Asos plans to increase its investment in digital marketing and influencer marketing after a “challenging” six months that saw a slowdown in customer acquisition and website traffic that hit its performance.
The online retailer says exceptional levels of discounting in the first quarter and ongoing economic uncertainty has “undermined” consumer confidence but admits “we didn’t put our best foot forward”. In particular, the strength of the Asos proposition weakened, with CEO Nick Beighton admitting it wasn’t doing as good a job of promoting the “width” of its producing offering or product newness.
That has hit its performance. Overall sales were up 14% year on year and 16% in the UK as conversion among loyal customers increased. But discounting and investment in areas such as automation hit profit levels, with pre-tax profits falling 87% in the six months to 28 February to £4m.
While Asos maintains it has a “great brand” with impressive engagement stats, organic customer acquisition and traffic have “stepped back significantly” and there has been a reduction in awareness and buying consideration, especially in France and Germany.
To redress this, Beighton says Asos will “upweight” its digital marketing while keeping overall marketing spend relatively flat – it accounted for 6.4% of sales in the first half. Asos is also increasing the “velocity of conversations with customers” – a step change he says has been especially notable on Instagram over the last few weeks.
“Our propositions are still market leading or as good as local, our main issue has been a slowdown in customer acquisition, particularly among the younger demographic around [issues with] presentation, product width and product newness,” he said on an analyst call this morning (10 April).
“Mission critical is growing new customers at an increasingly young rate.”
Asos is also doubling its investment in influencer activity year on year. That includes a “summer of festivals programme” that will see influencers appear at top music festivals in the US, including the ‘Life is Beautiful’ festival in Las Vegas.
This is part of Asos’s strategy to significantly increase its US footprint, where it sees a huge opportunity to tap into the $400bn apparel market and target around 70 million 20- to 34-year-olds.
Up until now, Beighton says Asos has treated the US as one country and disregarded the fact that there are dramatically different cultures, interests and expectations. This is something it “would never do” for its European customers, Beighton said, and Asos is increasingly investing in clustering tech that will allow it to serve up content to US customers depending on time zone, climate and region.
Elsewhere, Beighton said sustainability is becoming increasingly important to its customers and is an area of focus for the business. He pointed to the fact that Asos has a modern slavery commitment that ensures garment workers are paid the right wages and have access to the right working conditions.
Asos has also invested in its packaging, with 100% of its plastic bags now recyclable, although currently just 35% of it is recycled. The company is also looking at how it can reduce its environmental footprint in terms of the clothes it sells, with a range of jeans made from 100% recycled material about to launch.
“[Is sustainability] dominating demand? No, but there will be a tipping point. With the advent of social media and younger customers being more connected and aware of things than before, it will become a defining feature. We are ready on that,” explained Beighton.
“Customer know we are on it but we will weave it into our narrative far more. It will become a defining feature but it isn’t yet.”