ASOS is one of the iconoclasts re-defining the retail environment of today. It is a flag bearer for the new retail age. Here, Paul Martin, director at Boxwood Insights, examines the ASOS operating model, part of a series of insights Boxwood has published on the retailers of today. It believes there are three concepts that underpin the way ASOS organises its activities: capability, collaboration and complexity
Working for ASOS is an extension to one’s lifestyle, where the employee leaves the ASOS head office in Camden only to Instagram, Tweet and blog about fashion at home. The day job is supported by the vast community of ASOS users who transcend the usual employee-customer boundary, working alongside the ASOS team to keep the proposition fresh. The ASOS operating model is community-centric, the next step in maturity from a customer-centric model. However, bringing the community into the operating model requires control mechanics so that bloggers, for example, do not roam too widely off-brand. ASOS appears to manage this aspect of its operating model with skill and does not seem worried if a blogger sports an ASOS jumpsuit alongside a Chanel 2.55 quilted flap bag.
ASOS boss Nick Robertson has referred to his London base as “an amazing hotbed of young fast fashion” and employing these people who live for fashion must be great – at least as long as those employees are in sync with their fashion ecosystem. ‘Growing up’ while staying ahead of the curve and finding and exploiting the latest trends requires a careful approach to innovation and experimentation with an almost child-like appetite for everything new. The ability to renew this capability and to stay in touch with the target customer must be built-in whatever the level of organisational maturity.
Like any other retailer, ASOS requires strong capability in the buying and design space. Handling a vast array of partnerships and ranges requires strict focus and a rigid approach to range selection and an eye for trends and customer preferences. Interpreting the vast amount of data emerging across all platforms is where ASOS is known to collaborate with the London start-up scene, searching for solutions to not only handle ‘big data’ but to find causalities and commonalities amid discussion forums, blogs and opinions to create understanding and sentiment around trends. This real-time information is then used to inform product-related decisions like pricing and buying.
However, international success cannot be explained by data alone. The other area in which ASOS excels is an in-depth understanding of how to acquire and appeal to customers in local markets. From re-working the tone of the website, to understanding whether TV ads or city centre screens are the way to reach target customers, to researching cultural nuances, events and festivals in order to increase local engagement, ASOS successfully acquires customers via understanding consumer preferences and behaviour to the finest level of detail. The Chinese site is a great example of regional tailoring with over five times more images, a front page twice as long as any other home page and a chat service providing short yes/no answers instead of the lengthy conversations typical in the UK. The fact that ASOS has adapted to this regional variation as an ‘ordinary’ part of its operating model is clearly evidenced by the strong overseas sales that were 61% of overall sales in August 2014.
Although ASOS started by copying celebrity styles, it is bloggers, street-style photographers and other fashion fans – often called ‘fashion outsiders’ – who translate the latest trends into everyday looks and make them more accessible for everyone. Collaboration with bloggers has made the fashion more personal and generated a new type of relationship between ASOS and its customer. The blogger acts as the customer care representative, capturing the customer’s voice on a larger scale while reflecting the current fashion landscape through their own wardrobe.
ASOS has smartly collaborated with bloggers, and the ‘ASOS Stylists’ are online each day to help plain Janes to find their inner fashionista with the help of ASOS’ offering. The friendly ethos in the fashion community adds personalised stories to the product offering and so makes the ASOS value proposition more compelling. ASOS has become the expert in tying together the presentation, content and experience of seeing the actual product and creating the desire to buy it through blogger ‘mood board’ and ‘street style’ inserts. This might also be the reason behind ASOS shelving its loyalty card trial – in some sense, loyalty in ASOS terms is not measured by the amount of purchases but by the volume of participation. All in all, as the blogger industry continues to be revolutionised (and monetised) and with each blog soon allowing readers to purchase products featured on blogs and Instagram on the spot, the ASOS model will no doubt be among the first to benefit.
The ASOS collaboration extends beyond business-to-consumer relationships. Lately it has been exploring its ‘lifestyle’ branding, offering fashionable products outside the realm of apparel, yet within the content model it has created for fashion. One interesting initiative in this field was the Citroen & Benefit campaign, where consumers could digitally test drive a car whilst trying on different specifications and colour options, all in the ASOS microsite. While this is a departure from its traditional retailing activities, it does underline the possibilities that lie within the ASOS.com engine.
Another aspect of collaboration is the platform partnerships ASOS has in its portfolio. China has been a thrilling opportunity for ASOS and local partnerships are undoubtedly the right way to enter the market where sound advice and local insight is key. However, the China project has lately been showing signs of wear and tear, with one of the concerns being the partnership with Tmall, a marketplace created by the retail giant Alibaba, which provides its 231m active shoppers access to Western products with a remarkable 43% margin. Alibaba has recently been accused of ‘daigou’ (importing and selling unlicensed or counterfeit goods from the West to the Chinese home market), which highlights the importance of brand and risk management and requires the ability to handle a significant amount of curve balls that might land from any direction possible.
The 20-somethings want it all – and they want it now. ASOS’ response has been to place the customer and the community at the heart of the ASOS operating model, concentrating on customer lifetime value and overall participation. Complexity in the ASOS operating model is therefore driven by all the elements required to support this community-centric thinking. Managing complexity is a key value driver for ASOS – as well as a challenge.
Today the global mass fast fashion online player has 10 social networking sites; eight local language websites in the UK, USA, France, Germany, Spain, Italy, Australia, Russia and China; shipping to 240 countries and territories; six global offices; over 1,100 employees across these locations; 24-hour customer service; four warehouses and a returns centre; a tailored offer for different market maturities including service, product and content mixes; one print magazine; over 800 different brands; a significant number of partnerships to deal with; and accepts payments in 15 currencies…click. click. click.
At first ASOS had a shipping and returns policy to die for. However, to run a successful global business Robertson soon realised the unsustainability of such a value proposition – and next day delivery in particular – especially when shipping to one of its favourite markets in the Southern Hemisphere: Australia. Therefore it is no surprise that ASOS is keen to tailor the service proposition for different markets, and the UK, for example, continues to be the ‘pilot-market’ that is treated with silk gloves: more discounts, rapid deliveries and overall a more seamless customer experience with a premier customer status available for only £10 (including unlimited next-day delivery, free returns, early access to sales, exclusive sales and free ASOS print magazine).
In Russia, Australia and China the service proposition is less developed, which is partly a result of its guiding principle to keep investment in tangible assets minimal, for example when it comes to depots.
However, not even ASOS can manage infinite complexity. An increasing number of consumers shop online and across multiple e-commerce sites. While spending more money, they have become accustomed to fast and often free services meaning more and more items get returned – in the apparel market returns are typically around 30%. In addition to warehouses in the UK, Germany, US and China, ASOS has set up a dedicated returns centre in Australia to deal with the complexity around returns. Some of the centres are ‘ship-from-return’ in order to provide the same service proposition globally, which is clearly a challenge for a geographical spread like ASOS has. However, fulfilling from both new stock and returns needs careful planning, effective systems and commercial acumen – maximising profitability while understanding some products are sold for as little as £3 and are therefore not viable to transport across continents.
Finally, for a business like ASOS, whose strength is to embrace complexity, the future could deliver some wonderful opportunities. One of them is the outlook for mobile traffic, which in 2012/2013 accounted for 30% of ASOS sales. As the mobile application keeps improving with tailored service propositions for every level of market maturity, it provides a great way to shop for ‘on-the-move’ global consumers. Managing this complexity to deliver what the customer wants while staying fresh and flexible is something that might keep Robertson up at night.