Business Analysis of ASOS, the E commerce store

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ASOS Plc is a worldwide retailer in the fashion industry specializing in lifestyle products for men and women. The company sells various private labels, local and international brands through its nine websites registered in the UK, Australia, the US, France, China, Russia, Germany, Italy, and Spain. ASOS headquarters is situated in London, the UK. As of August 31, 2015, the company had over 2038 full-time and 240 part-time employees. ASOS tries to become a global leader in the online retail industry (ASOS 2015, p. 3). During the last decade, the company has been growing very fast. The firm has specialized and focused its operations on celebrity-style fashions. The abbreviation ASOS represents “as seen on screen.” The company targets Web-savvy and fashionable men and women between the ages of 16-34 years. The company deals in more than 850 brands that include dresses, T-shirts, lingerie, footwear, denim, beauty products, swimwear, as well as jewelry and other accessories (ASOS 2014, p. 3). In addition, the company has its branded merchandise. From when it was established in 2000, the company has been able to attract 13 million new visitors on a monthly basis. It also has websites with local languages such as German and French.

Financials

ASOS recorded revenues estimated at $1786.8 million during the 2015 financial year. This represented an increase of about 18% from the previous results reported in 2014. The company’s operating profit was estimated at $73.4 million during 2015. This represented an increase in profitability of about 1.5% from the results reported during 2014. The total net profit was projected at $57.2 million, which represented a decline in profitability of about 0.2% in comparison to resulted posted in 2014 (ASOS 2015, p. 2).

External Analysis

Porter’s Five Forces Analysis

Threat of Substitutes

The threat of substitutes is a significant challenge for ASOS because the company usually offers its products at discounted rates in comparison to its competitors to ensure that it continues attracting more clients to its online shops. If new online shopping companies are established and decide to offer similar products that ASOS deals in, the company will experience stiff competition from competitors who offer substitutes (Marketline 2016, p. 1-3). In this regard, it is essential that ASOS should closely monitor all its competitors’ websites to ensure that they are not offering similar products, especially if they are offering higher discounts.

Threat of New Entrants

Since ASOS’s business model has been very successful since it was established, there will be numerous copy cats seeking to emulate and copy its business strategy. This has the potential to significantly impact the business of ASOS (Datamonitor 2012, p. 1-2). In this regard, ASOS needs to be particularly cautious of new entrants since its business model can be easily replicated. The financial cost of opening a website is very minimal, and hence the threat of new entrants is relatively high.

Threat of Rivalry

Competitiveness is a critical determinant of the success or failure of most industries. This retail fashion industry is not an exception since businesses engage in fierce competition usually focused on price wars. ASOS is engaged in such competitions with its rivals that include Topshop and Rivers Island because they deal in similar products. In this regard, ASOS is forced to ensure that they offer their customers products are relatively lower prices than their close competitors (Ireland, Hoskisson, & Hitt 2012, p. 78). This is because customers are inclined to make purchases from dealers who offer the lowest prices. Moreover, the biggest thing differentiating ASOS from its competitors is its pricing strategy. In addition, ASOS needs to ensure that it remains abreast with the current trends in celebrity fashion.

Threat of buyers’ Bargaining Power

A single customer is not likely to possess bargaining power. However, collectively the targeted customers have significant bargaining powers. ASOS is dependent on its customers repeat visits to its online shops. Therefore, if these customers are attracted to other retailers due to lower prices and attractive offers, then the business of ASOS will be significantly threatened (Porter 2011, p. 45). The internet has made it relatively easy for customers to visit and compare prices of different products and services from numerous websites. In this regard, ASOS is forced to ensure that its price offering is the best in the industry.

Threat of Suppliers Bargaining Power

ASOS has partnerships with numerous independent designers who wield a lot of influence in the operations and business of the company because their designs and apparel are popular among the customers of the company (Porter 2011, p. 46). Nonetheless, most of the products sold in ASOS online stores can also be sourced from numerous suppliers, which implies that the suppliers bargaining power is relatively low.

Internal Analysis

Mission and Objectives

ASOS mission statement is to become a global leader in the retail fashion industry, specifically targeting men and women aged within their twenties. ASOS’s strategy to achieve its mission include to offer the most engaging experience to its customer by being a one stop shopping center for fashion enthusiasts. The company achieves this by ensuring that it stocks modern and trending fashion designs that offer its clients a wide array of choices and leveraging technology to offer multi-device e-commerce shopping experiences (Hoovers 2017, p. 1; ASOS 2017, p. 1). The company also seeks to enhance the speed at which it delivers sold products to its clients to appeal to international customers. This will foster the expansion of its business globally.

Strategy

The company has differentiated its business model from its competitors by offering its customers with a wide array of options that features a broad selection of product categories, pricing schemes, and world leading brands. Through its customer friendly and interactive online platforms, the company has positioned itself vividly in the mind of most of its customers (Singh 2008, p. 120; Morden 2016, p. 108). The company website portrays a distinct image of its credentials as a world leading fashion retailer. The organization has positioned itself as an online leader celebrity-style fashions. Similarly, the company websites are tailored to redirect customers to geographically corresponding sites when they log in, which ensures that the customers get pricing and sizing offers that are specific to their region.

The aesthetic environment designed by ASOS has a significant appeal to the eyes and mind of the customer by displaying merchandise on a stark white background. Moreover, the company has been able to clearly differentiate itself from its rivals both in e-commerce, as well as brick and mortar stores. This has been achieved by satisfying distinct customer preferences for a wide variety and exclusivity (Thompson & Martin 2010, p. 86). Because ASOS is strictly an online business, they have the ability incorporate a vast selection of designers from all over the world, which offers the company’s customers with a broad array of choices to make. Some of the major brands offered by ASOS include Oasis, Ray Ban, For All Mankind, Rivers Island, French Connection, Marc by Marc, Jacobs, as well as Cheap Monday.

SWOT Analysis

Strengths

ASOS offers an exclusive and wide variety of brands to its customers. It also has unique product categories that include both men and women apparel, footwear, cosmetics, and accessories. The company has embraced technology to innovate better methods of displaying its merchandise, allow its customers to shop on interactive platforms, and incorporating customer invented designs. In addition, the company offers free shipping to all its global customers. Moreover, the company has a blog that engages its customers on a wide array of popular aspects such as music, celebrity styles, movies, and the latest emerging fashion trends (Marketline 2016, p. 12). ASOS has also leveraged on social media platforms to ensure that it is constantly in touch with customers.

Weaknesses

ASOS only has online operations, which implies that its customers do not have the privilege trying on or feeling the texture of clothing and other products before they purchase them. Moreover, ASOS does not use any of the traditional marketing platforms such as newspapers, fashion magazines, and media advertisements. It is solely dependent on its online internet shops, which limits the extent to which it can reach other prospective customers. Similarly, the free shipping services offered by ASOS usually cost the company more than £100 million every year. In addition, an estimate of about 30% of all annual purchases are often returned, which leads to additional shipping costs financed by the company (Datamonitor 2012, p. 6). Finally, ASOS sources its products from a wide range of suppliers located in five continents all over the world, which results in a logistical and costing challenge.

Opportunities

Customers targeted by ASOS are willing to spend their income on genuine high-quality products, which is an advantage that the company draws from the diverse and exclusive brands offered in its stores. In the recent past, there has been an upsurge in the number of purchases that consumers are making from mobile platforms such as phones and tablet, which implies the future is optimistic for ASOS. Globalization has also transformed the extent to which retailers can reach diverse consumer segments since they have the ability to connect globally through the internet (Marketline 2016, p. 14). Moreover, most of ASOS competitors only have a limited assortment of products on their displays. This implies that they lack variety and exclusivity, which are the core strengths associated with ASOS.

Threats

The uncertain times caused by the 2008-2009 economic recession has left most consumers with very little disposable incomes to spend. This means customers are more prudent on what, how, and where they purchase products. The current trends in customer service are focused on in-store shopping experiences as they interact with the merchandise and sales staff. However, ASOS cannot benefit from this strategy because it is purely an online shopping store. Moreover, there has been an influx of numerous online shopping websites trying to emulate the ASOS business model. This poses a significant threat to ASOS’s future business due to the fierce rivalry. Most retailers in the fashion industry have both brick and mortar as well as online shopping platforms (Datamonitor 2012, p. 8). This allows their customers the chance and opportunity to try out their products and feel their texture before making purchases. This is a feature that ASOS cannot exploit.

Recommendations

ASOS should incorporate digital innovations that assist its customers to interact with its products before making purchases. It can include an advanced feature to help customers zoom closer to explore the texture of its products, which is a system currently employed by Burberry. ASOS should also use the traditional forms of marketing and advertisements such as fashion magazines, newspapers, and televisions adverts to market its products. The company can also streamline its logistics to enhance efficiency and reduce returns by innovating ways through which customers can interact with the product more before purchasing. Similarly, ASOS should continue to innovate and make its websites more interactive to leverage of customer experiences. The company also needs to constantly differentiate its website by using the display of unique, genuine quality products and brands to satisfy customer demands. Finally, ASOS should continue with its policy of offering free shipping because it allows its customers to make purchases regardless of their location with the assurance that the company will cover the shipping costs even when they have to return the product.

References

ASOS (2014). ASOS Annual report 2014. Retrieved from http://www.asosplc.com/~/media/Files/A/ASOS/results-archive/ASOS_Report_2014%20FINAL.pdf

ASOS (2015). ASOS Annual report 2015. Retrieved from http://www.asosplc.com/~/media/Files/A/ASOS/results-archive/pdf/2015-annual-report.pdfs

ASOS. (2017). Our ambition. Retrieved from http://www.asosplc.com/our-ambition-and-strategy.aspx

Datamonitor: ASOS plc. (2012). ASOS plc SWOT Analysis. Datamonitor company profile, 1-9.

Hoovers. (2017). ASOS plc company profile. Retrieved from http://www.hoovers.com/company-information/cs/company-profile.asos_plc.3f943fd0901f4425.html

Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2012). Understanding business strategy: Concepts plus. Mason, OH: South-Western Cengage Learning.

Marketline. (2016). ASOS plc. MarketLine Company Profile, 1-22.

Morden, T. (2016). Principles of strategic management. New York: Routledge.

Porter, M. E. (2011). Competitive advantage of nations: creating and sustaining superior performance. New York: Simon and Schuster.

Singh, M. (2008). Strategic management and competitive advantage. New Delhi: Global India Publications.

Thompson, J. L., & Martin, F. (2010). Strategic management. Andover: Cengage Learning.

October 12, 2022
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Business Economics

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Entrepreneurship Industry

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