Due to my untreated online shopping habit, I have spent a considerable amount of time and money on ASOS.com over the years. As both a satisfied customer and intellectually curious business school student, I admire ASOS’s ability to leverage its operating assets to deliver consistent value to its customers.
Founded in 2000, ASOS is a global online retailer for style savvy, price conscious young adults around the world. The original company name, “As Seen On Screen,” captured founder Nick Robertson’s goal to reproduce styles that celebrities love at price points young professionals and students could afford. ASOS continues to create value for customers by offering a multitude of trendy clothing and accessories at competitive prices.
Aside from affordability and trendiness, another key aspect of ASOS’s business model is the “democratization of fashion” – making styles available to consumers all over the world. As part of its strategy to increase accessibility and reach, ASOS has a worldwide free shipping and returns policy. This helps eliminate shipping costs as a barrier to purchase for price sensitive consumers, and makes customers feel more comfortable purchasing clothes without trying them on first.
In order for ASOS to successfully deliver on style, affordability and accessibility, effective supply chain management and order fulfillment are critical. The company’s operating model is designed to achieve this. Firstly, while ASOS produces merchandise on five continents, all goods are stored in one central 600,000 square foot warehouse facility in the UK. A single distribution center helps effectuate the business model in several ways. Firstly, shipping costs per item are reduced, because items can be bundled and freighted to the same location. These costs savings are passed on to the consumer, which helps keep prices low for ASOS’ price conscious customers. Secondly, having a single distribution center helps make fulfillment of orders faster and more efficient, because all inventory is centrally stored. Relatedly, the free returns policy is supported by a single distribution center by eliminating the issues around inventory management (i.e. what merchandise belongs in which center) that would arise with multiple storage centers.
Having a highly responsive, fast-paced supply chain is another operational key to ASOS’ success. The distribution center receives 1,500 new products per week, in various sizes and colors. While specific data is not available, the supply chain must be fast enough to respond to trends in the fashion industry and maintain a constant supply of new styles on the site. In order to keep customers satisfied and engaged, ASOS must be ready to fulfill those orders immediately once a consumer makes a purchase decision on the site. The combination of the efficient supply chain and single distribution center makes this possible.
Given that ASOS targets younger (and thus more socially conscious) consumers, sustainability and waste reduction are also important aspects of its operating model. Since 2012, the company has cut landfill waste by 99%, designed all packaging from recyclable materials, and reduced deliveries to its warehouse from 150 to 8 per day. Efforts to reduce ASOS’s carbon footprint are also cost saving measures that can be passed on to the consumer, further maintaining the company’s low price advantage.
ASOS serves approximately 10 million customers in 243 countries. Given the company’s goal of global penetration, an exclusively online operating model is the only option, as brick and mortar stores would severely limit growth. ASOS has developed creative ways to drive traffic and increase brand awareness in the absence of physical stores. In 2010, ASOS launched ASOS Marketplace, an online exchange where new designers and trendy individuals can sell new and vintage clothing. ASOS marketplace is a perfect example of the alignment between ASOS’s business and operating models. From a business perspective, ASOS marketplace is a marketing tool to create a community of fashion forward consumers and increase customer engagement, which ultimately converts into sales on the ASOS retail site. Operationally, by managing a platform that connects designers to consumers, ASOS can leverage data from both parties, and use this information to improve product offerings and ultimately drive sales on ASOS.com.
As a company, ASOS demonstrates strong alignment between its business and operating models. Going forward, I am confident in the company’s ability to make the operational improvements and innovations necessary in order to continue delivering on its customer promise. As a loyal ASOS shopper, I certainly hope they continue to do so.
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