturing, the price being a high velocity of new product development, a high velocity of new product change and the lowering of the total cost of handling of doing business together. That we will pass on to our customers.
Sadly I’m not in the ASOS target customer range any longer, but even as a browser rather than a buyer, the payback in terms of the user experience in all that tech investment over the years is clear. It’s a great example of how retail e-commerce done well and with a clear strategy to do better.
Away from the tech, the firm has run into some bad publicity this year with allegations about its workforce in Barnsley, Yorkshire being subjected to body searches and denied toilet breaks, as well as alleged use of zero hours contracts, allegations which ASOS denies.
Given its youthful target buyer, the firm’s ethical stance is something very much in the spotlight. Beighton insists that the firm has nothing to hide and will engage with the authorities to have what he calls “constructive debate”. He insists:
Some of the more lurid allegations that you’ve been reading it out about the work environment are not responsible the best. They are distasteful and stem from an agenda of a third-party [Believed to be trade union GMB] Don’t worry. We aren’t going to be blown of course by any of these things.
He points out that ASOS has a 21-strong ethical trading team, whose full-time focus is on managing its supply chain, upgrading factories around the world and rating them by the firm’s own ethical standards:
We believe in ethics and fashion. We call that fashion with integrity and that’s how we say, back at pace. Our young customer care about what we do and they weren’t do with companies in the future that don’t walk the way we do.
Given that the debate is underway and that the ASOS allegations may come in for investigation by legislators in the UK parliament, the customer loyalty and engagement of its buyers is going to be very important for the retailer. To that end, its digital marketing and social media communities efforts are likely to become very important in promoting its own ethical stance.