ASOS – Effectively Delivering Style, Affordability and Accessibility
ASOS.com, a TOM Winner, through the eyes of a loyal customer
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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Student comments on ASOS – Effectively Delivering Style, Affordability and Accessibility
As a fellow ASOS addict I think that this is fascinating. I agree that ASOS has done a fantastic job at delivering a seamless online shopping experience that makes you question whether to return to the high street ever again. I did not know that the company only has one distribution centre. Interestingly, Inditex (Zara, Massimo Dutti etc.) adopts the same centralised distribution structure and also benefits from it immensely.
There are two features of ASOS’s operating model that I’d be interested to learn more about:
• What proportion of the processes at the distribution centre are automated versus done by employees?
• How has ASOS developed its data infrastructure to support growth? How much of its data infrastructure has been developed in house versus outsourced?
(2) Information Flow
• How do ASOS’s designers understand what trends customers are looking for?
• How effectively does information flow through the company? (i.e. from from designers, to prototyping, to production)
I’ve just recently learned about ASOS and purchased two dresses after reading this post. Aside from needing some New Year’s Eve finery, your post’s keen insight regarding the intersection between operational efficiency (reducing cost through sustainable materials) and customer value proposition (young customers tend to care more about waste reduction; they also appreciate extra cost benefit) motivated me to give this company my business. My take on this is that if organizations are able to not only find but also effectively highlight to their customers the areas where what’s good for the organization is also good for its customers, they are that much better able to operate at scale.
Great to read about ASOS through the lens of a satisfied customer – with the holiday parties around the corner I have definitely noticed a steady increase in ASOS packages at HBS, so you’re not alone.
I have some follow-up questions after reading your discussion:
• It seems like ASOS has cut its innovation efforts to simply ‘copying’ the designs the celebs are wearing. As a frequent visitor of tabloid websites like the Daily Mail, I was wondering how ASOS figures out which celebs are ‘fashionably hot’ in the eyes of teenagers/ young professionals (for instance, J-WOWW versus Gigi Hadid) from the vast number of pictures/celebs that are shared? For instance, is there any way they are tracking the number of Instagram followers a specific celeb has?
• I agree, that a key alignment between value proposition and operation model for me (as an online shopper) is the free returns policy. I would be curious to know what return rates are, and how much more value ASOS could create if it would instead of free shipping reduce the price of clothes and add a shipping fee. In other words, is it indeed more beneficial from price-savvy consumers to have free shipping – or is is simply a perception they have?
• A key selling point to the style-savvy consumer is the ability to wear what celebs are wearing at a reasonable price. I would argue that not only price and style matters here, but also timing (if Gigi is wearing a dress at Coachella, you would want to be able to wear that during the summer festival season too). Therefore, I am curious to understand the time it takes ASOS to go from copying a design, to posting a garment for sale on their website – and if they have any specific operational strategy for this.
• I liked your argument of ASOS marketplace serving as a marketing tool to potential consumers. I am curious, however, to know how the participating designers feel about collaborating with a company that at its core generates it profit by essentially stealing designs from the designing community without rewarding them for their intellectual property.
I also love ASOS. I was introduced to it a few years ago by my coworker/friend and haven’t been disappointed with my purchases.
I’m also surprised to learn that they only have one central distribution center, which is even more impressive considering how fast their shipments arrive. Given, our enthusiasm for ASOS, I’m curious to know about their financial performance relative to their competitors.
Secondly, since ASOS sells hundreds of other brands as well as its own, How does it balance between promoting their in-house brands vs. external brands? Lastly, it will be interesting to know if ASOS would ever distribute its own brand through other online retail outlets.