ASOS: Time to lead & think big

ASOS is one of the biggest British fashion success stories of this century. From its beginnings in 2000 to today, with a valuation of around $900 million, it is still the one of the go-tos and most name-checked for affordable and branded fashion. It is also one of the most watched.

The online giant has run into difficulty in the last few years, trying to cut costs, reduce inventory and return itself to profitability. For the full year of 2023, the company said it was writing off inventory worth £130m.

The most recent financials showed a sales drop of 7% to £1.84 billion in the six months to 28 February 2023 while pre-tax losses widened to £290.9 million (2022: £15. 9 million) – in a large part due to those stock write-offs – but the online fashion giant said its turnaround plan was on track.

The brand is trying to keep shareholders onside who have seen the valuation in the company drop like a stone. Asos was once valued at just over £5billion – almost twice as much as Marks & Spencer at the time.

ASOS said the reduced markdowns, reduced width in product assortment and reduced marketing spend – had resulted in the sales drop, with the actions accounting for 50% of the sales decline since December. These moves have been put in place to improve "order economics" and profitability as the business shifts its focus to the improving the bottom line rather than top-line growth. UK sales were down 10%, Europe was flat, the US down 7% and the rest of world down 12%, the company revealed.

A bright spot, while UK sales had dropped it said it was improving market share among its core demographic of 18-35 year olds and was taking a larger share of their fashion spend.

ASOS CEO José Antonio Ramos Calamonte said: “There are many causes for optimism as we progress through the second half of the year. We are improving our gross margin run rate in the face of significant headwinds, are starting to see the benefits of a repositioned stock profile, and are taking action to reduce the proportion of our sales which are not profitable. Initiatives are in place to drive a further c.£200m of benefit in the second half and I am very confident of our return to sustainable profit and cash generation in the second half of the year and beyond.”

Will this see ASOS turning a corner?

It could be, but right now ASOS is just blending into the background. It feels like a brand just going through the motions rather than the fashion authority it used to be. While it offers lots of choice, it has no focus. Where it once was a pioneer, it now feels like it is treading water, pumping out thousands of products and hoping something sticks. It’s become a place you get throwaway festival or holiday fashion, but nothing that you’re really coveting or keeping.

When you seemingly sell everything, you have to focus eyeballs. It needs to look at Zara and H&M on how those brands target customers’ attention despite huge ranges.

Zara drops in little collections all looking distinctively different, while H&M has cleaned-up and streamlined its act with stores looking more spacious and easier to find things. The recent H&M Mugler collection looks like a sell-out because the product was strong and it knew exactly what the customer wanted. It also helped push the price points up and felt like you were buying ‘fashion’.

ASOS needs to think bigger. It needs to say ‘we do fashion’ too. It needs to show us where it positions itself. It could do amazing collections with cool designers like Mowalola Ogunlesi or brands like King & Tuckfield. Or really aim high and tie up with an established international House. Its 18-35-year-old customer likes brands and with many living at home, they have money if they want something badly enough. Some of the current ideas are brilliant – men’s belly chain with pavé crystals in silver tone, anyone? – and so much fun, but it’s a bit too anonymous and price driven.

When ASOS Magazine, thought to be the UK’s most widely-read fashion magazine in print at the time, closed in October 2019 as the e-commerce retailer announced a shift towards creating more social media content, many young consumers were upset saying it was the only magazine they read as they wouldn’t buy magazines in the shops. This was a missed opportunity to carry on taking the online into the physical and inspire.

The new look Topshop at ASOS

Topshop was a great acquisition but something of wasted opportunity, languishing as it does somewhere on the cumbersome main ASOS site. Reopening a few physical stores would make all the difference as would giving it its own distinct online identity and space. ASOS: is it time for the online young fashion giant to grow up?

We know free returns is a cross ASOS is willing to die on, but many brands have started to charge for returns which does reduce excessive ordering, waste and costs. Maybe it needs to bite the bullet on that?

While rival Boohoo has also had its challenges, along with many online retailers in the wake of the pandemic, Its vision for creating a global, online fashion group is clear and bold. Boohoo has said it wants to be the Inditex of the online world, but what’s the ASOS ambition? It has felt like it wanted to just keep its head above water recently.

ASOS needs to turn that corner because others could be circling too. In October 2022, Frasers Group confirmed reports that it had acquired a 5.1% stake. It is now the fourth largest shareholder in ASOS. While Frasers holds strategic shareholdings in a number of businesses without any intention of making an acquisition, it could change its mind and others might show an interest too given its lowly share price.

ASOS is huge and that is part of the attraction. However, it also suffers from scroll fatigue due to its size. It’s neither cool nor uncool at the moment, just a place you might ‘get a few bits’. The ASOS Design collection has some original and great ideas – I always find something interesting on there – but it feels like a ball ache to find. Show us the good stuff!

ASOS needs to start putting itself out there. It doesn’t need to be chained to online. Show us what you’ve got.