asos, the next online retail model?

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Asos, The Next Online Retail Model?

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Page 1: Asos, The Next Online Retail Model?

Helixa16, rue Brey - 75017 ParisCreative Commons License

Asos,The Next Online Retail Model?

July 2012

Page 2: Asos, The Next Online Retail Model?

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Why Asos?

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ASOS is the largest european pure-player on online clothing retail- Profitable since 2003- Has delivered 63% CAGR over the last 5 years- Should exceed 1b€ in revenues by 2014 on our forecasts

International business accounts for 59% of sales- Free shipping shipping to 190 countries - No foreign warehouse- Top 5 most visited online fashion stores

What is the secret of Asos?

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Asos at a glance

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ASOS launched in the UK«As Seen On Screen» sells clo-thing and accessories as seen in films and on stars

ASOS Business model Maiden Profit

ASOS IPOASOS was admitted to AIM on the

London Stock Exchange

ASOS MagazineFree magazine on last women’s

fashion trends to promote ASOS items

2000

2001

2007

2004

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ASOS sitesLaunched American, German and French languages versions.Then, Australian, Italian and Spanish languages (2011) and Russian (2012)

ASOS officesOpened the first international office in Sydney, Australia

ASOS own label At first, a label only for women,

then extended to men

ASOS marketplaceAdd small business and customer

to customer sales to their e-commerce offer

2010

2012

2008

2011

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ASOS2012

UK 198 £m sales

(41%)+7% (vs 2011)

CUSTOMERS17.5 m unique visitors (+35%)

4.4 m active customers (+38%)

BASKETS63.5 £ average basket

+6% (vs 2011)

ORDERS11.8 m orders

+52% (vs 2011)

INTERNATIONAL284 £m sales (59%)

+103% (vs 2011)

+46% GROWTH

(2012 vs 2011)

190 COUNTRIES

AMBITION 20151 £b SALES

495 £m SALES (2012)

Source : ASOS 2012 Full year financial results

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Asos,A clear and aligned positionning

vision

mission

target

E-stores & points of interaction

Be the online Fashion destination for young adults: inspire and power Fashion discovery

Provide the best online shopping experience for fashion through one of the largest offer (branded & own label products in womenswear, menswear, …) for all prices and enriched with social platforms

- Young adults (16 to 34 years old), men and women- Highly interested in Fashion - Digital natives

- 7 country-specific websites for: UK, US, Australia, France, Germany, Italy, Spain- All devices and social networks- Asos Magazine

Source : ASOS website

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Asos: an online success story

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Asos, Skyrocketting Turnover while significant Margins

Source: Company data, Credit Suisse estimates

0m£2004 2005 2006 2007 2008 2009 2010 2011 2012

8 m£ 14 m£ 20 m£43 m£

81 m£

165 m£

223 m£

340 m£

495 m£

CAGR 2005-2012: +66%

CAGR 2005-2012: +71%

0 m£ 1 m£ 1 m£3 m£ 7 m£ 14 m£ 20 m£ 29 m£

42 m£

Revenues EBIT

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A Growth fueled by Innovations

0m£

100m£

200m£

300m£

400m£

500m£

2004 2005 2006 2007 2008 2009 2010 2011 2012

ASOS own brand (2004)

ASOSCosmetics

(2005)

1th online fashionshow UK (2006)

Asos Magazine(2007)

ASOS outlet(2008)

CollectionASOS maternity

(2008)

ASOS for children(2009)

Designer Store(2009)

ASOS Life(2009)

Launch inUS, France &

Germany(2010)

LaunchAustralia, Spain &

Italy (2011)

Facebook Store(2011)

Mobile & Marketplace

(2010) ASOS Apps(2012)

ASOS Salon(2012)

CollectionASOS for men

(2007)

Source: Company data, Credit Suisse estimates

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Expected sales growth over the next years in a gloomy market

0 M£

200 M£

400 M£

600 M£

800 M£

1 000 M£

1 200 M£

2009 2010 2011 2012 2013e 2014e 2015e Uk Sales International Sales

ASOS sales growth, UK & International

Source: Wells Fargo Securities estimates, December 2011

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It delivered its 1st operating profit in 2003, only 3 years after its launch

Net-a-porter profitability is quite an exception thanks to high luxury margins

Asos compared to other Online Retailers

-27,8%

1,3%

5,5%

8,3%

8,5%

15,4%

-30,0% -20,0% -10,0% 0,0% 10,0% 20,0%

EBIT % of sales for majors e-tailers, FY 2010-2011

Source: Company data, Credit Suisse estimates, December 2010

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How does ASOS manage to be so profitable online?

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A Very Attractive Customer PropositionA Highly Effective International StrategyA Constantly Improved Cost Structure

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Womenswear

56%

Menswear

20% Accessories

16%

Beauty

8%

ASOS sales split by product

An Appealing Product Offer Is the 1st Pillar of ASOS Attractiveness

Source : SG Cross Asset Research

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A large range of products

Zappos

Forever 21

Asos

Debenhams

La Redoute

M&S

Zara

H&M

0 1 000 2 000 3 000 4 000 5 000

Tops & T-shirts Blouses & Shirts Dresses Jeans

In Europe, Asos has the leading range proposition available, parti-cularly targeting the 18 – 34 fashion forward.

ASOS Womenswear Range VS global peers, Full Price, August 2011

Source : Company websites, Deutsche Bank

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With well targeted prices and a very competitve entry level

20 € 285 €

0 €

H&MZARA

TOPSHOP

URBANOUTFITTERS

ASOS

60 €

255 €

485 € 485 €

40 €

10 € 20 € 25 €45 €

20 €

top priceentry price10 € 40 € 20 € 60 €

25 € 255 €45 € 485 €

Source : Company websites

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Serve by a highly convenientservice proposition

Cost of delivery Free4 £ for UK

and above for international

5.95 $ - 6.95 $ for USFree above 50 $ for US

Free shipping above 75 € for EU

Up to 4 days in UKup to 10 days and more

in EU

4 days for UKand more for international

Free for UKAt your own cost

outside UKAt your own cost

4 -> 10 days

Free

Speed of service

Ease of return

Source : Company websites

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0

500

1000

1500

2000

2500

3000

3500

4000

4500

ASOS

Bersh

ka

Pull & Bea

r Zara

H&M

New Look

Next

M&S

Deben

hams

ASOS is a good example of a brand that has made of its community a strong pillar of its business model

ASOS facebook likes per £1m of sales VS global peers,August 2011

Asos, The most «liked» Fashion retailer

Source : SG Cross Asset Research

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The 2nd visited clothing retailer on the planet, a strong indicator of ASOS appeal

Postion Name Average Daily Visitors (000s)

1 VANCL.com 920

2 ASOS Plc 749

3 HM.com 606

4 Nike 465

5 Moonbasa.com 458

6 Trendyol.com 380

7 Inditex Group 357

8 Bonprix 353

9 Forever 21, Inc 327

10 Limited Brands 317

Retail Apparel 18 001Total

Source : Comscore Ranking

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ASOS Marketplace - 2010

One of the largest Fashion Marketplace with:• 65,000 products listed • 500 boutique sellers from 95 countries • 28,000 individual sellers from 98 countries

Customer Value AddedGet access to small brands and designers, but also to vintage products. And get the opportunity to sell their own items and creations.

ASOS Benefits• Offer the largest range, through own & external brands,

small retailers, designers and vintage • Engage your customers giving them the chance to sell

and get inspired by other customers

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ASOS Fashion Finder - 2011

Social platform to see the new trends and the most popular looks & outfits among the community. Around 134,000 outfits created and 174,000 items of user generated content.

Customer Value AddedBe in the known about Fashion thanks to a large choice of trendy looks created by other customers and get inspiration to develop their personal style

ASOS BenefitsEstablish ASOS as an authority of Fashion Source new it brands and products for freeMake profit of a social platform with very active users (1.9m social comments and votes)

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ASOS Mobile Website and Apps [2009 – 2011]

Since 2009 ASOS website is available also on mobile phones. Mobile sales rose 800% Y-o-Y in 2011, and should stand for 20% - 30% of global sales in 3 years for Nick Robertson (ASOS Ceo).

Customer Value AddedNot only get access to the ASOS offer at any time through any device, but also discover new looks and brands through the magazines

ASOS BenefitsMake buying at ASOS easier and available on all the Internet devices Enrich the shopping experience adding contents through the magazines

ASOS MOBILE WEBSITE

SCAN TO SHOP

ASOS MAGAZINE

ASOS MEN’S MAGAZINE

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A Very Attractive Customer PropositionA Highly Effective International StrategyA Constantly Improved Cost Structure

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ASOS highly efficient International strategy

ASOS fast International expansion is in part due to its online-only model, as no time is required to hunt for new store locations and fit out new outlets.

But ASOS has also been very efficient in replicating its successful UK strategy of lowering delivery charges and improving services to drive growth in new markets.

From a UK e-tailerto a multi-country web platform

ASOS global strategy roadmap

Source : ASOS 2012 Financial Report

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Emerging markets, the next ASOS growth opportunity

China is already the 6th largest country by sales for ASOS. And there’s a huge potential since the online apparel market is relatively underdeveloped and ASOS proposition is likely to be well-received.

ASOS is expected to make much faster progress into immature markets than other traditional European retailers, especially in China.

ASOS exposure to emerging markets vs Global peers,% of global sales in 2010 and in 2015e

2010 % sales in emerging markets 2015e % sales in emerging markets

0%

10%

20%

30%

40%

50%

60%

70%

80%

Inditex Esprit ASOS H&M Marks & Spencer Debenhams Next Primark

Source : SG Cross Asset Research

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A Very Attractive Customer PropositionA Highly Effective International StrategyA Constantly Improved Cost Structure

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Reinvesting Gains In Customer Proposition To Drive Growth

Payroll & sta�Delivery costs recovery Warehousing

Marketing CostsProduction CostsOther Opex Costs

13,5% 8,5%

9,4%

6,4%

3,9%

4,3%

1,1%

0,6%

6,0%

4,8%

2009 2010 2011 2012

112%

84%

38%

16% All lines of the P&L have seen efficiency gains since 2009. A noteworthy effort has been made on staff and warehousing costs.

As a result delivery is now a cash investment for ASOS while it was a source of profit in 2009.

Source : ASOS Company Reports

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A Model inspired from Online and Fashion Best Practices

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Amazon and ASOS, same vision : customer obsession…

« We start with the customer, and we work backward »

Jeff Bezos, Amazon CEO

« Do what’s right for the customers, not what’s right for the business »

« ASOS is aiming to become the Amazon of Fashion »

Nick Robertson, ASOS CEO

« We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better »

« It’s all about changing the perception from ‘what can we sell’ to ‘what customers want’ and if we can sell some of that… then that’s fantastic! »

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Amazon and ASOS, Same Pillars…AMAZON key pillars ASOS key pillars

Serve customers, ever better and in ever more ways, by improving customer proposition

through continued efforts to :

ASOS superior customer proposition is at the heart of all that we do.

Its credo: innovate restlessly to offer the best shopping experience through:

Reduce prices of products & services

The best offer & services at the best price

Increase selection of products offering

The world’s best Fashion selection

Increase in-stockinventory availability

The « best in class »products availabilities

Source : Jeff Bezos and Nock Robertson interviews

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Inditex model… An Inspiration for ASOS Fashion Best Practises

INDITEX positioning ASOS (initial) positioning

This positioning requires to design “hot” products that capture the latest consumer trends and renew constantly your offer to stay on the edge

Customer value proposition:Give to a customer segment the latest Fashion trends from catwalks at affordable prices

Customer value proposition:Offer red carpet replicas and copies of dresses worn by actresses at affordable prices

Key resources: 1. Highly fashionable product design2. Fast speed to market (lead time)3. Cost structure optimization

Key resources: 1. Highly fashionable product design2. Fast speed to market (lead time)3. Cost structure optimization

Customer target: Highly sensitive to latest Fashion trends Price conscious

Customer target: Young, net-savvy Fashion Forward Price sensitive

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Inditex fast-fashion, the best way to match with the latest customer trends

INDITEX Fast Fashion System 2 key pillars

Highly fashionable product designOffering consumers a product they value more elicits a greater willingness to pay from customers and make them less willing to risk waiting for a clearance sale and possibly experience a stockout.

Short production & distribution lead timesQuick responsiveness enables frequent changes in product assortment and more flexibility to adapt to the latest customer trends.It yields significant value for firms by better matching supply with uncertain demand.

Key resources: 1. Customer trends monitoring2. Quick design lead times

Key resources: 1. Local sourcing2. Efficient supply chain

Inditex has proven that when both fast fashion pillars are combinedthe firm enjoys a great incremental increase in profit

Source : The Value of Fast Fashion, G. Cachon, R. Swinney, Stanford University, 2011

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Inditex and ASOS… Same Highly Fashionable Product Design Strategy

Louis Vuitton SS 2012 Catwalk Zara Spring 2012 Collection

INDITEX – Highly Fashionable ProductsFrom catwalks to the street

ASOS – Highly Fashionable ProductsFrom carpets to the street

Louis Vuitton SS 2012 Catwalk Alexa Chung - 2011Zara Spring 2012 Collection ASOS Autumn 2011 Collection

Both companies are very similar on these strategic pointsand really more competitive than traditional retailers

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Inditex and ASOS…Same Quick Response Strategy

INDITEX quick response strategy

ASOSquick response strategy

Short lead timeFrom 2 weeks to 2 months(While 6 months for traditional retailers)

Short lead timeAround 6 to 8 weeks(While 6 months for traditional retailers)

Local sourcingOnly 35% of sourcing from Asia(While H&M 75% of products from Far East)

Local sourcingOnly 30% of sourcing from Asia(While H&M 75% of products from Far East)

Central inventoryWarehouses only in Spainwhile shops around the world

Central inventoryOne unique warehouse while ASOS delivers to 190 countries

Both companies are very similar on these strategic pointsand really more competitive than other traditional retailers

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Asos goes beyond Inditex by setting a strong emotionnal relationship

Emotional degree

Phase ofthe Journey

Past experiences Comparison Purchase Reception Post experience

Whatshe thinks

« Let’s go on my usual

websites »

«This blog is so cool,

always like st

u� on it»

« I like Zara because

it’s cheap, but u

rban outfitters

and asos usualy fit bette

r with

me »

«There are so much choice

on Asos, it’s very im

portant

to me !» « This dress is quite

expensive for m

e but i can’t r

esist

nobody wear it my fri

ends will

like it a lot !»

« one more day to

wait !»

«I have just

checked asos

blogs and marketplace it’s great!»

She loves fashion and always take time to check the last trend on the web, she knows ASOS because of her friends and blogs

3 or 4 blogs that she likes and check 1/2 hour per week

Spend 30 min by day on Facebook, to chat mainly

Goes to H&M with her friends time to time because it’s near her house

She likes to read and share fashion magazines with her mother

She spends most of her shopping time comparing brands but also products. She’s looking for a product not for a brand. Her shopping time is mixing with her social activities and even with her studying time

The product have only taken 3 days to arrive

The more she goes on ASOS, the more she likes fashion world and feels close to it

Looking for her credit card and order

Waiting for her dress

The dress is arrived

Goes on Asos blogs and marketplace

Zara, Urban outfittersand Asos are all open at the same time

The buying decision is taken

Facebook and her favorite fashion blog are open

Openning her web browser

«I can return my products for free»

«The shipping was fast and free»

«Asos is a great place to shopping because it’s not only a showcase of products but a place to discover»

«Asos put the last trends in an a�ordable e-store»

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Is Indi-Zon the real name of ASOS?

pure playermodel

fast fashionmodel

• Highly fashionable • Product design• Affordable Prices• Short Production and

Distribution Lead Time• Local Sourcing• Central Inventory

• Customer obsession• The largest selection• The best prices• The best availabilities• The best services

• Highly fashionable • Product design• Affordable Prices• Short Production and

Distribution Lead Time• Local Sourcing• Central Inventory

• Customer obsession• The largest selection• The best prices• The best availabilities• The best services

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In a constantly changing world, companies can no longer do business in the same way as in the past. Indeed, companies now have to steer a course through a world where everything is changing at a high speed . It is forcing them to rethink their strategic choices along completely different lines. Those firms able to rapidly identify disruptive innovation and take up adequate strategies can gain the upper hand on competitors and become the next winners.

To build such strategies, Helixa has devised a series of new tools and proceeds by combining creativity with analysis to imagine for its clients what has as yet never seen light of day. With its wealth of experience in such sectors as luxury goods, media, retailing, chemistry, energy and internet and given its design thinking inspiration, Helixa can offer highly effective tailor-made solutions. Helixa’s team mixes engineers, strategists and designers.

Strategic Innovation to reinvent businesses

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