It’s no secret that Asos is on a mission to turn things around after navigating a challenging few years, marked by fierce competition from brands like Shein and struggles with a drop in consumer spending.
The online fashion retailer saw its pre-tax losses widen to £379.3m in the year to 1 September from a £296.7m loss the year before, as sales plunged by 18% to £2.9bn.
In a bid to bolster its flagging performance the online giant has launched its ‘Back to Fashion’ turnaround strategy aimed at delivering the most relevant product to customers while zeroing in on profitability and future opportunities.
Asos chief of staff and strategy Michelle Wilson spoke to Retail Gazette at its Camden head office to give an update on its efforts to streamline operations, clear excess stock, and get back on track toward long-term growth.
“Last year, we took a real hard look at our stock,” says Wilson. The fashion retailer has struggled in recent years after it was left with staggering £1.1bn pile of unsold clothes post pandemic, which led to it selling many items at a discount to shift the excess product.
“We’ve brought our stock levels down to £520m,” Wilson notes, explaining that the etailer has now turned its attention to new product in a bid to win spend from younger shoppers.
This shift has seen a 24% year-on-year growth in sales of newer products, something Wilson sees as a clear sign of progress.
As part of streamlining operations, Asos has implemented a sharper focus on aligning inventory with customer demand, supported by its ‘Test and React’ model where items are ordered on a two to three week lead time compared to a 4-10 week period.
The approach allows the retailer to stay agile, reducing excess stock while quickly responding to emerging trends and customer feedback. These changes have been instrumental in cutting costs and improving operational efficiency.
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Wilson says: “We’re seeing the green shoots now, with newness selling well, and that’s a big focus for us.”
The ‘Test and React’ model, which currently accounts for 10% of own-brand sales, will be expanded to 20% next year.
But this strategy isn’t just about cutting costs; it’s also about focusing on future potential.
Asos is positioning itself for sustainable growth with a strengthened financial foundation, following a £600m refinancing deal secured in September that extends its financial runway to 2028.
“We’ve got the balance sheet in place now, and we can really focus on generating profitable growth,” Wilson explains.
Back to fashion
At the heart of Asos’s strategy is a focus on its core audience, fashion loving twenty-somethings who are particularly trend-driven consumers on the hunt for exclusivity and style.
The business is also betting on exclusive collaborations to fuel this growth, tapping into consumer demand for unique, on-trend products.
Partnerships with brands like Adidas and New Balance are paying off thanks to Asos’s new go-to-market model.
Asos is also ensuring it continues to appeal to a wide range of shoppers as it adds to its portfolio of 850 brands on the platform.
Asos EVP of Product, Elena Martinez Ortiz highlights the etailer’s recent launch of H&M-owned Arket in September as a particular success alongside exclusive New Balance models which have already proven popular, with more expected in the future.
Perhaps the biggest news for fashion lovers is the upcoming relaunch of Topshop, which will focus on blending the brand’s rich heritage with future-forward fashion, offering both nostalgic hits and new, collections through a standalone Topshop.com website, giving the brand the space to shine away from Asos’ hoards of other names.
Asos, which snapped up the iconic British brand out of administration in 2021, is gearing up to launch tgw site in spring 2024 through its new joint venture with Danish investment firm Heartland.
Wilson’s excitement is clear: “Topshop’s always been a major part of British culture, and we’re really looking forward to putting that back in the spotlight.”
Beyond fashion, Asos is also turning its attention to customer loyalty.
Set to launch next year, the new loyalty programme will reward its most engaged shoppers with exclusive access to products, events, and experiences.
“For our most loyal customers, we want to create experiences they’ll love and give them access to something special,” says Wilson, explaining the programme will be an essential part of Asos’s future.
It won’t be the retailer’s first foray into loyalty offer since 2018, when it scrapped its popular “A-list” loyalty programme just two years after launching, taking a £2.7m write-down on the scheme.
At the time, the retailer called it a necessary move so it can “get to work on even better ways to reward our loyal customers” and at a more global scale.
With A-list, shoppers earnt 5 points for every £1 spent and received £1 credit for every 100 points collected. The more points you got, the higher the tier of loyalty scheme you could enter, with each level giving access to greater rewards including discounts, entry to competitions, prize draws and bonus points days.
From what Wilson teased, its new version of loyalty will be an evolution of A-list and offer more than just discounts and prize draws.
While the road back to profitability is still in progress, it looks as if Asos is making all the right moves.
From refocused efforts on inventory and exclusive collaborations to the relaunch of Topshop and the upcoming loyalty program, all eyes will be on Asos and its ability to execute its “Back to Fashion” turnaround.
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