Spotlight on...Asos tightens focus on 20-something consumers
Asos CEO and founder Nick Robertson
As Asos booked yet another year of stellar growth yesterday (24 May), the online fashion retailer's CEO Nick Robertson also revealed the company is tightening its focus on the 20-something consumer. He also stressed that while growth across the business is likely to slow, it has by no means matured.
Speaking to journalists after the company posted a 93% hike in full-year pre-tax profit, Robertson said: "I know we've had heady days of growing at 100%, 60% 80%, [but] I think those days are behind us".
He added that while the retailer may see rapid growth in certain markets, maintaining this level of growth across the business will be "challenging".
That said, Robertson still believes 30-40% annual growth can be achieved for the next two to three years.
In its most recent financial year to 31 March, the company recorded 7% sales growth in the UK which, in the context of the UK economic environment, Robertson sees as being the "new 27%" sales growth.
"In the UK it's gotten tougher, much tougher," he said. "I hate to use the word maturity in the context of Asos in the UK - we are shocked by the very large number of 20-somethings in the UK already. In terms of opportunity, it's less than it would have been five-six years ago, but I still think there's growth to be had."
Robertson says he hesitates to describe the UK market as mature because he doesn't think that the online sector is mature. "As long as we are competing online there's a natural tailwind, and there are things we can do in pricing and ranging that can help us along."
The company has tightened its focus on the 20-something customer range -despite this demographic facing significant headwinds around unemployment and credit.
"We're going to be more disciplined about aiming at 20-somethings, which does mean we are reducing the opportunity in the UK, but [also] means that I'm using all of our collateral to attract 20-somethings globally. That's more important to me," he argues.
This demographic is globalising faster than any other generation, and their tastes are becoming more common than any other group. Also, the global success of young fast-fashion brands H&M and Zara "gives me the confidence to say there's an opportunity here."
"The thing about the Zara model [is that] outside of Spain they are not huge. In the UK they are a reasonably sized high street retailer. Where they come good is that they absolutely stick to what they do, they don't weave off what they know they can do. But they operate in 70 markets, [and] even if your presence in 70 markets is quite small, you can get to quite a big number."
It is in international markets that the retailer has seen the most growth, recording a 103% sales uplift over the last year. For Asos, any product it ships outside the EU - currently predominantly to Australia and the US - it doesn't claim 20% VAT, so on these items, the retailer is 20% better off.
"We invest that in free delivery and you're seeing it on the retail margin line," says Robertson.
The company also sees an opportunity in men's wear. Robertson says the improvement in its men's wear performance has largely been due to increasing the ratio of own-buy products against third-party brands.
"The ratio of own-buy to third-party brands has always been the other way, and now we've started to reverse that to about 50%. That own-buy is absolutely pitched at the Topman customer."
For Asos, schemes like global free delivery are key to driving up purchase frequency and volumes.
"The general theme is that on the one hand we are investing back into customers, through better price points, global free shipping and that kind of stuff, but we are paying for it though an increase in volumes.
"As our volumes go up we can negotiate everything better, we can get lower costs per unit out of warehousing, you get operational efficiencies coming through head counts.
"So, on one hand we're investing, but on the other we're reaping the rewards of a scaling business, and taking that benefit and putting it back into the customer," Robertson explains.
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