With infrastructure in place to support continuing growth, ASOS is seeking further opportunities.
With sales increasing 94% to GBP15.6 million for the 6 months to September 2006 it is no surprise that ASOS has been channeling funds into increasing its staff head count and improving its warehouse facilities. Operating costs have increased by GBP2.8 million but the benefit of this investment is that the company produced a profit before tax of GBP269,000 against a GBP44,000 loss for the same period last year.
The online retailer is continuing to expand its product range from the current 4,000 plus product lines. It plans to grow its own branded product by introducing a premium range, in which the average price of a dress will increase from GBP25-40 to GBP65-70, with obvious benefits for margin. ASOS is also increasing the amount of branded product it sells – currently 30%. Although this will not have a similarly positive effect on margin, the presence of desirable brands – such as Diesel and Chloe – will help drive hits on the site.
Looking further ahead ASOS is not content with just UK growth, believing its formula, copying celebrity fashion, has far reaching appeal. This deduction seems logical, given the power of the global media, but inevitably there are limitations. While icons like Jennifer Aniston and Kate Moss may have global appeal, there are not sufficient celebrities in their league for ASOS to keep its extensive product range fresh. Furthermore, celebrities in this pool do not necessarily resonate with ASOS’ existing UK shoppers in the same way that ‘girl next door’ Colleen Mcloughlin does.
Consequently the benefits of global scale will only be reaped on a limited product range. Though there is still plenty to play for in its home market, it does need to have the foundations laid to become a global player to ensure continued growth, and to fight off competition. While international expansion is challenging, ASOS’ plans to develop its in house IT team reflect the company’s commitment to further organic growth both in the UK and abroad.
Source: Verdict Research
