Asos credits marketing’s role in record results

The online fashion retailer grew its sales by 24% over the first half of its financial year, after boosting digital marketing spend to raise brand awareness and drive traffic to the platform.

AsosAsos achieved record sales in the six months to 28 February, having significantly increased investment in marketing to capitalise on the Covid-driven shift towards online retail.

The fashion retailer raised its marketing spend to £108.9m over the period, according to its interim results. This is around £40m more than it spent over the same period in 2020, which ended just prior to the Covid-19 pandemic hitting the UK.

Asos spent £119.4m on marketing during its 2020 financial year to August, after dropping investment in the third quarter to avoid stimulating demand it could not keep up with.

By increasing its marketing spend in response to changing consumer behaviour as a result of the pandemic, the business aimed to raise awareness of the brand, drive customer acquisition and engagement, and increase traffic to the platform, prioritising its budget on “more efficient” digital and social channels.

The company’s sales soared by 24% compared to the same period in 2020, reaching more than £1.9bn. As a result, it recorded a gross profit of £890m. Asos credits an exceptional UK performance, where sales grew by 39%. EU markets saw 18% growth, with 16% in other markets.

These record results demonstrate the significant progress we have made against all of our strategic priorities and the strength of our execution capability.

Nick Beighton, Asos

The platform also saw its active customer base grow by more than 1.5 million people to 24.9 million over the period, offsetting the fall in event-led reasons for people to shop during lockdown. In the UK, Asos’s total customer base grew 15% on the year to 7.8 million.

Asos has pointed to its marketing efforts as one of the key drivers behind its substantial growth in sales and active customers over the period, alongside the integration of the recently acquired Topshop, Topman, Miss Selfridge and HIIT brands. The retailer also noted that it had “undoubtedly been a beneficiary” of the shift to digital shopping as physical stores were shuttered during lockdown.

Asos stands to boost quality perceptions with Topshop acquisition

“We are delighted with our exceptional first-half performance and proud of the work our teams have put in to achieve this,” says Asos CEO Nick Beighton.

“These record results, which include robust growth in sales, customer numbers and profitability, demonstrate the significant progress we have made against all of our strategic priorities and the strength of our execution capability. The swift integration of the Topshop brands and the impressive early customer engagement is also especially pleasing.”

Beighton adds that while Asos is mindful of the short-term uncertainty and potential economic impact of the continuing pandemic, the company remains confident in the momentum it has built. The business has raised its expectations for full-year performance in line with its first half figures.

Integrating Arcadia’s brands

According to Asos, the integration of the Topshop, Topman, Miss Selfridge and HIIT brands has progressed “smoothly” since their relaunch on the platform on 22 February. Asos acquired the fashion brands from Arcadia Group earlier that month, following the latter’s fall into administration.

On launch day alone, the site saw a 226% increase in traffic, driving strong sales momentum across the brands. The US saw the strongest growth rates, along with the UK and Germany, which Asos says has been supported by strong social media campaigns. It claims to have seen the most success with its two TikTok launch campaigns, which achieved a combined reach of over 200 million and almost 3 billion video views.

The business has set a target of achieving a full, seamless integration between Asos and the former Arcadia brands within 100 days of deal completion. According to the company, that plan is “on track”.

Commenting on Asos’s trading update, Retail Economics’ CEO Richard Lim notes the results have been “mightily impressive” given the pressure rippling through the apparel market as event-led demand for new outfits has dropped.

The pace of the integration was astonishing, showing the kind of agility that other retailers aspire to.

Richard Lim, Retail Economics

He says: “The acquisition of Topshop appears to have gone very smoothly, presenting a chance to impress new customers with an online proposition that is way ahead of the curve. Bolting on the Topshop brand will enhance its appeal to a new segment of online shoppers as the retailer connects with new audiences and continues to grow market share.

“The pace of the integration was astonishing, relaunching the brand within three weeks of its acquisition showing the kind of agility that other retailers aspire to.”

Lim adds that the retail industry is entering a period of consolidation, as brands benefiting from the digital shift become stronger and look to acquire “weaker” players in the market. “Further acquisitions should be expected,” he says.

In 2018, Asos beat Ikea, KFC and Quorn to be named Marketing Week Masters Brand of the Year for standing out in a tough retail market with its sales and profit figures.