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Whatever happened to ASOS - and how can it be fixed in the retail market of the Vaccine Economy?

Stuart Lauchlan Profile picture for user slauchlan November 8, 2023
ASOS was once an e-commerce darling, but that was then, this is now. As to what comes next...


We want to go back to the core of what ASOS was.

It’s an understandable sentiment from José Antonio Ramos Calamonte, CEO of ASOS, once a darling of the e-commerce world, but now a company that’s struggling to find its place in a changed retail market.

The firm itself has been around for over two decades, peaking during COVID when physical retail stores were shuttered and people looked online en masse. ASOS had ‘a good pandemic’, turning in profits in the region of £200 million. But in the Vaccine Economy that has followed, its fortunes have reversed. Last week the company turned in a loss of nearly £300 million with revenues down year-on-year by 11% at £3.5 billion.

So what went wrong? And more importantly, is there a way to put it right? That’s what Calamonte, a retail sector veteran with both physical and digital credentials, was brought in to find out. Over a year into his role, the CEO still has confidence in the future, but that confidence comes with caveats:

We have started to set the foundations of a new ASOS, so a new way of a deeper change if you want…we feel comfortable that right now is the moment to accelerate in this transition.

He adds:

We think ASOS is different. Obviously you will hear that from everyone and we are not different in that sense. We think ASOS is different. We think our model has some capabilities that are unique. 

One defining characteristic that ASOS has is that it is both a brand and a retailer, argues Calamonte, while a lot of its competitors are either one or the other. Some 40% of ASOS sales is generated by own brands:

We offer our consumers the best curation and this word is very important that curation of the most exciting third-party brands for fashion-loving 20-somethings. The magic happens when we put them together, because by putting these two elements together we create a higher level of credibility in front of the eyes of consumers and a higher level of credibility in front of the eyes of brands that can see us as a channel for growth, and as a channel to reach different consumers or different locations. 


So far, so pretty much what you would expect any turnaround CEO in any sector to say. But how does that translate into practical actions? For example, Calamonte says that one goal is to “change our customer journeys” to build “much more around excitement about inspiration”. He argues:

We do that with what we call competitive convenience. We want to make sure that the journeys of our consumers are frictionless. We want to make sure that they are as convenient as they can be anywhere else. And this is a relevant part of the digital sales process. 

We're moving to a model that is built on speed and light stock levels. Being able to react faster to the trends, being able to react faster to the weather, being able to react faster to whatever that is coming and is happening out there is approaching us to the moment that our consumers are making the decisions.

Our consumers on average buy more than three units every time they buy. This is clearly ahead of most of our competitors and it's pretty much driven by our capability to create this unique outfit and make us being this different destination for style. What this model will do is we'll increase the basket sizes even further and will help us to continue selling full price.

Add into this mix a desire to “re-invent our marketing” to create “customer newness”:

That will help us tackle, the churn, reduce the churn of our consumers because we know that transactional relationship with consumers generates more churn, while inspirational relationship with consumers [will]  reduce the churn and that will help us also reduce our customer acquisition costs.

ASOS has a churn problem, admits Dan Elton, Senior Customer Director:

We've developed this kind of one dimensional model, if you like, and it's an approach that isn't working for us in the way that we want anymore. And I'll tell you why. The number of customers that we acquired in 2023 was back at the same level as 2019. That's one indicator. Our churn is increasing, particularly, among newer customers. I guess that's another indicator.

I think one of the most important indicators for me is that our share of branded search so that is consumers who are searching for search terms that involve ASOS has declined and that's the brand affinity point that I'm talking about and that's something we really need to address.

Having a performance-only model was appropriate during the COVID crisis, he argues, but that’s in the past:

We had millions of consumers entering the e-commerce market for the first time, forced into the e-commerce market, and it was the marketing team's job really to kind of capture that unfulfilled demand using these performance tactics. But times change and performance tactics are greater capturing that in-market demand when it exists, but it's not so good at stimulating demand and growing that brand affinity for the longer term.

So, in short, when the e-commerce market was in growth in demand for ASOS alongside it that model is fine, but we need to change. Eventually all brands hit this performance marketing plateau, the point in which you need to pivot away from just relying on performance marketing to start to grow your brand instead and moving to a more balanced approach.

So what’s the solution? According to Elton:

We're going to build life cycle customer strategy and embed that in our customer journey. In the short-term, we're particularly focused on app downloads and app engagement…Secondly, we've recently developed a number of new capabilities, a number of new features in our customer journey to increase personalization. We're doing that in two ways. We're doing that both on the cost side to improve profitability but we're also doing it on the growth side.

On the cost side, we've got features like the ability to personalize the checkout. So we have the ability, for example, to restrict ‘buy now pay later’ for our least profitable customers which has improved profit growth there. We've also restricted some promotional advertising for our least profitable customers. And then what we've been able to do as well is to exclude our least profitable customers, our very least profitable customers from paid media. So we're not spending money to acquire and reacquire those customers.

I think more excitingly on the growth side, we started using AI-driven one-to-one personalization across the journey, particularly in our CRM program. I think as a fashion brand what we often assume is that kind of editorial decisions are better. But actually, what our customers want is one-to-one decisions based on their data. We've had some very strong results in our CRM program over a short period of time and we'll be building on that over the course of this year.


Another problem that needs to be addressed is that of more effective stock management. As a ‘fast fashion’ pioneer, ASOS has found itself suffering from the hangover of unsold stock, which Calamonte acknowedges had knock-on effects:

Too much stock that was driving too much discounts so not very exciting for the consumers. We were very slow to market and we had a formula with our brand partners that was very rigid. We could only offer them a wholesale kind of relationship.

That’s going to change, he pledges, with an overhaul of the stock management model:

The ambition is that when consumers come to ASOS, they are exposed to the relevant assortment. It is not a lot of use to make a lot of effort in bringing new assortment, if this new assortment is lost in a sea of a lot of older things. So what we want is that when our consumers come, they really can see properly this new assortment and it is receiving the right focus. In order to do that, we have started and we already started in fiscal year 2023 to change our stock management system.

On top of it, as we've been talking about speed, speed, speed, our ambition, our obsession is to accelerate our go-to-market. And that is built on two critical capabilities, a different sourcing model, a more strategic sourcing model…but also a change in our go-to-market process, so that we can get to market much faster with all of our lines.

He adds:

We're using pricing in a much more active way to make sure that we tackle the problems as soon as we detect them. We don't want to wait until the end of the season. At the moment we see something that is not working, and we are using our data-based technology. We are tackling it immediately.

My take

It is obviously a very exciting moment for us. We see that this is the moment to accelerate. This is the moment to double down on making ASOS unique.

Calamonte’s determination is tangible. Whether it can translate into a profitable turnaround for this one-time online retail pioneer is another matter. The firm is now worth only £430 million. It’s exploring options to sell off its Topshop brand. And it’s mothballing one of its UK warehouses.

In this Vaccine Economy, the importance of an omni-channel mix of physical and digital has never been more important. Lockdowns made us yearn for that Saturday afternoon trip the mall to browse for stuff that we probably don’t need but end up buying anyway. Yes, online is convenient and its importance can’t be underestimated, but shopping is an experience and one that people like to enjoy in person. ASOS is in a lot of trouble.

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