This time last year it was noted that online-only retailer ASOS had benefitted from people not going out during the COVID crisis, with a 275% jump in year-on-year profit. At the time, diginomica pondered whether the company would be able to make the shift back to a ‘going out’ business model? The firm itself acknowledged the uncertainties here:
We believe the shift to online retail as a result of the pandemic and the accelerating consolidation of offline retail has increased consumer confidence in shopping online. In the coming months we expect a portion of consumer demand will move back to stores as restrictions are eased throughout our markets, but we expect online penetration to remain structurally higher than pre COVID-19 levels.
Flash forward a year and the picture looks considerably bleaker. For the six months to the end of February, ASOS sales were £2 billion, up just four percent year-on-year - against 25% for the comparable earlier period - while pre-tax profit collapsed 87% to £14.8 million.
And the firm doesn’t have far to look for more problems. Aside from ongoing economic uncertainties coming out of COVID, the retailer has been impacted by the global supply chain crisis, while suspending operations in Russia is set to cost it £14 million. Meanwhile there’s no sign of a new CEO following the abrupt exit of Nick Beighton last October with Chief Operating Officer Mat Dunn still holding the fort in the interim.
Long term plans
For his part, Dunn, inevitably, remains upbeat, arguing that the firm remains well-placed to capture the long-term opportunities, even if the short term looks highly bumpy:
Our vision is to be the go-to destination for fashion-loving 20-somethings, and no one else actively and exclusively focus on this segment of the market. And that allows us to do 20-something fashion better than anyone else. Given our strong heritage of catering to 20-somethings, we remain well-positioned to capitalize on the huge opportunity ahead of us. We've built an extremely in-depth understanding of our customer, a customer which spends 50% more of their disposable income on fashion than older consumers.
To address, capture and retain such customers, there’s an ongoing focus on personalization, he states:
We also continue to deploy other changes in our technology to enhance our customer offer and have made improvements specifically through personalization, experimentation and tailoring of category experiences...Overall, what we are seeing is that our increased level of experimentation is driving an ever-improving experience for our customers, one that is becoming more personal, more relevant and more engaging. There is much for us still to do, and we continue to invest to build our capability, but I'm pleased by the progress we've made so far.
This personalization has been accompanied by a growing build out of operations in-country to support localization, he adds:
In the first half, we have appointed more senior trade heads for the US, France and Germany and Southern Europe. And in the second half of the year, we will focus on localizing our assortment with a particular focus on the US where ASOS EDITION, ASOS Luxe and our plus-size range resonate well, and we will accelerate the rollout of more dedicated options.
Experimentation across digital and social marketing platforms has continued, although it seems there’s more to learn here. Dunn says:
The first phase rolled out on a test-and-learn basis, targeting 18- to 34-year-old females, and this was rolled out across multiple platforms, including TikTok, YouTube, Snapchat, Hulu and Roku, across a number of core test areas within the UK, US and France. The feedback we've had and the learnings we have received have been incorporated and iterated into the next round of testing, which is rolling out already. We will continue to test and learn, but we currently expect the scale-up of our broad reach efforts to take place from the fourth quarter onwards. However, we will need to do this in a deliberate manner, continuing our test and learn approach and ensuring we balance this against the reality of the consumer environment as it evolves.
But there have been early learnings:
The critical learnings were about how we activate the creative. And what's interesting is we saw a much better pickup in customers who were already aware of ASOS than we did in customers who weren't aware of ASOS, which suggests that we need to be, I guess, more direct probably in how we get that creative cut through. So a lot of the work on the plans for Q4 is focused on how do you get more actionability of the creative itself and get them kind of quicker to what does ASOS stand for?
I think the other thing we've learned is all around the kind of media mix and how we optimize the media mix. And therefore, we will go for kind of always-on approach. Once we start, we will continue that. We've seen that, that consistent activation is better than short, which we've trialed consistent activation versus kind of bursts, and it can depend on what you're trying to activate as to which one works best. But we've definitively learned, which is what we would have anticipated to be honest, is that always-on approach works better.
Meanwhile the firm’s partnership with US retail institution Nordstrom to “deliver an ASOS experience in a physical environment in store for the first time” is paying off, argues Dun. Two physical stores opened with ASOS drops in November last year, while two ‘retail concepts’ were added in LA stores in February. Dun explains these provided customers with the opportunity to "touch and feel everything" at The Grove in Los Angeles, with a dedicated Glass Box and also a pop-up in store with 120 options available across both womenswear and menswear:
The ASOS Glass Box concept featured a carefully curated assortment of ASOS styles, along with a wall-to-wall digital screen with featured content to inspire customers as they browse the selection of our product. The pop-up at The Grove featured a dedicated retail experience within the Topshop by Nordstrom store, and this featured a broader range of styles, merchandise from a selection of merchandise with a selection of other popular brands from Nordstrom that customers know and love.
In addition, click-and-collect in-store is available for orders placed on ASOS.com while there’s now an expanded range of ASOS products available via Nordstrom’s own site, while the second half of the year will see ASOS brands in a further ten stores.
As well as the search for a new CEO, there has been an expansion of senior executive roles within ASOS with the appointments of a Chief Data Officer and a Chief Digital Product Officer. The Chief Data Officer will be leading a dedicated data organization with “embedded data product management capability, improving ASOS data governance and focusing on quality and ownership to drive improved business operation; evolving the firm’s data architecture to enable greater agility and speed of development; and continuing to scale investment in data engineering and use case”.
The new data and digital exec roles are welcome, although both are functions that have been curiously absent to date given the nature of ASOS’ digital-only operating model. As Dun notes:
These changes may well seem obvious or even overdue, but they are necessary.
Well, yes. The big question is whether they are too late? There appears to be potential candidate for one of these roles, but nothing’s signed yet. Meanwhile the other role, “we’re still working through”.
That said, going out has come back, insists Dun:
When you walk around London through to what we're seeing in terms of what we're seeing on our site right now is that people are absolutely 100% buying into the going-out categories, which have traditionally been a core strength of ours.
Maybe yes, maybe no - COVID variants could still have something to say about that, not to mention the cost of living crises erupting around the world. Whatever the case, ASOS has a lot of work to do to get its act back together.