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We have all experienced this situation. A friend’s wedding is approaching in three days and you have no outfit prepared. The thought of browsing through physical stores is unappealing, so you naturally turn to ASOS. The company is renowned for their speedy delivery and convenient return policy.
According to the released results on Wednesday (1 November), ASOS’s pre-tax losses increased to approximately £300m in the year ending on 3 September, compared to £31m in the previous year. This news comes despite the fact that many people turn to the popular online fast fashion retailer for last-minute holiday shopping or larger seasonal purchases.
Although it was once the top online retailer, ASOS now faces strong competition from international markets, difficult economic conditions, and an aging customer base that may be looking for a more personalized shopping experience. This has prompted some to question if ASOS is in trouble and in need of help.
In the year 2000, ASOS was introduced and was hailed as a groundbreaking online retailer. It provided customers with a virtual department store experience, offering a vast selection of dresses for £30, making it the first choice for UK shoppers.
However, over the past few years, the business has reduced its inventory due to significant declines in profits and revenue. During July and August, the store reported a decrease in sales due to inclement weather conditions, resulting in a 30% reduction in inventory.
According to industry professionals, it has been revealed that there are flaws in ASOS’s business structure. In an interview with The Independent, Rick Smith, the Managing Director of Forbes Burton, explains that ASOS’s practice of offering free returns in large quantities puts them at risk for financial setbacks in difficult economic times.
Smith says that the group of people they are trying to attract tend to return multiple items for every purchase, resulting in lower profits. ASOS has experienced a rapid growth since they started, but may have reached their maximum potential and should adjust their spending, especially with the current economic challenges like the cost of living crisis.
In the 23 years since ASOS was launched, the purchasing patterns of consumers have changed. According to Smith, browsing through numerous products has become a tedious and often unpleasant experience for ASOS customers.
According to Smith, as online retailers grow in size, it can become overwhelming for customers to search through their entire collection. The world of online fashion is changing, and customers are now seeking a more personalized experience from websites.
As shopping on social media becomes more popular, young individuals are now purchasing individual products from retailers on platforms like Instagram and TikTok. Alternatively, they are also choosing to shop directly from brands carried by ASOS, such as Pull and Bear, Stüssy, and Bershka, which each have their own websites.
“ASOS’s key demographic of busy individuals in their twenties may not have the luxury of browsing through numerous product pages,” states Smith. “Therefore, incorporating curated collections and personalized recommendations based on user feedback may be a potential alteration they consider in the future.”
Originally known as As Seen On Screen, ASOS began its business with the slogan “Purchase the same clothing seen on screen” by selling copies of celebrity outfits. However, the company has since evolved to offer a wide range of 850 affordable to mid-range high-street brands and provides shipping services to 196 countries.
However, the company is currently addressing a problem with debt, as their net debt, including leases, has increased from £533m to £648.5m in the past year. Experts forecast that the e-commerce fashion platform may need to raise funds in the near future, possibly through the possible sale of its Topshop brand. ASOS obtained Topshop when the Arcadia Group went bankrupt in 2021 and shut down their physical Topshop stores.
Although ASOS’s profits have decreased and they are expected to experience more losses in the future, José Antonio Ramos Calamonte, the company’s CEO, stated in the report that they have made positive strides in a difficult market and plan to keep investing in their brand and offering more trendy clothing options.
The business intends to allocate an additional £30 million towards marketing efforts and announced its focus on returning to the fashion industry. Their products will be geared towards fashion and designed to generate excitement.
This week, it was reported that Shein, a Chinese retailer, has acquired UK-based Missguided with the intention of reviving the online retailer. The previous owner, Mike Ashley’s Frasers Group, had only bought Missguided out of administration 18 months ago as ASOS suffered significant financial losses.
Shein, despite facing boycott demands from activists against the fashion industry, has reached a valuation of approximately £53 billion by expanding its reach globally and acquiring numerous competitor brands. As of 2022, it holds the top spot as the most searched fashion brand worldwide and has generated a reported revenue of £18.9 billion, indicating that the demand for affordable, all-in-one outfits is still strong among consumers.