Fashion Retail Marketing: ASOS Marketing Audit

UNIVERSITY OF SOUTHAMPTON Winchester School of Arts Fashion Retail Marketing:

ASOS Marketing Audit Written by - Mengxuan Zhang Degree of Study – BA Fashion Marketing Deadline – 07/06/2013 (Extended) Date Submitted – 24/05/2013

Word count: 4,120

1.

Executive Summary

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The objectives of this marketing audit are to evaluate the Asos company and to define its future opportunities and challenges. The report is divided in four sections. First, the company will be internally investigated from the point of view of brand value, positioning, key strategies, financial performance, and marketing mix (including product range). Next, according to the situation analysed in the first section, the macro environment trends that affect the company will be conducted using the PESTLE tool. Following this, the external opportunities and threats that are defined based on PESTLE, as well as the internal strengths and weaknesses that are outlined from the company analysis, will be summarised in SWOT. The micro environment of e-commerce is also analysed in this part. Finally, major opportunities and challenges will be critically researched with recommendations given on foot of same.

As a result of the audit, suggested actions that can help the company to improve are summarised: • To improve the delivery service to be more efficiency and make parcels tractable in aboard by cooperates with regional shipping companies.

• To communicate via local social platforms in countries where major western social networks are banned by the government; • Use China as a spring board to break into other Asian countries. Viral marketing can be adopted in Korea. Brands collaborations, subculture collections, and magazine promotion can be adopted in Japan •

Reduce the return and exchange rate to save operational expense by improving fits function

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Focus on developing BRICS and MENA market

Marketing Audit Frame

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What is ASOS?

Company Introduction

How is it doing financially?

Positioning,

How do we evaluate the E-commerce micro trend?

Financial Performance,

What are ASOS’ key strategies based on the micro environment of digital market?

Key Strategies (include CSR& Ethics)

What are the global macro market trends?

How would these factors affect ASOS?

How to conclude the pros and cons of ASOS based on the company analysis ?

Marketing Mix (include product range)

Macro Environment Analysis (PESTLE)

SWOT Analysis

What opportunities and challenges can be found according to Macro and Micro environment?

Critical Evaluation of E-commerce

How to grasp these opportunities?

Key Opportunities and Challenges investigation followed by recommendations

How to improve the business to face the future challenges?

Conclusion and Summerization of Suggestions

Table of Contents 1.

Executive Summary 2.

Company Introduction 2.1 Company Brief 2.2 Brand Value 2.3 Positioning 2.31 Market Position of ASOS Collection 2.32 Target Customer 3.

Financial Statement 4.

ASOS Key Strategies 4.1 Growth Strategy 4.11 Retail life Cycle 4.12 Global Expansion 4.2 Supply Chain/Sourcing Management 4.3 CSR and Ethics 5.

Marketing Mix 5.1 Product Range and Segmentation 5.2 Price Range and Pricing Strategy 6.

Macro and Micro Environment 6.1 PESTLE Analysis 6.2 Micro Environment Evaluation: E-commerce 6.3 SWOT 7.

Opportunities and Recommendations 8.

Challenges and recommendations 8.1 The Expansion Hindrance: Delivery Time and Parcel Tracking 8.2 Reducing Returns and Improving Fits Function 8.3 Communication challenges 9.

Conclusion Appendix 1 Internationalisation Appendix 2 – Delivery service Appendix 3- Place and promotion factors in the Marketing Mix A3.1 Promotion A3.11 Sales Promotion A3.12 Communication A3.2 Place Appendix 4 - PESTLE Evaluation A4.1 Political A4.2 Economic A4.3 Social A4.4 Technological A4.5 Legal A4.6 Environmental Appendix 5 –E- commerce – Referenced Figures Appendix 6 – Advantages and Disadvantages of Online Only Retail Appendix 7 Referenced graph – Modification of Ansoff’s Product Market Matrix Appendix 8 Push and Pull factors of Global Expansion Appendix 9 Summary of Major E- tailers Appendix 10 Price Hierarchy & LFL Appendix 11 Russia and China Digital Market Situation Bibliography

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2.

Company Introduction

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2.1 Company Brief

The first online stores in the world appeared in the mid 90’s and the form of e-tailing gradually increased in popularity up to the 2000’s. An early adopter of this type of business model, Asos was launched in 2000

by Nick Robertson & Quentin Griffiths in Camden town, north London. While it only started making a profit three years after its establishment, it is now the fastest growing independent online-only retailer in Europe, and features an extensive range of merchandise on the site, adding plenty of new-in products every week.

2.2

Brand Value

The global online destination is the online selling proposition (OSP) of the company, which expresses itself as a customer’s best friend. Not only does it offer numerous choices of branded products at competitive prices, but also provides an accurate fashion zeitgeist and directional product segmentation to inspire shoppers as well as help them to find their ideal pieces with ease. The most important value propositions of the company are providing the best fashion in addition to the best shopping experience. For example, it increasingly introduces on-trend and unique fashion brands to make exclusive and new products available to its global consumers. The highly functional and effective online store enables visitors view the details of items through the assistance of 360° views, live catwalk shows, a size visualiser and other innovative functionalities. Last but not least, it emphasises fashion with integrity in relation to CSR issues.

ASOS Brand Onion

Essence Online Fashion Desitination for fashionable twenty-somethings in the globe

Values Unique OSP Up to date fashion Best fashion edits Fairly good quality

Best online shopping experience Own-label collection as an essence value Large selection of brands and product lines Well-targeted price range A friend of consumers

Personality Quirky

Fashion-conscious

Forward-thinking

Independent

Brand In Actions

Trendy

Successful

Innovative

Socially interactive Keep growing company

Global free shipping

Tailored country by country sites

Offer both high street and designer products Trade only online

User-friendly site

Multichannel marketing

2.3 Positioning

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‘Asos’ stands for “as seen on screen”. The brand name is also used as the logo. Providing fast fashion at competitive prices and stimulating fashion editorials, the distinctive brand image of Asos is well reflected by its merchandise assortment, packaging and website design. It also diversifies rapidly from other competitors in the fashion sector such as Topshop, Zara and H&M via technological innovations and social promotions.

Asos has benefited hugely from its pure-play positioning. It targets a particular market segment (twenty-somethings) that is full of Internet users. Also, unlike Amazon or eBay, Asos only trades in the field of fashion to better serve audiences within specific market sectors. Thus, its online presence is convenient to customers and enables the company to offer products at a more competitive price point than multichannel retailers. Because of its marketing edge and unique position, Asos is the fastest growing, as well as the largest online pure-play operator, in the Europe. In addition to this, it is an impressive CSR performer that is involved in many CSR activities.

2.3-1 Brand in Competition

High Fashionability

Urban Outfitters Topshop

ASOS

H& M

Zara

River Island

Low Price

Jack Wills New Look Next

M&S

Primark

Low Fashionability

High Price

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ASOS Unique Positioning High Street, Fast Fashion Model (ZARA, TOPSHOP, H&M) Merits High Fashionability Affordable price range large propositon of local sourcing short lead time short production time short product cyle high inventory turnover (Low inventory)

Pure Online Operating Model (eBay, Amazon) Merits 24/7 online customer service large brands and product mix High product availability High rate of customer conversion Wide geographic customer base Competitive prices, great value

ASOS Unique Bussiness Model Online Only Fast Fashion High Fashionability Affordable price range large propositon of local sourcing short lead time short production time short product cyle high inventory turnover (Low inventory) 24/7 online customer service large brands and product mix High product availability High rate of customer conversion Wide geographic customer base Competitive prices, great value

2.31 Market Position of ASOS Collection

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Unlike brands such as Urban Outfitters, who stock a larger proportion of third party goods than self-branded merchandise, Asos’ own-label is positioned as an essential element of the brand and the company increasingly invests in improving the value of its own collection. In the financial year ending February 2013, Asos’ own collection counted for 52.4% of its total sales (52.5% in 2012). The collection is considered to be the market leader of the whole collection and it covers a variety of products in different categories. Thus, Asos’ collection holds a strong position and has helped the company to build brand awareness, attract audiences and attain the highest profit. It also represents one of the core competitive advantages of Asos.

2.32 Target Customer

The brand is presented as a fashion destination for mainly 15 to 34 year old fashion-forward individuals who are keen on shopping from home and are searching for the latest fashions from one sole source.

Geographically, it targets a global audience and the major customers are based in the UK, USA and Australia. Demographically speaking, the target customers are aged from 18 to 23 years old (55%), as they appear to be the main consumers of fast-fashion clothes as well as being the group who have adapted most easily to Internet shopping.

The second largest sectors are those consumers aged 24 to 29 years old (20%) and 30 to 35 years old (20%), followed by a bracket from 36 to 42 years old (5%). Hence, its customGraph 2.32-1 UK Internet Visitors to ASOS Segmenters are typically students and young ted by age group (2007-2008) professionals. It is reported that Asos attracts about 80% of female shoppers compared to 20% of male (Taheera, 2011). This is because of the product range, in which 56% comprises women’s clothing while only 20% of products are for men.

Age Gender Occupation

Performance 18-­‐23 (55%) , 24-­‐29(20%), 30-­‐ 35(20%), 36-­‐42(5%) 80% of customers are female, 20% are male Young professionals and students

Ethnic Group The majority are white Income Average income Location Most of shoppers are from the UK, Europe, USA and Australia.

Table2.32-2 Demongraphic and Geographic Segmentation

Original Target 15-­‐34 year olds

Female and Male customers Young professionals and students All Middle Global audiences

Asos Customer

3.

Financial Position

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3-1 Financial History

3-2 Retail sales growth in 2012

3-3 Interim Results for the six months ended 28 February 2013 (Quoted from Company Financial Report Feb, 2013)

Source : Citywire.co.uk, Company report Febrary 2013, Compant report 2012

11 This year, the company has 3-4 Expected Sales Growth continued to grow while simultaneously sustaining a healthy financial position, having a steady cash flow as well as a clean stock position. Up to February 2013, it reached net funds of £45.2m. The net assets also rose, reaching £129m the six months following September 2012. In the same 6 month period, the group revenues increased by 33% to £359.7m and profits increased by 19%.

The retail sales increased by 34% to £352.3m, in which, notably, 52.4% came from own brand products and 26% were from menswear. While 3-5 ASOS Financial Performance VS Globthe sales of its counterpart ‘Urban Outfitters’ al E-tailers in 2010-2011 increased by 8.8% (include retail sale and wholesale) in the fiscal year 2012, their retail sales segment only rose by 7%.

The Chief Executive Nick Roberton claimed that the pre-tax profits grew by 19% to £25.7 million in the six month period leading up to February 2013. The company also aims to reach £1 billion in sales by 2015 (Chloe, 2013). As a result of this, the basic earnings per share2, grew from 20.8p to 23.7p whilst diluted earnings per share2 increased by 22% from 19.1p to 23.3p. Furthermore, international sales increased by 39% (£214.7m) with an impressive growth of US sales (a growth of 54%), and now overseas sales makes up 61% of total retail sales (Conti, 2013), compared to 59% in 2011/12 Source : Citywire.co.uk, Company report Febrary 2013, Com(Asos annual report, 2012). Meanwhile, the pant report 2012, Helixa, 2012, The Telegraph, 2013. company invested in the improvement of its logistic efficiency and distribution costs increased by 45%. As a result of these increased costs, the company has a lower retail margin in UK than in other countries, while the UK market unexpectedly increased by 26% to £137.6m in this period. Consequently, the average selling price decreased by 9% and the retail gross margin declined from 49.5% to 48.9%. Also, the average basket value declined from £63.30 to £60.30.

Operating resources and capability are areas which also receive continued investment from the company.

The total operating costs ratio increased by 50bps while unit labour costs (ULCs) decreased from £0.71 per unit to £0.58 per unit. Additionally, the operational cost of the new Asos China website is planned to be C£4-6m for each year to 31/08/14 and 31/08/15. In this six month period, the IT infrastructure received investment to support future growth. Communication costs were increased to support strategic markets including the UK, France, Germany, Australia and the US (ASOS plc., 2013).

4.ASOS Key Strategies

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4.1 Growth Strategy

ASOS pursues an organic growth strategy without resorting to business acquisition or merging. It archives customer acquisition and conversion through merchandise development, customer communication, and expansion strategies.

The potential of e-commerce is succinctly demonstrated by the growth of Asos, which is one of the largest contributors to online retail development in the UK. In 2013, more than 19.8 million users visited the ASOS website per month (2012: 15.6 Million). Approximately 11.1 million users registered on the site in 2013 compared to 7.95 million in 2012; 6 million (Asosplc.com, 2013) of whom shopped in the last six months compared to 4.38 million during the same period in 2012, representing a growth of 41%).

Footprints

13 4.11 Retail life Cycle

The retail life cycle curve based on PLC theory is a theory which applies to the life stages of a retailer. The four stages are innovation, accelerated development, maturity, and decline (Vernon, 1966). The data indicates that Asos penetrated the market between 2000 and 2006. Although it has now held an established position for over 10 years, it continues to expand is and currently at the stage of accelerated development.

In 2001, it joined AIM on the London Stock Exchange to raise the overall volume 4.11-1 Retail Life Cycle Curve of business and thus reduce costs. To support its global expansion, the company has over 950 employees dedicated to increasing operating efficiency, with more than 1,580 people working with Asos through outsourced partnerships.

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4.12 Global Expansion

There are a variety of entry strategies in terms of expansion within a new market; typically, these are internal expansion, Joint venture, licensing and franchising, and acquisition or merger (Moore, Bruce & Birtwistle, 2012). However, plenty of exclusively online retailers, including Asos, choose to expand their business scale through an internal online method. The full global expansion investigation can be found in Appendix 1 - Internationalisation.

4.12-1 Market Entry Method

2013

2011

2000 2010 2000 ASOS launched 2010 American, German and French language sites launched 2011 Australian,Italian and Spanish language sites launched 2013 Russian language site Launched

2010

Expansion Footprint

2011

4.2 Supply Chain/Sourcing Management

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“Online-only retailers have caused a revolution in the supply-chain business, pushing up standards in order to keep customers coming back.” - Nick Robertson

Supply chain management (SCM) is one of the most prevalent business concerns for fashion retailers.

Asos has agreements with suppliers across the world. It sends out 24 million garments every year, and its supply chain manages production, storage and delivery in the warehouse with more than 250,000 parcels handled every week. In general, the life cycle of fashion products is shorter than that of others. High street fashion retailers have to recognise and adapt to the latest fashion trends and allow frequent changes in product assortment. Asos adopts a quick response strategy to run an efficient logistics operation and therefore ensures order fulfillment and product availability. The lead time of Asos is six to eight weeks compared to the six month period of traditional retailers, which requires local sourcing and efficient logistics management. Research conducted by Helixa in 2011 shows that Asos has only 30 per cent of sourcing from Asia compared to 35% of that for the Inditex group, and 75% of that for H&M. Moreover, it replaced three warehouses in Hemel Hempstead by one Barnsley warehouse in Yorkshire with over 1.1 million sq. ft. of floor space in which the company archives a central inventory. In order to build capacity ahead of demand, ASOS plans to extend the Barnsley warehouse by 25 per cent in 2014 to meet its target of £1bn worth of sales by 2015 (Asos annual report, 2012). Cost efficiency is largely driven by operational and technological changes. Asos selected supply chain specialist Allport to manage its international logistics.

It also utilizes the LIMA (Logistics Information Management Application) software of Allport to increase visibility and cooperation across the international supply chain (Kachhwaha, 2013).

In addition, Asos adopts robust policies regarding supply quality control. It monitors production, quality and ethical standards through regular factory visits and independent garment testing.

On top of this, Asos continuously upgrades the delivery service to satisfy its consumers. A full explanation can be found in Appendix 2 - Delivery Service.

16 4.3 CSR and Ethics

The UK is widely acknowledged as a leader in this field, as many UK-based enterprises have played significant roles in spreading the importance of CSR on the global stage. Nowadays, a high level customer of awareness is illustrated by the fact that 84 per cent of consumers have a more positive image of companies who commit to social corporate actions and 62 per cent would switch brands in order to support a cause (Cone & Rone, 1994). Corporate philanthropy not only leads to sustainable development, but also benefits companies. Corporate social marketing (CSM) is a powerful strategy that enhances company image, retains good employees, engages customers and boosts sales. Asos claims that its position regarding to CSR is ethical, sustainable and involved and has reached Foundation level for its first ETI Annual Report. Indeed, ASOS was the first fashion retailer to achieve Carbon Neutral status under the Carbon Neutral Protocol.

The company makes use of marketing techniques to improve society and it is operating many corporate social initiatives in six categories: cause promotions, cause related marketing, corporate social marketing, corporate philanthropy, community business practices, and socially responsible business practices (Kolter & Lee, 2005).

Table 4.3-1 CSR Actions Cause promotions Cause related marketing Corporate social marketing

Corporate philanthropy

Community business practices

Socially responsible business practices

o The Green Room / Men’s Eco-­‐Fashion product segments are designed to promote pioneer brands with environmental ethos. o Donated £5 for every item of Africa range sold to fund for a new eco-­‐ workshop for SOKO in Kenya in 2011 o All energy directly controlled by ASOS is sourced from green tariffs o ASOS developed the course of 'Get Started with Fashion' with the Prince's Trust to educate young people how to unicycle vintage/ charity shop and shell their works on the marketplace. o Each delivered parcel contains a hand-­‐out of engaging customers to sell old clothes on the Marketplace o The company contributes to many UK charities such as The Prince’s Trust, Udayan Care, Oxfam and Retail Trust. o ASOS partnered with SOKO and helps to create sustainable, fair employment, training and skills with one of Kenya’s poorest communities. o ASOS Funded charitable trust, ‘ASOS Foundation’. It is held with the Charities Aid Foundation. o Introducing bike racks instead of car parking spaces to raise employees’ environmental awareness. o Engaging staff to be more environmentally conscious by hosting events to promote cycling and walking o Promote Cut out a kilo of CO2 to encourage members to switch off monitors and lights o 20% of ASOS employees give to charity through their pay o 100% recyclable packaging o Reduced the amount of plastic used by an average of 30% in 2012 o Reduced the size of packages to minimise transporting air o Trading with partners and suppliers processing ethically o Accelerating the use of materials whose origins are sustainable o A portfolio of innovative, third party verified emission reduction projects are employed to reduce the unavoidable emissions; projects include The Garcia River Forest project, California, The Uchindle-­‐ Mapanda reforestation project, Tanzania, The Govindapuram wind power project, India, and The Tieling Coal Mine Methane project, China.

5.

Marketing Mix

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In this section, the product and price factors will be studied, while the place and promotion elements are analysed in Appendix 3 - Place and promotion in the Marketing Mix. 5.1 Product Range and Segmentation

Graph 5.1-1 ASOS Product Range VS Global Competitors

Source : Based on the search of their online stores and Helixia case study , 2012

A key brand value proposition of Asos is providing an extensive choice of products to its customers, which has also been a crucial factor in archiving customer acquisition. Due to its online presence, it is capable of stocking over 60,000 fashion and beauty products of more than 1,000 brands including its own labels, global designers and local brands such as Rag & Bone, Vivienne Westwood, Boy London, River Island and more. 1,790 new lines are added each week and sold on eight country-specific sites. The ASOS womenswear collection is a core competitiveness, which includes 4229 styles yet the womenswear of H&M has only 1923 styles. The amount of product styles of ASOS womenswear range is compared with other retailers in the Graph 6-1. Next, it offers a wide selection of on-trend fashion products from all around the world, covering the departments of womenswear, menswear, lingerie, swimwear, footwear, accessories and beauty products. The main range is women’s clothing, while the company has increasingly stocked goods in other departments over recent years. The change of product mix is shown in Graph 6-2. Womenswear accounted for 61% and menswear occupied only 17% in the product range in 2007, while womenswear decreased by 2% (but the actual quantity of the stock was increased), and the latter went up to 20%.

18 Graph 5.1-2 Change of Product Mix

2007

2012

Womenswear Accessorises

61%

Beauty

20%

56%

2%

8%

Menswear

17%

16% 20%

: 100 Business Case Study, 2008; Helixia, 2012 Source branded items only at ASOS and specifically for its target consumers, such as Markus Lupfer for ASOS Black, Marios Schwab Lingerie, and Puma for ASOS Black Menswear.

Furthermore, the Asos aims to provide the best fashion edit, which have been embodied through some of the distinctive assortment of products, for example, a range of new fashion trends, special events, the daily edit, and more.

Asos adopts mainly differentiated strategies within three types of segmentation strategies (undifferentiated strategy, differentiated strategy, and concentrated strategy) so as to narrow down its target markets into sub-sets.

For example, the company stocks maternity, petite, and plus size collections targeted at particular groups. Apart from selling Asos label products and other designers, Asos collaborates with many designers to offer exclusive

5.2

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Price Range and Pricing Strategy

Asos has both promotional and market-oriented pricing strategies. The branded goods are priced similarly to other department stores and its own collection is priced very competitively ‘Price is an essential part of retail when compared to other similar high street brands. For example, strategy. A pricing strategy can the price range of printed white T-shirts from the Asos collechelp determine the speed at which tion is between £7.50 and £65, while the same product’s price a company achieves its marketing range is £8 to £75 in Topshop and £15 to £160 in Urban Outfitobjectives’. (Grose, 2012) ters. Asos offers self-branded as well as designer merchandise priced at various levels starting at approximately £5 and reaching a height of £565 and that is a lower range ‘Our product offer remains focused on our compared to that of Urban outfitters (£10-£699). Fur- global twenty-something customer and we ther, due to the great volume of goods, users can easily have continued to invest in improving the find various price levels within one product type. For value of our own-brand offer. This ‘first instance, 219 styles of denim jacket can be found by price right price’ approach resulted in a the search engine while specifying a price range from higher mix of full price sales and a reduction £17 to £565. Consequently, the wide price range helps in markdown spend’ (ASOSplc, 2013). the company to include customers at varying consumption levels. The price architecture has a competitive Opening Price Point (OPP), yet some designer pieces are quite expensive, so a price range bar is designed at the right side of product pages to enable visitors to shop by ideal price range.

(See Price Hierarchy in Appendix 10)

ASOS TOTAL

ASOS COLLECTION URBAN OUTFITTERS TOPSHOP ZARA H&M FOREVER 21

Graph 5.2-1

£4

£565

Asos has its own collection targeted at younger individ£4 £150 uals, typically students. This £699 collection offers high fashion £10 products at affordable prices. According to the average basket value of £60.30 (Feb£12 £350 ruary, 2013), the pricing of its own-labeled products is £19.99 £169 appropriately targeted at the twenty-somethings, for whom £2.99 £49.99 it is a reasonable and targeted pricing strategy, while it also causes a higher mix of £2.5 £36.75 full price sales and diminution of the markdown race.

ASOS Price Range VS Global Competitors

Collection Total price range includes products of Self brands and third party brands ASOS collection ASOS Black ASOS Petite ASOS Maternity ASOS White ASOS Curve

Table 5.2-2

Price range £4-­‐£565

Styles Over 600,000 (Company report, February 2013)

£4-­‐£150 £38-­‐£111 £5-­‐£120 £5-­‐£180 £13.5-­‐£107 £4-­‐£150

4229 9 659 480 21 577

ASOS Womenswear Price Range

6.

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Macro and Micro Environment

6.1

Marcro Environment (PESTLE) Ananylsis

The full macro trends evaluation can be found in Appendix 4 - PESTLE Evaluation.

Economic Political 1.The tax levels are vary in different countries 2.The customs duty on overseas parcels 3.Free trading policy in America 4.Government actions: In some countries some social networks like twitter, YouTube and Facebook are banned by the government, which causes ASOS fails to adopt its communication strategies.

5.Government regulations in terms of worker health and safety 6.Mary portas polis report 7.The OECD Guidelines to international retailers (OECD Annual Report, 2012).

Social and Cultural 1.Demographics factor- In Asian countries people are skinnier and shorter, that will force ASOS to rearrange the product lines in Asian language sites.

2.If it will expand the market into the Middle East, the relational facts will have to be taken into account.

3.In east Europe and Japan, aging issue is crucial.

The amount of young population is less than the elder, and ASOS will be influenced because there are not enough young people to be targeted .

4.Lifestyle factor- in some countries, people do not really shop online (Appendix Graph A4.3-1) 5.Culture difference affect people have different opinion on fashion 6.fashion trends are varying in countries such as print colour and fabric trends 7.Some people have preference of local well known brands than brands from other countries.

8.Its target consumer group of 15-34 is the largest composition of Internet users Legal

1.The income levels are vary and that relates to the comsuption level of customers (Appendix graph A4.21) 2.Employment levels- The employment wedges are growing, and the production costs are growing which do not heavily reflect on the price points on designer and luxury brands as their price is driven by other factors, but it will influence the price of high street fashion products 3.Costs of material and labour are increasing 4.High street product price point is different in countries 5.Rate of inflation 6.Economic growth 7.Inflation rise the production and operating costs (Euromonitor, 2012) 8. Growing E market (Appendix Graph A4.2-2/ A4.2-3) 8.Textile and clothing is the most trading segment in E-commerce 9.Euro zone stuck in recession Technological

1.3D printing 2.New manufacturing facilities can be improved to create new textiles.

3.People shop on mobile devices via shopping apps (Appendix Graph 4-42) 4.Companies are paying more attention to operational system to enable global visibility and better management control 5.Demands of new technique in production 6.Technology innovations are important to E tailers 7.Tablet users are increasing 8.Personal information and passwords can be hacked 9.Importance of security checkout

1.Legal incompetence of Designs protection will cause counterfeiting (IPO, 2012) 2.Internet Privacy 3.Account information credit card information can be stole and that will make the company be involved in lawsuits 4.Employment law 5.Child labour 6.Extensive legal checks in different countries when expand to the globe

Environmental 1.Material using 2.The use of toxic dye 3.Green credentials 4.CSR policy 5.Commercial advantage by being green 6.Greenwash 7.Energy consumption issue 8.“Throwaway Fashion� trend

6.2 Micro Environment Evaluation: E-commerce

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Conducted figures can be found in Appendix 5 –E- commerce – Referenced Figures.

The Internet is considered a new channel for retailing and has seen huge growth since the 2000’s. E-commerce is now the fastest growing market in Europe and the textiles and clothing section is reported as the most traded product group on the Internet (Heinemann, 2010).

E-commerce impacts have been positive though different from many expectations and reinforcing of existing relationships. E-commerce has led to greater firm efficiency, better customer service, and improved supply chain coordination.

-Kenneth L Kraemer (2006)

In 2008, the online market was worth a total of £101,840 million, while it increased to £169,880 million after 3 years in 2011. In the UK, the online retail trade occupied 8.6 per cent of retail sales in 2008, which grew to 10.5 per cent in 2012 (Chaffey, 2013). E-commerce has several features, including assortment, information, targeting, direct connection, and new business models, which were grouped by Ghosh as a set of advantages and opportunities of online retailing in E-commerce: A Platform for Integrated Marketing (Schmidit, 2000). From a retailer’s perspective, selling products online requires a lower cost investment than selling in stores. Online shops are easier to expand, and therefore render internationalisation a far easier goal to reach. The platform reaches a wider geographical space of users, and e-tailers have an unlimited capacity to present much more articles on websites than in physical stores. From a customer’s perspective, users can visit online shops at their own convenience, anywhere and anytime, without the limitations imposed by opening hours. Online retailers always offer a larger selection and more categories of products and they restlessly improve the online shopping experience as well as accessibility to improve customer interaction.

Table 6.2-1Risk-Benefit analysis of E-commerce

Marketer perspective

Customer perspective

Advantages and opportunities Lower cost required than offline retail Easier and lower investment to expand Large geographic customer base Unlimited capacity to present articles

Shopping convenience (anywhere at anytime) More choices High comparability More product info

Source : Based on Passenheim 2003, p.99

Disadvantages and risks Cannot reach non home shopping customers Hard to gain customer trust High cost of return handling Internet users are young generations in general

Short of physical contacts Lacks of social aspect Effort to return Additional delivery costs

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6.3 SWOT (See Detailed Investigations in Appendices 6, 9, 11)

Strength

Weakness

1.Online only operation saves time and cost, and is easier to achieve global expansion 2.Unique position of ‘online fashion destination for twenty something’ gives a marketing edge 3.Via technology innovations, Asos creates a user-friendly site that delivers good shopping experience 4.Multichannel marketing (Marketplace, fashion finder, magazine, blog), strong communication (Twitter, Facebook, YouTube, Instagram, Tumblr etc.) and customer relationship management 5.Wide geographical coverage, high rate of customer acquisition and conversion. Vast amount of loyalty customers.

6.24/7 customer service 7.Wide range of product lines and brands. Products are refreshed weekly 8.High fashionability and fairly good quality with well-targeted price point 9.Green credentials, ethical involved, fashion with integrity. Joint in the Ethical Trading Initiative (ETI) 10.Providing the Best fashion edit 11.Attracting customer by efficient delivery with free of charge or low charge 12.Independent language sites improve accessibility to international audiences 13.A successful Fast growing e-tailer who have strong brand reputation in digital fashion market 14.Accepting foreign currencies and many payment types

1.E-tailing has bad publicity of poor delivery performance in general, and it takes effort to shift consumer’s mind.

2.It unable to attract non home shopping customers 3.Shoppers will hesitate to purchase, as they cannot see the quality of fabrics and workmanship 4.Asos is not as well-known as Zara or H&M in Asian and Latin American countries 5.The lead-time is inefficient to Asia as goods are delivered from the only one warehouse in the UK 6.Asos has to handle large returns due to sizing problems, because customers unable to try products on.

Fits-function has to improve to avoid returns 7.Some international customers cannot track their products when it is out of the UK. 8.Asos digital magazine is only in English, which can be translated to different languages to please foreign readers

Opportunity 1.The company can focus on the expansion to BRIC area and MENA market, where shows trade-oriented economies.

2.The new china site of Asos is a good opportunity to increase sales and enhance brand awareness, and it is a good start to crack into Asian markets.

3.English is the most common Internet language, and clothing and footwear is one of the biggest segments of e-commerce, which can help asos to expand.

4.Online retail is a fast growing channel of retail sales, and it is now occupied 10.5% of retail sales in the UK (Chaffey, 2013). This is because that people are more and more aware of the convenience of online shopping and are attracted by value prices of products sold on Internet.

5.Asos can utilize more pop-up shops as what they did in Sydney, Australia, because is a good locally targeted marketing initiative to better the brand recognition.

6.Improving delivery time to satisfy consumers of countries that are far from the UK. 7.The company can develop more cooperated products with local brands and providing on country specific sites, and also use celebrity endorsement or launch celebrity cooperated products to catch people’s attention.

8.Chilrenswear segment can be developed in the future, as many online shoppers are young parents.

9.Increasing payment types and currencies acceptance Threat 1.Due to the incomplete legislation of design protection in mainland china, Asos will have to deal with counterfeiting when it gets popular in there.

2.Multichannel retailers realised the importance of online trading and increasingly invest in digital market.

3.In general, it is harder to gain customer’s trust for E-marketers.

4.The growing of material and labour costs 5.As it is free to return, it costs a lot in return handling 6.Season and climate factors, and different local fashion tastes and opinions will affect globalisation 7.Some social media are banned in many countries and asos’s social promotion would not reach them.

8.More and more british E-tailers become popular such as Yoox.co.uk and Very.com. Asos also has many international counterparts such as Sole struck in the USA, Namish.com in the Middle East.

9.Consumers will have preference on local e tailers and Asos has to compete with them in regional stages.

10.HR issues are vital to any enterprises. In 2012. ‘Buying director Caren Downie, womenswear design director Sarah Wilkinson, product director Robert Bready and head of womenswear buying for trend brands and branded accessories Moriamo Oshodi have all left or are due to leave Asos’(Drapers, 2012).

23

24 7.

Opportunities and Recommendations

By analysing the macro and micro environments using the PESTLE and SWOT tools, many opportunities can be identified. In this section, recognised previous opportunities will be evaluated.

7-1 Forcast Growth in Retail Sales 2012-2016

Asos’ new Chinese website will be the first Asian-specific site of the company, however its ambitions do not stop there. It is forecast that there will be a growth in retail sales of 64.2% in the Asia-Pacific area between 2012 and 2016 (Barclays, 2012). Asos can look to other Asian-Pacific countries for increasing profit after it becomes well-established in mainland China, and in particular in South Korea and Japan. This penetration can be archived by using language specific websites, viral marketing, brand collaborations, exclusive subculture collections, and magazine promotions.

7-2 World Retail Market Comparison (souce: Lowe.2012)

25 The first thing to note is that South Korea has the larg7-3 Forecast growth in E-commerce est digital market which is forecast to absorb the largest penetration of e-commerce by 2016 in the world, which means a vast amount of Koreans are likely to shop online.

Further, many foreign high street apparel retailers have successfully forced their way into the market, such as Zara, Forever 21, H&M and American Apparel, indicating that people are likely to appreciate Asos. It can also be said that Koreans generally have a large appreciation for foreign fashion brands.

The best approach in finding a place within the South Korean market is to use viral promotion. Koreans are very taken with popular fashion bloggers, who post their looks on the Internet, spurring thousands of fans on to purchase these outfits. Hence, with the establishment of its Korean language website, the company can collaborate with celebrity bloggers and make waves using popular pieces that they have worn to acquire customers. However, Korean people place a heavy emphasis on the quality of material and workmanship, so the brand promotion also has to focus on the merchandise’s quality.

Secondly, Although Japan is a well-developed market, its economic strength and people’s level of income have enabled a great purchasing power in the fashion field which cannot be underestimated. The Japanese economy is the third largest in the world with a slightly lower GNP than the USA and China (Japan Guide, 2012). The Japanese are a very fashion-conscious people, and they have created trends and subcultures throughout history such as Dekotora and Gyaru. More importantly, Asos’ counterpart Topshop/Topman is already one of the most popular brands in Japan. Topshop launched its first store at Laforet Harajuku in 2006 under a wholesale contract with Arcadia.

It entered the market via a collaboration with a Japanese company, T, which acquired the marketing rights of Topshop and Topman in Japan.

In 2010, Topshop opened its Shinjuku flagship store in Tokyo occupying 1,000 square metres 7-4 GDP World ranking (FashionMag, 2010).

It is recommended that the Japanese website adopt the same module as Asos’ Chinese website as the target consumers are in similar demographic groups. To promote the brand, Asos could introduce exclusive collections inspired by Japanese fashion subcultures, stocking more local high street and designer brands such as Master Mind Japan, Neighbourhood and Bape. Moreover, Asos would also be able to promote their products in local fashion magazines. There are a number of popular fashion magazines targeted at young readers such as Boon, the street fashion magazine for teens, as well as BOAO, a fashion magazine targeting working women in their 20s.

At the same time, global expansion is a multi-point development progress and is not just limited to Asia.

The opportunities are in both the BRICS (Brazil, Russia, India, China, South Africa) and MENA (Middle East, North America) markets, which show a strong economic growth as a result of which plenty of western retailers are trying to break into those markets.

26 8.

Challenges and recommendations 8.1 The Expansion Hindrance: Delivery Time and Parcel Tracking

A critical challenge of the company is discovering how to accelerate the shipping times in Australia (711 days), Russia (9-20 days), and Asia-Pacific (9-20 days). In the future, the company will expand further into these areas, while the barrier is that the delivery service is time consuming and results in consumers leaving for retailers with locally-sourced distribution. Although the central inventory in the unique Barneys warehouse is a key strategy of Asos which will increase the efficiency of logistics management and save costs, this benefits of this method will no longer apply with increasing customer demand in Australia, Asia and Russia.

If Asos develop another warehouse in China, fast distribution and customer satisfaction can be achieved in a wide range of countries. and Chinese shoppers will not have to pay additional customs duty. Although labour and operational costs will rise, the sales profit would positively cover the expense.

The second issue regarding the delivery service is that customers have made complaints about the fact that that a parcel cannot be tracked once it is outside the UK. This is a common logistics problem of all international retailers, but Asos can resolve it via cooperation with regional shipping companies. Therefore, a parcel could be tracked by third parties when it is overseas.

8.2 Reducing Returns and Improving Fits Function

The company invests large amount of money in dealing with returns and exchanges. It is a major challenge for any company to reduce the return rate, which can be partially achieved by increasing the authenticity of the pictures of products and by adding more product information. However, the “fits” function has to adequately improve in order to decrease returns with sizing reasons. It is difficult for consumers to find the right size in an item of clothing without trying it on; a major barrier to the development of fashion e-tailers. Asos encourages customers to use its Size Visualiser to enable accurate choices, but it is not practical in what it asks consumers to do.; the tool is very complicated. Nathalie Pierrepont, a journalist in The Business of Fashion (2012) comments that ”the company is in the very early stages of testing a proprietary method that is less tech-based than most solutions on the market.“ Two methods are recommended to solve the sizing problem. Either Asos must invest in the enhancement of its “fits” function and make it more user-friendly or it must employ existing tools such as MyTrueFit, for which Macy’s, Nordstrom and Guess pay monthly to use.

8.3 Communication challenges

27

8.3-1 World Map of Social Networks (O’neill, 2011)

One of the merits of Asos is its use of social media in communicating its brand. The challenge is how to adopt this strategy in a global scale along with the advancement of the business. For example, Facebook is a fantastic platform for promotion in many western countries, and especially English-speaking countries, but it is not as popular in nations such as Russia and China, where social networks are dominated by local platforms. In countries such as Russia, Ukraine, Azerbaijan, Kazakhstan, Moldova, Belarus, and Israel, the major communication platform is VKontakte, which has over 200 million registered users. In china, the local versions of Facebook and Twitter are Renren and Weibo respectively. Asos needs to adapt its communication strategies to regional social networks when entering a new market. Lastly, the digital magazine could be translated into different languages to give a better reading experience to international customers.

28 9. Conclusion

To conclude, Asos is an excellent ambassador for fashion e-tailing. Its high level of accessibility and the usability of its website, the various brand and product mixes, the appropriately targeted pricing, the multichannel communication, the effective customer relationship management (CRM), and fashion editorials have all been crucial in building its success. The free shipping policy and tailored country-specific sites are also important factors in accelerating its global expansion. Its unique USP and online presence provide it with a vast space for development in the future. It has the potential to firmly archive internationalisation.

However, the company still has to overcome barriers to growth and expansion. Recommendations regarding opportunities and challenges are summarised as follows: • To increase the efficiency of the delivery service and to make parcels traceable abroad by cooperating with regional shipping companies.

• To communicate via local social platforms in countries where major western social networks are banned by the government; • Use China as a spring board to break into other Asian countries. Viral marketing can be adopted in Korea. Brand collaborations, subculture collections, and magazine promotion can be adopted in Japan • tion

Reduce the return and exchange rate to save operational expenses by improving the “fits” func-

•

Focus on developing the BRICS and MENA markets

29

Appendix 1 Internationalisation

There are a variety of entry strategies for new market expansion, typically, internal expansion, Joint venture, licensing and franchising, and acquisition or merger (Moore, Bruce & Birtwistle, 2012). However, plenty of pure online retailers, including Asos, choose to expand their business scale through an internal online method. Going it alone is high risky, which, on the other hand, brings high returns. Conceptually, E-tailers have lower barriers to go global than offline retailers, which is also the key reason for Asos’ fast expansion. It is indicated that English is the top one Internet language in the world (Graph A1-1, A1-2), which gives priority for English E-tailers to reach international English shoppers. Besides, pure online retailing saves the time and cost for store location hunting.

Appendix Table A1-1

A1-2

Top Ten Languages Used in the Web

(Number of Internet Users by Language)

TOP TEN LANGUAGES IN THE INTERNET English Chinese Spanish Japanese Portuguese German Arabic French Russian Korean TOP 10 LANGUAGES Rest of the Languages WORLD TOTAL

Internet Users

by Language 565,004,126 509,965,013 164,968,742 99,182,000 82,586,600 75,422,674 65,365,400 59,779,525 59,700,000 39,440,000 1,615,957,333 350,557,483 2,099,926,965

Internet Growth Internet Users Penetration in Internet % of Total

by Language (2000 - 2011) 43.4 % 301.4 % 26.8 % 37.2 % 1,478.7 % 24.2 % 39.0 % 807.4 % 7.8 % 78.4 % 110.7 % 4.7 % 32.5 % 990.1 % 3.9 % 79.5 % 174.1 % 3.6 % 18.8 % 2,501.2 % 3.3 % 17.2 % 398.2 % 3.0 % 42.8 % 1,825.8 % 3.0 % 55.2 % 107.1 % 2.0 % 36.4 % 421.2 % 82.2 % 14.6 % 588.5 % 17.8 % 30.3 % 481.7 % 100.0 %

World Population for this Language (2011 Estimate) 1,302,275,670 1,372,226,042 423,085,806 126,475,664 253,947,594 94,842,656 347,002,991 347,932,305 139,390,205 71,393,343 4,442,056,069 2,403,553,891 6,930,055,154

30

There are crucial considerations for internationalization, such as local market differences, economic/pricing, costs, distribution/fulfillment, weather, customers’ taste, culture differences, religious, other local knowledge etc. The country-by-country approach of Asos has been key to the successful global expansion. Free shipping policy and good customer service even enhance the accessibility. Asos effectively applied some successful strategies to global audience, for instances, locally targeted marketing initiatives, regional trend guides, outlets product section, and student discount. It also accepts various payment methods and foreign currencies.

Recently, the company aims to fasten the progress of immature market development and dominate market shares ahead of its competitors. In BRIC areas, the online clothing market is poorly developed, while the online selling proposition (OSP) of Asos is likely to be appreciated. The new Russian site has been launched in May 2013. In the new financial year, the company also schedules to introduce specific site for china, which market is already the 6th largest market of Asos. This site will differ from others by having an independent business module.

A1-3 Considerations of Expanding Overseas

31

Appendix 2 – Delivery service

The company continuously upgrades the delivery service to please consumers. It masters the consumption psychology of its target groups and offers free shipping and returns to 241 countries (Asosplc.com, 2013) to lessen their hesitations of purchasing. In the UK, the free standard delivery is within 4 working days with the charged options of Next day, Saturday and evening deliveries. Orders can be shipped and returned via collect + service anywhere in the country. For international users, there are standard and express delivery options and the time measured according to the distance. All orders can be tracked. In 2012, Asos introduced a new third party managing returns hub in Sydney to fasten the operational process. Also the shipping time speeded up to 2 days in USA (Asos official site).

Appendix 3- Place and promotion factors in the Marketing Mix A3.1 Promotion A3.11 Sales Promotion

At Asos there is an independent outlets section providing past seasoned goods at attractive discounted prices that are marked down to 70 per cent. And students get 10 per cent discount all year round among UK and some international sites. For other types of regular sales, Asos measures the effectiveness by revising the performance and then uses sales promotion as a tool to motivate certain potential customers.

It hired SmartFocus to work on Customer Relationship Management (CRM), tracking consumer profiles to study their buying behaviours demographically, so that the company would be able to promote highly relevant products to specific groups at the right time/season.

A3.12 Communication A key communication strategy as well as an important competitive advantage is the emotional relationship Asos set with its customers. It archived the best search result in regarding to Youtube, Tweets, Twitter followers, Facebook fans, and Internet users’ mention volume. Secondly, the company is highly interactive with customers through technological innovations on its website, apps, and other communication platforms. It is the second top ranking of womenswear search volume of both organic click and paid click over UK online stores (Moth, 2012). The growth is greatly driven by the strategy of multi channel marketing. The fashion finder, market places, magazines, blog, mobile apps, and other interactive promotion activities form an easy and interesting way of shopping. For example, 500,000 E-mails are sent to female customers twice a week and 100,000 E-mails are sent to males once a week (Taheera, 2010). It is reported that Asos is the most visible and interactive brand in the UK and it is rewarded as the social marketing leader (Moth, 2012). It also promote its goods via fashion edit. It offers celebrity inspired outfits in the fashion event segments on the site or linked from its fashion blog. Additionally, viral marketing activities such as refer-a-friend, and loyalty programmes were placed to engage customers.

The smartFOCUS platform will help ASOS to maintain customer data and realise the value of customer information by profiling customers accurately. By building sophisticated segmentation models, ASOS will be able to apply precision marketing techniques and offer each group highly relevant and timely marketing messages, helping ASOS to reinforce and enhance the existing relationship it has with its customers (EFYTimes News, 2008).

32 Referenced Figure in A3.12 A3.12- 1 Social Volume Score Index- Asos as the Most Interactive Brand (Moth, 2012)

A3.12- 2 Volume Verses Engagement Index (Moth, 2012)

A3.12- 3 Social Interactive Enagement (Moth, 2012)

33

A3.12- 4 Organic Click Ranking for the top 10 generic women’s clothing and fashion phrases between October 2011 to March 2012 (Moth, 2012)

A3.12- 5 Paid search Ranking for the top 10 generic women’s clothing and fashion phrases between October 2011 to March 2012 (Moth, 2012)

34 A3.2 Place

As an online-based company, it does not have place for customers to visit. Compared to multichannel competitors, Asos has the common pros and cons of ‘click’ business. The online pure retailing saves cost and time to expand the scale and can reach wide geographic customer base, yet people can not physically shop in its store and try on its goods. However, the company has invested over £35m in the past four years to support the technological innovations. Following the growing trend of mobile browsing, Asos invested to enable customers to access its online store via multi internet platforms such as laptop, desktop, mobile, iPad or Android device on a 24/7 basis. Currently 16% of asos traffic is from mobile (Asos official site). It built separate international sites for USA, Australia, France, Germany, Spain Italy, and Russia to fade into local trends. International users are directed to the certain sites corresponded to their regional specific currency, sizing and possibly language. In April 2013, Asos invested largely to upgrade the delivery service.

Now goods can be shipped to 241 countries compared to 190 countries in 2012 (Asos plc.com, 2013).

Appendix 4 - PESTLE Evaluation A4.1 Political

A firmly established global brand, Asos have to consider various government regulations in terms of economical and retail legal perspectives before entry new markets, including varying tax levels, the GST, duties, tariffs, trade policy, currency policy, regulations of worker health and safety etc.

The new ASOS china site will be launched in October 2013, while the local currency policy makes the price of imports to be significantly higher than market price. The company has to consider how to price the product to compete with local A4.1-1 most visited site for 15-34 year olds in the world internet players such as Vancl. com, which is already the most visited site on the planet for 15-34 year olds (920,000 per day), Asos as the second top ranking (749,000 per day) (comScore, 2012). In countries such as Pakistan, Syria, North Korea and Iran, many global social media networking sites including Facebook, Google+ and Twitter are banned by the government, the strong communication of Asos on some of social platforms will therefore unable to reach these countries’ audiences. And consequently, local media promotion channels will have to be used.

A4.2 Economic

35

In 2013, the euro zone economy still stuck in the recession, only Germany shows positive performance (Giles, 2013), and that causes slow sales in many European courtiers like Greece and Italy, as people cut down overall spending when suffer in the economic downturn. Thus Asos has to focus on new potential markets in Asia and Latin America that are forecasted strong growing trade-oriented economies according to Organization for Economic Co-operation and Development (OECD)’s report of Growth and Sustainability in Brazil, China, India, Indonesia and South Africa (OECD, 2013). Secondly, the income level directly relates to consumption level. While in some countries as India, per capita income is about Rs 5,729 per month (2012-13), ranked 142nd in the world (EconomicTimes, 2013); therefore, the local high street price point is much lower than that in the UK or other western countries. Hence Asos might have to reposition the brand market level or markdown prices to gain local market share.

The growing of production costs has larger impact on high street brands than designer brands. 30% of Asos products are sourcing from China (Helixa, 2012), in where the material and labour costs increasingly grow in recent and therefore will reflect on Asos’ price point. China will no longer be the first choice of Low-cost country sourcing (LCCS), and Asos can have potential options like Indonesia, Bolivia, Brazil, and Mexico.

Graph A4.2-1 Retail spend growth rate (Lowe, 2012)

36

Graph A4.2 -2 Online Share of Retail Trade 2011 Combined sales ÂŁ169.88bn

Graph A4.2 -3

A4.3 Social

37

There are several demographic facts heavily effect on retail performance. First, the target consumers of asos are fashionable twenty-somethings, so that sales can be poor in significant aging countries such as Japan and Germany reference. Then, skin colours and facial structures of different races will affect consumer’s choice on beauty products, for example as people with dark skin tones are likely to use brown foundations or sheer powders, while southeast Asians prefer using very pale foundations with no browsers. Also, people’s heights and weights are different in regions, for instance as Asian people are shorter than white and back, so that they will potentially buy from Petite range of Asos. Obesity rate is higher in countries such as USA (79%), Argentina (75%), Mexico (73%) and Australia (71%) than the 66% rate in the UK (Stone, 2010). Asos, as a result, has to develop wider size range in these countries, also its plus size range will sell more to these audiences.

Furthermore, due to cultural and religious reasons in some Arabic countries, beachwear products like bikini swimsuits would not be sold. The targeted product range can be developed in the future, as Middle East is a big potential market.

A4.4 Technological Technological factors are vital to digital brands. Technological innovations have been competitive advantages for Asos, who provides efficient source of technology service. For the target of 1bn sales by 2015, Asos increasingly invests in IT infrastructure to support growth and improve the efficiency of its operating system (CompusterWeekly, 2010). Currently, the speediness and practicability of the site are strength of asos, whose product loading spend is almost twice as fast as that of Urban outiffters on both website and mobile apps. The development of digital marketing channels is also an important investment case, its communication on Instagram, Twitter, Facebook, YouTube etc. advanced its brand awareness and boosted sales.

However, it is worth mentioning that 3D printing is forecasted the emerging trend in clothing and textile areas. Asos can be an early adopter of its technique, and introduce innovative textiles to satisfy its fashionable consumers.

38

Graph A4.4-1 ASOS IT Expense (6month period to February 2013)

(Company report February 2013) Graph A4.4-2

Graph A4.4-3 Wolrd Map of Social Networks (December 2012)

A4.5 Legal

Asos has to ensure it is abiding by local legislations when force into new markets. The negative legal issues will cause the loss of customer trust. For example, the brand image of Adidas was negatively impacted by their ignorant of blatant labour violations in 2012, as people thought they disrespected human rights (Brown Daily Herald, 2012).

Along with the growing of the brand awareness, counterfeiting problem will be more and more prevalent in nations with legal incompetence of Designs protection (IPO, 2012). This problem is serious occurred in luxury market, yet in recent, some hot brands with high fashionability are also suffered from counterfeit production in typically mainland china, including River Island, Zara, and Asos etc. (Taobao. com, 2013). On the contrary, high street retailers have to carefully avoid design plagiarism from premium designers, especially when Asos aims to provide celebrity inspired outfits. In 2007, Topshop, who has paid £12,000 in compensation and legal costs, was ordered to destroy all dresses plagiarised from Chloe (Intangible Business, 2007). Moreover, violation of internet privacy is deeply disturbing online shoppers. Asos has 11.1 million (2013) registered users. The loss of their personal information or payment details will deliver a serious blow to the reputation and also spur lawsuits according to The Data Protection Act law in the UK (DPA, 2013).

A4.6 Environmental

Nowadays, green credentials of retailers link to their brand image and reputation. Based on the Green Deal Plans (Legislation.gov.uk, 2013), retailers are enaged to be green in both producing and operating.

Unlike Zara, who was reported the ‘most toxic apparel brand’ and forced to zero chemical discharge by 2020 (Chua, 2012), Asos has done well in selling green merchandise and gained commercial advantages through being green.

Value brands such as Primark or F&F set off a ‘Throwaway Fashion trend’. Low cost garments are normally made of manmade fabrics that are hard to be recycled. The textile waste has grown from 7% to 30% in the last five years (Tillotson, 2012). Asos has been engaging consumers to sell old clothes on Marketplace, while it can pay more attention on material choosing such as use more cotton or silk fabrics than synthetic materials in the future.

39

40 Appendix 5 –E- commerce – Referenced Figures

A5-1 Revenue Developments in E-commerce (Heinemann, 2010)

A5-3 UK Retail Ecommerce Sale 2007-2013 (Elkin, 2013)

A5-2 Internet Sales According to Product Segmetns (Heinemann, 2010)

41

A5-4 UK Retail E-commerce Sales Share 2013 (Elkin, 2013)

A5-5 Forecast European Online Retail Sales 2012 -2017 (Forrester Research. Inc., 2012)

Source: SAS and Verdict Research

A5-6 Risk-Benefit Analysis of online distribution channels from a customer’s perspective

42 Appendix 6 – Advantages and Disadvantages of Online Only Retail

Appendix 7 Referenced graph – Modification of Ansoff’s Product Market Matrix (Schmidt and Döbler, 2000)

Appendix 8 Push and Pull factors of Global Expansion

Appendix 9 Summary of Major E- tailers Graph A9-1 UK Retailer Success from Expanding Globally

43

44

Price Hierarchy & LFL Comparison Approx. Margin 36%

OPP

Appendix 10

42%

56%

Good

Better

68%

Best

Object : Sleeveless Blouse

Clolour: Black, Blush, White 100% Viscose Size Range 6-18

£15 100% cotton size range 6-18

£25 100% Cotton Size Range 6-16

Colour white orange 100% Viscose Size Range 6-18

£22 100% Polyester Size Range 6-18

£30 100% Polyester Size Range XS- L

100% Polyester Trim: 100% Polyester Size Range 6-18

£25 100% Polyester Size Range 6-18

£38 100% Polyester Size Range 6-16

100% Silk Size Range 6 -18

£30 100% Polyester Size Range 6-18

£45 76% Polyester,24% Nylon Size Range 6-16

46 Appendix11 Russia and China Digital Market Situation

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