Company analysis of ASOS

ASOS was first launched in June 2000 under the name of ‘As seen on screen’ by Nick Robertson (asos.com, 2010) which was later renamed ASOS in 2003.. The original idea of the company was an Idea span out of a company called Entertainment Marketing, a company set up by Nick Robertson in 1996 being paid by large brands to associate them with celebrities (Finch, J, 2008). Nick further explains that he was given the Idea by fashion, television and films. It was when he read about an episode of ‘Friends’ a television sitcom comedy owned by NBC who had over four thousand calls asking where a lamp featured in an episode could be purchased from that he realised the potential for an online website ‘As Seen On Screen’ to take off. Nick realised that he couldn’t do all of this on his own, as he’s an entrepreneur, not a fashion buyer. He knew he would have to get the best people in the business to start the company running as he first imaged it to.

ASOS is the largest independent online fashion and beauty retailer in the UK, with over thirty thousand products available with over 1500 new lines added each week. ASOS is steaming through as the market leader in the UK online fashion market (ASOS, 2010). ASOS contains men’s and women’s clothing and accessories to suit all occasions, from nightwear to shirts for men and dresses for women. The service offered by ASOS is a simple one, Robertson explains that he wants to ‘fix all the problems people complain about instead of helping them to complain’.

ASOS was started by Nick Robertson in 2000, financed partly by his older brother Nigel, according to (Davidson, A, 2010). Nigel gave Nick a £1.4 million investment, a small amount of his £29 million fortune he had profited from Freepages and Scoot (Davidson, A 2010). Robertson had some money to start up ASOS as this wasn’t his first business venture. He started in an advertising job for Young and Rubicam, he explains that this gave him good experience into ‘negotiating’ as this was primarily one of the main skills of the job at hand (Davidson, A, 2010). He moved onto a planning role with a company called Carat, taking over the Asda account. He then left ASDA to set up Entertainment Marketing mentioned before; this was set up with a friend and funded by his father who was experience in the advertising sector. From Entertainment Marketing came the start up of ASOS, Robertson realised there was a niche gap in the market for the As-Seen-On-Screen website to be established. The unique selling point was clear; selling clothes similar to those of celebrities on television. No other company had done anything like this before through an online retail store. Robertson says that he was very lucky at the time as his brother has made a small fortune and he had also just moved to Monaco with some wealthy friends. This is when he gave Nick the £1.4 million start up fee. Robertson explains that there was no formal contract made between the two brothers, but he had confidence he would make more money from the £1.4 million pounds lent to him (Davidson, A, 2010). Sirmon and Hitt (2003) make it clear through the social capital theory the importance of entrepreneurs’ ability to draw on resources from their social network for survival and growth which both Davidsson and Honig (2003) push forward in stating that Robertson had the encouragement and support from his grandfather, Austin Reed, his brother and his father which was a very important factor in the decision to starting his own company (Deakins and Freel , 2009).

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Analyse the key strategic decisions made by the company

Nick Robertson first took on the challenge of ASOS in the year 2000, the year that was believed to be the dot com bubble burst. Many previous successful e-entrepreneurial companies collapsed and had to abort trading (Deakins and Freel, 2009). Robertson realised there was huge potential in an internet based business, in the fashion retail sector primarily focussing on imitating celebrity fashion accessories. This would have been a huge risk at that point in time, but Robertson believed he had the innate attributes of an entrepreneur combined with the future of technology to really make this venture take off.

ASOS falls into the Demand-pull innovation (Deakins and Freel, 2009) as a Market need was spotted and ASOS was further created to fulfil the gap of the innovative, desirable need and to be developed into a worldwide service. Shane and Venkatraman (2000) explain this type of risk Robertson took was identifying an opportunity quicker than others and therefore will accept larger amounts of risk as competing entrepreneurs lack the understanding to appropriately assess the opportunity. Hence, this imbalance of knowledge between Robertson and others leads to a difference in opinion on the level of risk involved (Janney and Dess, 2004).

Knight explains that an economic agent would describe Robertson’s risk as an uninsurable risk as he was prepared to take the risk in return for large profits, but was very uncertain it would definitely happen (Deakins and Freel , 2009). Robertson however would also fit Kirzner’s approach of risk as he figured that his operation would be on the opportunity that the internet presented him with and decided it would be the best marketing tool. Through previous experience, some expert colleagues and cliental he attracted the desired market (Deakins and Freel, 2009).

Target Market

ASOS core target market is primarily aimed at 16-34 year old fashion conscious consumers (asos.com, 2010). ASOS attract 8 million different visitors per month, with 3.7 million registered viewers with 1.6 million being active customers (asos.com, 2010). ASOS defines an active customer as someone who has purchased something from ASOS in the last 6 months. (TheTimes100, 2009) explain that over 20% of customers are now over the age of 34 and as it continues to grow, it is appealing to a much wider fashion market. These consumers have increasing amounts of disposable income and have become more fashion conscious. Figure 1.1 shows how their market is segregated into sex and type of accessory. Figure 1.2 shows a profile of the visitors to ASOS.com.

Needs Fulfilled

Figure 1.3 highlights the increase of viewing number to the ASOS website.

ASOS was the first unique online retailer store to offer both its own brand clothing as well as branded clothing like Diesel, Paul Smith etc. ASOS was designed to provide customers with the full experience of purchasing full clothing and accessories outfits with a few easy clicks through the website. Carter, K (2010) explains that the average price is very reasonable, the site is easy to navigate and it’s painless to return items, an absolute key to having an online fashion store. Consumers of this age want to be able to view a product, see the variants in size and colour and be able to purchase the item without too many boxes to fill in. ASOS goes one stage further in offering certain services and discount to their segregated target market, an essential part of the online fashion market today.

Brand management

ASOS online site contains two branding sections; The own label clothing and the branded clothing. When the consumer clicks on an own branded item, ASOS then has the option to either entice you into purchasing more own branded items, or if they feel they can make larger profits they will offer you a branded item they feel match the fashionable item you have chosen.

Throughout the last decade, ASOS have taken on many designer brands to their website and hope to add to those brands in the future. Robertson explains:

“ASOS is now a “global fashion destination”, already taking orders from 167 countries and distributing its own freebie magazine. Soon it will have dedicated websites for America, France, Germany and more. “This is about world fashion going out to the world.” Davidson, A (2010).

It’s no wonder Robertson believes ASOS will be a global fashion destination when considering the size of their advertising budget of £1.4 million (Mintel, 2010), larger than any other internet retailer in 2009.

Over the last decade ASOS have been able to span out to 58 countries worldwide with leading markets including Ireland, Denmark, Sweden, France and the US. Leading brand such as Karen Millen, G-Star and Mango which are all outsourced companies have their own outlet shop which offers up to 70% the leading brands (Mintel, 2010).

Pricing strategies

Pricing strategies as defined by (Barringer and Ireland, 2010) as the pricing strategies most entrepreneurs use cost based pricing and value based pricing;

ASOS can either use Cost-based pricing where a mark up percentage is added to a products cost to manufacture. It’s a straight forward method and is very easy to work out the margins however it can be hard to change the price of a product if future production costs increase. New products can have a large mark-up as a large promotional material would have been created, hence people willing to purchase the product at a premium price. Value-based pricing is an estimation on what customers will be willing to pay for the product. ASOS clothing can have a value based price attached to it if they believe the customer will be willing to pay more for a certain item. For example if a similar leather jacket is £250 in a retail store, ASOS own brand £199. The jacket may have only cost £50 to manufacture but ASOS believe they can get up to £199 for the jacket they can set their prices accordingly. Value-based pricing is strongly advised as it puts the customer’s perceived value first, it can often be the best way to maximise profits for a business and add value to the customer at the same time as the product is cheaper than other retailers.

ASOS offer a free delivery service for orders over £75 Mintel, (2010). This is becoming increasingly popular for online retailers as the customer is getting more for their money and don’t have to pay an extra charge to receive the goods when going to the shops can be a free experience. Emails are often sent out stating free delivery on orders between hours of 12pm-2pm, often working lunch breaks; people have time to access the internet for pleasure and hedonistic benefits; (Kapferer, J, 2008) explains that his builds the feeling of a relationship between the consumer and brand, the consumer is much more likely to purchase from a brand you feel something towards. They also offer 20% discount to students (asos, 2010) one of their largest core markets in their target market.

Route to market – insource vs outsource

ASOS have grown as a business significantly in the past 10 years, which has seen them selling more items than ever before. Their own label clothing has hit the roof and ASOS aren’t able to meet the demands of their sales through their present distribution centre. This has meant that ASOS have had to take on a new distribution centre in Barnsley, South Yorkshire. Logisticsmanager.com (2010) report that ASOS are investing £20 million in a new distribution centre to accommodate a sales rise of 35 per cent in the past year.

The outsourcing of branded clothes is sent from the brand to a warehouse where it is then distributed to the customer.

E-strategies – clicks and morter

ASOS falls under Michael Rappa’s merchant model click and mortar (Rappa, 2010) as it’s a traditional brick and mortar model retail establishment with a web storefront. Nick It’s a simple process; the consumer browses through the website, chooses the item of clothing, adds it to their basket, either logs in as a previous customer or sets up an account. The good are then sent to them within a few days. They then have a returns policy offering standard returns within 14 days Mintel, (2010).

Evaluate those decisions and reflect on what they tell you about entrepreneurs

Nick Robertson’s decision to create ASOS was based around the opportunity he saw in consumers wanting to purchase what they had seen on screen. The opportunity combined with the burst of technology and an articulated need which hasn’t been comprised together before to create a ‘global fashion destination’. This is supported by Bruyat and Julien (2000) who agree, viewing that, “while entrepreneurship is to do with a process of change, emergence and the creation of new value, it is also a process of change and creation for the entrepreneur “.

The decision Robertson made to start-up his own company could have be derived from the fact that his grandfather was Austin Reed, a famous entrepreneur, his father was very successful and his brother was also a very successful entrepreneur; starting .com businesses. Nick had the support he needed around him and could see how it had worked for his family members in the past. Hisrich and Peters (1998) explains the categorisation the various skills required by entrepreneurs as follows. Technical skills: written and oral communication, technical management and organizing skills; Robertson developed at the earlier companies he worked for. Business management skills: includes planning, decision-making, marketing and accounting skills; Robertson developed in the early years of ASOS when strategically deciding on the direction and growth of the company. Personal entrepreneurial skills: includes inner control, innovation, risk taking and innovation; Robertson developed these in his upbringing, family and friends surroundings. With these already in place, Robertson was able to gain funding from his brother and others to kick start the business. At the time of starting the business, many other entrepreneurs were failing in .com businesses. Robertson could see the opportunity and believed the risk could be measured and ASOS could be started. Successful entrepreneurs are able to take risk but at the same time, measure the risks involved against the power of the business Deakins and Freel (2009).

It’s clear to see from the size of ASOS at present, in its’ first ten years of trading that it has taken fashion to another level. Nothing along the lines on the ASOS concept had been invented before, people would have to look through magazines and try and match up the clothes celebrities wore. In just 2010 alone, ASOS won 13 different awards (asos.com, 2010) including e-commerce award of best direct retailer. Throughout the last decade they have won numerous awards for the growth of the company, how good their website is and how satisfied consumers are with the service. ASOS will continue to grow over the next decade, it could become the biggest fashion retailer if it continues to grow at the same speed is has done for the past decade.

With ASOS now taking over a warehouse that can hold over £1 billion in sales Davidson, A (2010), delivering direct to the USA in 4-6 days (standard for that market) with free delivery as no duty is paid for items below $200 there is no reason for them not to be able to accommodate every order which in turn will increase orders as people will be receiving their goods in time. A good service will enhance a repeat purchase from ASOS. Technology is still moving forward, more people are using the internet every day (internetworldstats.com, 2010). Social networking is growing; with the use of ASOS life, a tab on their website, they are connecting with the world with real-time social networking with twitter, facebook and the discussion board to share up-to-date, minute by minute news; see figure 1.4.

Strategically, Robertson decided to take the business globally which has worked for him so far, operating in 58 countries (asos.com, 2010). Which has again enabled him to open up a bigger warehouse for stock. The next steps for ASOS is for their website to be available in many different languages, something they are working on at present. Robertson has worked incredibly hard to get to where he is now, through perseverance and determination. The question is still asked whether an entrepreneur is innate or whether the qualities can be learnt by an individual. Do they develop over time and how can they be measured? Deakins and Freel (2009). One aspect Robertson certainly does have about him; people want to work with him, around him and for him, there must be something special about him for so many people to be with him and behind him for his successful venture.