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Can ASOS fashion an e-commerce future in the Vaccine Economy? Here's the (fishy) plan

Stuart Lauchlan Profile picture for user slauchlan October 20, 2022
ASOS was once a poster child for the UK e-commerce industry. Can those glory days be restored in the Vaccine Economy?


Once upon a time ASOS was the retail e-commerce champion of the UK. It may not have had the scale of Amazon, but it was a case of ‘The British are coming!’ as it scoped out grandiose international success plans. That was then; this is now and the ASOS of 2022 faces a highly uncertain future and a need to make some seriously sharp course directions in the coming months.

Like so many online retailers, ASOS, whose brands include Topshop and Miss Selfridge,  flourished during the pandemic lockdown, benefiting, according to its then CEO Nick Beighton, from ‘not going out’ syndrome. But even as the Vaccine Economy began to take shape, there was a lingering concern about what the transition back to having real world shops open would be on this online-only firm.

That was particularly true when pre-COVID profit collapses were factored into the thinking and fears were only increased this week when the firm turned in a full year pre-tax loss of £31.9 million, down from a profit of £177.1 million last year,  while revenues grew by a mere one percent to £3.94 billion. Active customer numbers were flat at 26 million, while average basket value was down by five percent to £38.

Sales rose in the UK by seven percent, in the US by 10 percent and by two percent in Europe, but other international operations fell by nine percent.  And a lot of that growth came from the firm's acquisition ofTopshop, which turned in 105% growth year-on-year and 200% in the US where the brand has concessions in physical Nordstrom stores.


For new CEO José Antonio Ramos Calamonte, the challenge now is to overhaul and reposition the e-commerce retailer into a viable operation in an increasingly crowded market chasing the ’20-something’ fashion conscious consumer at a time when disposable incomes are being squeezed by inflation and the global cost of living crisis.  He knows there’s a big job ahead:

Since I became CEO four months ago, I've spent a lot of time talking to people, talking to suppliers, talking to investors, talking to customers, and also talking  to our colleagues, to try to understand better the strengths of ASOS, but also our challenges. And in all these conversations, there has been a very clear red thread and the red thread is, everybody thinks this is an amazing business and it has a great future. But also, everybody thinks there is a lot to change.

There are clear performance issues in a number of areas, he admits:

The first one is the unsatisfactory performance of our international business. It's quite clear that we're not happy with the performance. The second one is the reliance of our marketing and commercial model on markdowns. The third one is that our operating model is not as efficient or as flexible as we need to support a global operation. The fourth one is the lack of sufficient leverage on our data and our digital-native capabilities.

To tackle these issues, there will be a two-phase change program - one short-term focusing on the next 12 months, one longer-term with a ‘north star’ of becoming a “global fashion destination”.  To that end, the firm will write off at least £100 million of out-of-fashion inventory. An immediate challenge is immediacy, with Calamonte turning to a colorful comparison to make his point:

We sell fresh fish. And fresh fish is only relevant as long as it is fresh. The moment it is not fresh, it stinks. Just keep that image in mind and then you will understand what I what I mean here. We need to make sure that what we put in front of our consumers is relevant, it’s contemporary it's the trend of the moment, because if it's not, it's good, but it's not fresh fish. It's a completely different business.

Customer acquisition strategies will be re-examined, he adds:

We're exploring, adding on top of what we've learned, things like differential customer experience or  more upper funnel activity.  I also mentioned before our need to better leverage our own data and we are making very clear efforts on, for instance, personalization. That is going to be one of the critical ones and is already one of the critical ones.

There will be some CapEx reductions that are likely to hit certain tech investment plans, he admits:

We are going to delay some of our automation projects in some of our logistics facilities. At the same time, we will protect, as much as possible, our investment in technology, because this is going to be one of the enablers of future growth for ASOS.

And Calamonte remains adamant that this growth is achievable. Pointing to the 20 million or so 18-34 year old customers in the UK, he says:

It's true there are only 15 to 20 million people, but we are ten percent of the online global market. This market is extremely fragmented. There is clearly a continuous trend to move into online and that that trend is not going to stop. This trend is going to help us. We have a very clear opportunity in the masculine market in the UK where we are very penetrated on the feminine one. On the masculine one we have very clear opportunities to increase. Also with our average basket, we have opportunities to increase. So I think that we are really far from having reached our our level of saturation in the UK. We will have ample opportunities still within our 18 to 35 years old age bracket.

But he concludes:

Right now, it's very difficult to to anticipate what's going to happen. What we know is that we are doing the right things to make sure that ASOS is resilient enough to take advantage of opportunities.

My take

There are no sacred cows. We are going to have a look at everything.

Hmmm, that being the case, there’s going to need to be a lot more evidence of this in practice. A lot of what Calamonte is talking about is about balancing the books and making ASOS operationally more efficient. That’s clearly important, but as a fashion retailer, what really counts is making the ASOS proposition compelling to the target demographic. For evidence of what happens when that isn’t the priority, look no further than the ongoing decline of GAP world-wide.

The new CEO does need to be commended for facing up to the problems he’s inherited:

In recent years, the quest for growth has resulted in ASOS becoming excessively capital intensive, too complex and overstretched globally, which has resulted in a lack of meaningful growth and scale in its key international markets of the US, France and Germany.

How he fixes that, given that International operations account for over half of total sales, is a huge challenge. ASOS is not alone in its difficulties - rival online-only retailer Boohoo recently warned on its outlook. That 12 month short-term first phase of turnaround needs to kick in quick or the prospects for the UK e-commerce poster child of 20 years ago is going to be very fishy indeed. 

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