ASOS-TOUNDING!
The £5.8bn online star’s rise has become so spectacular that ‘to Asos’ is now in the language as a new word for shopping
DEPARTMENT stores may be facing extinction on an unforgiving high street, but the country’s biggest online fashion operator is proving a spectacular success.
Sales at internet giant Asos, which sells brands from Hollister to Hugo Boss, could rise by 30 per cent this year to top £2.4billion.
That would see the company, whichtargets 20-something fashionistas, soar past ailing high street giant Debenhams which sold £2.3billion of goods last year but last week admitted that a dire Christmas had blown a hole in its annual profits.
Asos will update the market later this month. But City analysts are forecasting that its soaring sales trajectory will continue this year. In a mark of its success, its name has entered the language as a verb in a similar way as to ‘Google’ and to ‘Hoover’. To ‘Asos’, means to go fashion shopping, according to analyst John Stevenson at City broker Peel Hunt.
‘They appear to be nailing it, to the extent that ‘to Asos’ has become a verb for young fashion customers,’ he said. ‘It has become the go-to platform for young fashion in the same way as Amazon has become the platform for all the other stuff.’
Amazon recently increased the level of competition in the clothing market by launching its own fashion label, Find.
That has not so far hindered the astounding rise of Asos.
An analysis by Goldman Sachs last year revealed why the high street has been left in its tracks. Asos can turn round products from design to store in just four weeks, it said. Even the most streamlined high street fashion retailer Zara takes at least three times that on average, according to Goldman. Most other retailers take far longer.
Asos launched as AsSeenOnScreen in 2000 and floated on the stock market in 2001. A decade ago sales were still only £81million but by then the writing, was already on the wall.
‘We are having an absolute stonker,’ said co-founder Nick Robertson in 2007, as an economic crisis loomed and retailers began to enter choppy waters that would continue for much of the next ten years.
‘For every pound we lose because of the economic downturn, we gain at least one more because someone turns to the internet to shop,’ he explained. At the time the company was plugged into celebrity fashions – lifting styles from both TV and the catwalks. Now it is embedded into social media, allowing its own shoppers to do much of the marketing work. Chief executive Nick Beighton neatly summed up the situation to investors last year: ‘Asos sits in a place that has never been occupied before.’ The company initially built its business on own label styles, but less than half of its sales are now in that category. The remainder includes both high fashion and high street labels such as New Look and River Island. Clothing made by online rival Boohoo is one of its biggest sellers.
Boohoo and Missguided –whose design-to-floor lead times rival Asos – also relentlessly focus on fast fashion. But Asos has become a much bigger beast.
It has 85,000 product lines on offer online at any one time, introducing 5,000 new ones each week.
But it also has 850 brands from global fashion houses to local designers on its website, and culls about a fifth of those brands each season to help maintain excitement.
Peel Hunt’s Stevenson explains: ‘It is now the online department store for young fashion.
‘They have been very good at getting the proposition right for their target customers and bringing in right brands, getting the returns and refunds done quickly.
‘It is absolutely about being right for their young fashion customer, but also being a cutting edge website and having cutting edge new technology.’
Recent innovations include Asos Instant, where shoppers in some London postcodes can order products by 10am to be delivered by 10pm the same day.
The shares price has increased 114 per cent in the past two years, taking the company’s value to £5.8billion on Friday, putting Asos in the top four most valuable retailers in the country behind only Tesco, B&Q owner Kingfisher and clothing retailer Next.
Deutsche Bank says the shares – currently £68.35 – could reach £74 in the next 12 months.
Analysis by the bank suggests that successful entries by Asos in overseas markets in Europe, the US and Asia could see company sales reach £8.6billion by 2026 if it can maintain the same momentum and keep the 20-something fashionistas of the world flocking to its website.