ASOS is a UK-listed online fashion retail platform with over 26m customers across the UK, EU, and the US. The company was founded in 2000 and generates ~£4bn in sales with ~45% private label and exclusive brand collaborations and 60% from branded suppliers.
The company mainly operates a traditional online wholesale model but has recently launched a 3P-marketplace to widen the selection. ASOS sources 60% of the assortment on longer lead times from APAC and 40% from the UK or Europe. The company targets ~70% full price sales with a lower intake margin than offline competitors but also a lower promotional rate which leads to a gross margin of 45-50%.
Over the last 5 years, ASC has grown the customer base from 12m to over 26m customers that order ~3.5x per year on average. The average order value is ~£40 including returns and the company is targeting a medium term EBIT margin of 4%. ASC’s CEO recently stepped down and the original cofounder is a non-exec holding ~3% of shares outstanding.
Written in Dec 2021
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They had multiple product categories. Traditionally, there were dresses, tops, and going-out dresses. However, they started to blur these categories. So, you would have day dresses, going-out dresses, and casual dresses. Each product had different garment techs and sizes were not standardized. This lack of standardization spiraled out of control. Because they were successful, everything they sold was selling, at least for a while. It didn't matter that returns crept up to 70%. This didn't happen overnight. People often say 40% is an average return rate, but I'd argue it's closer to 50%. Half of what you sell comes back because people are buying multiple sizes. There were many issues with fit. They also started to reduce prices too much, resorting to inferior fabrics. We use viscose elastane which should be about 220, but they were accepting garments at 180 to meet their price point. This is what we call engineering into price.
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Over the past few years, the heads have become more powerful, reducing the control of the buyers. A new lady, Elena, has come in. Initially, I wasn't sure about her, but she's proven to be very competent. If given the responsibility and authority, I believe she can make a difference. I think ASOS did well under Nick, who was a genuine leader and very inspiring. He's now a sought-after consultant. I don't think José has the same reach or authority as Nick, although I've heard he's a good guy with impressive credentials from Inditex. However, the leap from Inditex to ASOS must have been huge, especially during difficult times.
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