In October 2017 sell-out rates hit 49.71 per cent, but then fell to 31.6 per cent by December. A year later sell-out rates had fallen to 28.11 per cent in October 2018, and fell further to 27.98 per cent by December 2018.
Then, in March, operational problems came to light. ASOS had ambitious plans to shift to a global model, ramping up warehouses in two countries simultaneously. But it had severely underestimated what was needed for these big plans. Automation issues and a delay in orders ensued, which lead to its third profit warning, in July 2019.
The biggest problem was its sales forecasting. ASOS pitched sales to be at £120 million ($233 million) for 2019. Stocks were purchased accordingly to reflect the numbers, but the operational issues indefinitely affected newness offerings and product presentation.
Aside from internal setbacks, ASOS faced an external issue too: younger competitors rising up the ranks. Boohoo, for example, saw an 83 per cent surge in its pre-tax profits, its share prices far surpassing ASOS’s. Boohoo had the speed too, as it easily manoeuvred according to market demands, delivering trends much faster.
With ASOS battling rising competition and struggling to contain persisting operational woes, its financial review in 2019 closed at £33.1 million, a stark contrast to 2018’s £102 million.
Getting back on track
The company knew it had to pick up its pace.
“This financial year was a pivotal period for ASOS,” CEO Nick Beighton said in October last year. “This was more disruptive than we originally anticipated.”
ASOS promised to deliver better results – and it did. By early 2020, the online retailer saw a resurgence, citing a 20 per cent increase in retail sales, beating analysts’ forecasts. The numbers were also lifted by strong customer engagement throughout the last four months of 2019, as well as record Black Friday sales.
How did it get back on track so quickly? There are four key insights into ASOS’s turnaround, and how it signifies a larger consumer shift.
Paying attention to sustainability;
Paving its own way with pricing;
Smarter discounting; and
Having representation at the forefront.
Beyond fast fashion
The fashion industry has written off the fast-fashion customer as being driven only by speed and value, but this is beginning to change.
Traditional ownership models are disintegrating. Younger consumers are leaning more towards subscription-based services – with access being more important to them than ownership. For fashion, the same trend can be seen in the rise of the resale market.
There’s a broader consumer shift here – and it’s all tied in with concerns about climate change.
Retailers that regard sustainability as a trend, or worse, greenwash, will find themselves at an increasing disadvantage. Consumers, especially the younger ones, are demanding change. They’re environmentally aware of the fashion industry’s high consumption of resources, and are unafraid to call out large corporations for it.
Consumers are still hungry for newness, but not at the expense of the environment.
Despite its operational setbacks, ASOS understood the importance of sustainability and brought it to the fore.
Steps to sustainability
ASOS has added a “responsible filter” so that consumers can search for sustainable brands. According to data, the products made of recycled materials and sustainable fibres had a 43.8 per cent sell-out, with 69.5 per cent sold out at full price – showing clear demand.
One of ASOS’s biggest power moves was joining the Global Plastic Pact, pledging to reduce its use of plastic in its deliveries, reducing waste significantly.
Its returns policy was updated too, citing that it may investigate serial returners. It also introduced a new sizing tool, See My Fit, which it hoped would prevent some returns.
Boohoo may have overtaken its lead in 2019 in sales, but the brand scored much lower than ASOS in 2019’s Fashion Transparency Index.
When it comes to pricing, ASOS isn’t aiming to be the cheapest. Its pricing architecture differs from its main competitors Boohoo and Missguided. Those retailers price most of their product within the US$10 to US$30 range, but ASOS leans more towards the $US20 to $US30; the $US30 to US$40 range; and US$40 to $US50 range. For ASOS, the key is in its product offerings, not the price factor.
The same approach applies to its discounting, too. While other competitors opt for a continual discount model, ASOS prefers to focus on its key offerings. On average, Boohoo releases 150 to 250 products on a first-time discount, daily. ASOS, on the other hand, is more reserved.
This was apparent in its Black Friday sales. Data showed that ASOS delivered a strong performance in 2019’s Black Friday, a much better result than 2018.
ASOS saw a high total sell-out, yet it had the lowest percentage of discounted products. It also had the highest stockout rate in the 10 to 49 per cent and 80 to 89 per cent discount range.
There was one thing the consumers wanted that ASOS grasped pretty quickly: diversity. Rihanna’s Savage x Fenty fashion show was a pivotal moment in the industry – the outpouring of positive sentiment proved that consumers have long wanted diversity, and if Rihanna can do it, why can’t other brands?
Victoria’s Secret, once the darling of lingerie, still promotes a homogenous view of beauty standards. While racial diversity was up by 50 per cent in its 2017’s Shanghai show, over the past 23 years, models that walked the runways got thinner. Its lack of body diversity has sparked backlash and boycotts, joined by the ranks of models Ashley Graham and Robyn Lawley.
The rise of the #MeToo movement has redefined female empowerment and changed the narrative of how women dress – it’s no longer all about the male gaze. Even Bella Hadid, who walked for Victoria’s Secret for three years, confessed that she felt sexier walking in Savage x Fenty’s 2019 show.
The final blow came when Ed Razek, Victoria’s Secret’s chief marketing officer, infamously told Vogue that the show won’t hire transgender models, as the brand “sells the fantasy”. He stepped down soon after, but the damage was done.
Even if fashion retailers “don’t market to the whole world”, as Razek said in the same Vogue interview, this fact remains: consumers are drawn to brands that are values-driven – and if it means leaving once-dominant brands behind, so be it.
A decade ago, ASOS was the disruptor of the e-commerce scene, but it understood that just like any other brand, it needed to evolve. In its 2019 annual report, it stated that even though it was one of the early e-commerce retailers, it still needed to “stay ahead of the game” and be “relevant despite customers having more choice in front of them”.
Back in 2018, ASOS was already championing representation by collaborating with Paralympian Chloe Ball-Hopkins to release its disability-friendly collection. That year also marked the second time ASOS has worked with GLAAD, an organisation that protects LGBTQ rights.
In 2019, the company launched its third collaboration with the organisation a few months ahead of Pride Month. The collection is also available in plus sizes (both ASOS Curve and ASOS Plus), delivering its promise in offering a variety of styles to 20-somethings.
Modest fashion – clothing aimed at customers who prefer less revealing pieces – is another focus for the retailer. Its first ever modest fashion edit launched in April last year, as ASOS believes that “everyone should be able to confidently express themselves through fashion”. The website also allows customers to filter by silhouettes, which gives consumers something most mainstream fashion brands withhold: the power of choice.
While ASOS still has much to do to stay ahead of the competition, its positive numbers highlight its ability to do a quick turnaround. Its tumultuous year is a lesson for all retailers, even online players – the retail storm isn’t just restricted to bricks-and-mortar stores.
Retailers that choose to ignore sustainability and inclusivity will be left behind. Younger consumers will continue to prioritise progressive brands, and it’s essential for retailers to craft future-resistant strategies.
But how does a retailer know which trends work, and which to avoid? Increasingly, they are looking at data. Having access to hard numbers enhances merchandising and buying skills, which helps to avoid overstocking problems that add more environmental costs.
Not everyone wants cheaper prices and higher discounts. In a world where consumers are increasingly values-driven, understanding what your audience wants is important. This helps to set clear, defining lines in product, pricing and presentation.
Blindly following the crowd is a surefire way to lose a brand identity.
Phung Yi Jun is the lead content editor at Omnilytics, a data platform powering business decision-making with deep and actionable insights. Yi Jun built her career as an independent fashion writer and uncovered the latest news and trends in retail before transitioning to her current position at Omnilytics. Her previous work can be found in Retail Asia, Harper’s Bazaar and Female magazine.