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On the shop floor with......ASOS chief executive Nick Robertson
On the second floor of an appealing Art Deco building in north London is the doorway to the office of online fashion retailer ASOS that is shared with part of the NHS.
By Glynn Davis
While many retailers might find this close proximity to life-enhancing expertise comforting in these tough times ASOS is ironically the most unlikely business to need such help.With its first half sales expected to have grown over 100 per cent to £65 million when it reports its interim figures on November 17 and its debt-free balance sheet the company is fighting fit as it enters the crucial Christmas period.
And despite its rapid growth ASOS appears to have handled itself pretty well - no fulfilment and logistics cock-ups or IT failures. This is just as well as the City has been valuing the company on a high rating on the basis of flawless execution.
Wandering around the head office it is clear that the personnel numbers have grown very fast to their current 700 because people (mainly young girls) fight for space among piles and racks of clothes. The calmest places are the two studios that ASOS operates, with one filming video footage and the other photo stills for the website that are used for the 1,000 new products that are added to the website each week.
These studios highlight both the company's insistence on keeping most of its activities in-house and the desire to portray the products on its site in the best possible light. Robertson says the latter is crucial as it is the high quality presentation that has helped attract fashion brands to the site: “On our journey of nine years we're now the
This has helped it attract 600 brands and the number is growing fast (200 will be added this year) as smaller names are finding it tough operating their own sites. For a retailer with 20 or 30 stores in the UK then Robertson suggests the internet is a great distraction.
“I sense some of the smaller brands have jumped on the online bandwagon as it was the right thing to do but they've now recognised that it's complicated and expensive and a few will throw the towel in,” he predicts, as he sets his sights on the 4,500 online fashion transactional websites.
He believes the key driver of growth at ASOS has been its positioning as the number one location for fashion brands online as unlike on the high street Robertson says online shoppers want to visit as few sites as possible to make their purchases. “It works on the high street as you walk past windows, but not online.”
With its key positioning Robertson believes ASOS can become the dominant player in the market. He dismisses the moves made by the likes of Amazon into fashion. “It is not geared up for fashion. They are very good at commoditised fashion. Perhaps Next and Marks & Spencer might be happy on there but not ASOS-type fashion brands,” he explains.
More fashionable brands are typically more demanding of the selling environment - whether is it in physical stores or online, which is why the catwalks and presentation aspects are integral to the ASOS model. However, it is not just about third-party brands as 50 per cent of ASOS business is own-label goods.
The company also has seriously low operating costs compared with traditional retailers with their costly high street store portfolios: “We've £4.50 per sq ft warehouse space compared with prime high street.”
Needless to say, ASOS and its online model has long been an attractive investment opportunity to the City and 'Buy' recommendations from retail analysts are pretty commonplace. Their attraction to the growth story, which has seen the group enjoy a CAGR (compound annual growth rate) of 77 per cent over the past five years, helped push the shares to a peak of 418p a short while ago.
They have since fallen back to around the 240p level, possibly on the back of some forced selling from larger investors who have been looking to raise cash for margin calls on their other investments.
Robertson believes that such a valuation does not taking into account some of the future opportunities available to ASOS. One area involves attracting overseas brands to its site. Whereas the City has factored in the prospect of ASOS opening up in other countries it has not fully recognised the vast array brands around the world that the company could sell on its UK site. “The UK is first but then there are these other global brands
Other big opportunities include ASOS Red that launched in early September and offers discounted brands (along the lines of a TK Maxx) with end-of-season and end-of-line products featuring heavily. The climate is right for such a proposition says Robertson: “We've currently not got a lot of stock and we're desperately trying to find it. But in January there will be lots of excess stock.”
Further down the line in 2009 he is planning ASOS kids and ASOS vintage/ethical with the latter looking to replicate the success of eBay but focusing only on clothes. “Is there an opportunity for somebody to take one of eBay's 1,000 categories and gain some traction from it? Yes.”
With Robertson fully believing that this 'somebody' will be ASOS this is an indication of the level of confidence running throughout the business and is in stark contrast to almost every other retailer.
Despite this current buoyancy he admits that the level of success of ASOS is somewhat unexpected: “Without a shadow of a doubt I've been surprised. What we did not know was the consumer take-up of fashion online.” Robertson and the rest of us now know categorically the answer to this question.
glynnd@theretailbulletin.com
Tagged as: asos | nick robertson |
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