Asos: ‘We are investing in price first and marketing second’
Asos chief executive Nick Robertson says the fashion retailer’s priority is to improve its price positioning first before it considers a marketing push to increase customer acquisition as it looks to boost sales following a difficult year that has seen sales decline internationally and growth slow in the UK.
Speaking on a conference call following the announcement of its first quarter results this morning (9 December), Robertson said Asos will be investing the £6.3m it collected in insurance payouts following a fire at its Barnsley distribution centre straight into price, rather than putting it into other areas such as marketing or new customer services.
“We did consider putting it elsewhere but our principles are about put it back into customer pricing first so we have pricing in the markets we are comfortable with. We have a number of proposition changes landing in the Eurozone anyway and so it was price first then come back round to further customer acquisition-building activity through marketing second,” he added.
Mobile shift “intensifies”
Robertson said increasing investment in mobile has paid off for Asos as more and more consumers shop via its mobile apps and website. The iOS app has now been downloaded more than 4 million times while the Android app, which launched just over a year ago, has seen 1 million downloads.
That has helped “intensify” the shift to mobile, he added. Mobile traffic passed the 50% threshold in the quarter, up from 36% a year ago as Asos made it easier to navigate via mobile devices and introduced product videos that have improved engagement.
On Black Friday, it’s heaviest shopping day on record, mobile traffic was up 200%.
Asos has had a challenging 12 months in which it has been forced to issue profit warning following slowing growth.
Asos has been particularly badly hit by the strength of the pound, which has impacted its international sales by making the cost of goods seem relatively expensive, particularly in Australia. Sales were up 8% in the three months to the end of November, way down on its average sales growth over the past two years which has averaged more than 30%.
Sales outside the UK fell 2%, while UK sales were up 24%, down from 36% a year ago. International now accounts for 57% of Asos’ overall sales, down from a high of 63%.
Asos implemented zonal pricing in three markets – the UK, Australia and French-speaking zones – in mid-November and says it will rollout across the all its territories by the end of February. It has already invested in its price position in six markets and claims it has been “encouraged” by those investments, which have positively impacted customer KPIs.
Average order frequency, for example, was up 8% compared to a year ago, while average value was up 6%. Active customers increased 18% and conversion rates rose by 20 basis points, which Robertson put down to enhanced search.
The insurance money will “accelerate” Asos’ price investment plans. It has so far focused on repositioning the price of branded products, as well as lowering the cost of some Asos own-label products. It is now looking to expand its branded offer in markets where it was previously unable to sell some brands due to the high relative price.
“We are using zonal to reposition our pricing internationally. We expect sales growth to accelerate but it is too early to call,” said Robertson. He also admitted the move would hit profit margins although Asos still forecasts profits of £46m for the full year.