Asos shifts focus from promotions as transformation progresses

Asos

During the first half of its financial year, Asos generated over 60% of its sales without the need for any promotions or discounts. This shift in focus reflects the company's efforts to prioritize building brand loyalty and connection with customers.

Back in November, the online retailer realized it relied too much on promotions and flashy marketing. In response, they decided to invest £30m in building their brand. This shift resulted in over three-fifths of sales happening without any promotions in the first six months of their financial year ending on 3 March 2024.

While making progress, Asos did experience a 260 basis point drop in their adjusted gross margin. This was due to planned discounts aimed at selling off old stock. The retailer mentioned that they were actually doing better than expected in clearing out this old inventory.

Revenues for the group dropped by 18% year-on-year to £1.5bn. In the UK, sales went down by 16% year-on-year, with active customers also decreasing by 13%. However, there was a slight increase in the average basket value by 3%.

Back in October 2022, Asos’s CEO José Antonio Ramos Calamonte pointed out that the company's heavy reliance on promotional activities and lack of brand investment had hindered its growth for that financial year. Today (17 April), he informed investors that amidst the significant revenue decline this year, the company is still in a phase of "continued transformation".

"According to our Back to Fashion strategy, our main goals for the year were to provide top-quality products, improve customer relationships, and lower operational costs," he explained, discussing the company's turnaround plan.

Calamonte proudly stated that the business successfully achieved all of these objectives in the first six months of the year.

Asos is making changes to its marketing strategy by moving away from relying heavily on promotions to drive sales. In a recent interview with Our Website, senior customer director Dan Elton admitted that the brand had been focused on performance marketing for a long time. To shift its focus, Asos has invested in a new brand platform called 'Asos Your Way'.

The company is now aiming to go back to its roots of cultural marketing, content marketing, and organic social media. As part of this effort, Asos collaborated with influencers to launch the 'ASOS IRL' campaign, which is an experiential guerrilla marketing initiative.

The retailer has launched an "always-on" social and influencer program, collaborating with over 300 "micro and mega influencers" worldwide every month.

Although the company is focusing on building its brand rather than immediate results, the team has noticed some promising early signs from this initiative. Asos conducted tests with control groups to measure the impact of the campaign activities, revealing a 10% increase in new customers and a 2% increase in organic web traffic.

The retailer recently launched a pop-up shop in central London to promote its brand. This campaign reached over 30 million unique users, resulting in a 17% increase in branded search.

In the last six months, marketing expenses decreased by 8% compared to the previous year. However, as a percentage of revenue, marketing spend increased by 70 basis points, making up 6.7% of total revenue.

Importance of product

In his review of the six month period, Ramos Calamonte said Asos was foremost focused on the product it offers.

"Asos's main focus is to engage consumers by offering them the most exciting and relevant products," the CEO explained.

He also emphasized Asos's 'Test and React' strategy, where new products go from design to being available on the website in just three weeks. Currently, items under this strategy account for about 5% of Asos's own-brand sales and about one-third of own-brand sales in the specific category they are launched in.

“Once we have product that is more relevant and a proposition that genuinely inspires our customers, we will then turn up our marketing to amplify our brand message,” Ramos Calamonte explained.

Editor's P/S:

Asos's strategic shift towards brand building has yielded promising results, with over 60% of sales generated without promotions. This focus on customer loyalty and connection aligns with industry trends, emphasizing the importance of building a strong brand identity. Despite a decline in revenues, Asos remains committed to its transformation, investing in product quality, improving customer relationships, and reducing operational costs.

The company's move away from performance marketing towards cultural marketing and organic social media reflects a growing understanding of the value of authentic engagement. The success of the "ASOS IRL" campaign and the partnership with micro and mega influencers demonstrate the effectiveness of experiential and influencer marketing in driving brand awareness and customer acquisition. As Asos continues to invest in its brand and product offerings, it positions itself well for long-term growth and increased profitability.