Analysis of Business Strategy at ASOS

Analysis of Business Strategy at ASOS Chapter1. 1.1 What is E- Business? Electronic Business is very simple the meaning to any reader that Business taking place electronically. E-Business which we are benefiting from has gone through many stages of maturity. One of main reason to choose this topic is that to see how organisation either switching their business to E-Commerce or starting solely only online business. No doubt there are many advantages but its note free of limitations. 1.2 Purpose of Report: There are many Organisations to consider in my report but I am choosing ASOS (As seen on Screen). ASOS is the United Kingdoms one of largest online-only fashion and Beauty store. The purpose to consider this organisation is to highlight in detail how ASOS using E-commerce Technology captured significant market share and Market Reputation. ASOS has targeted the people of age group 16-34, catering to both genders. I would like to focus how they formulated their E-Commerce strategy and how they have chosen a specific age group to Target their business to. ASOS has spent lots of money on Research and Developments. I would like to mention here very recent Example of their Advertising campaign in UK.I have seen in many places specially on Bus stops where they are advertising to give chance to every   individual to visit their website and upload your picture to participate in street style competition. I would also like to consider how their financial position has been significantly increased and showed positive sign of further progress in this Recovery Economic cycle. They also launched US, French and German specific language website which is another addition to their enhanced performance. I will also focus on their statement of core purpose â€Å" Our core purpose is to inspire and power your fashion discovery; without an internal brand and strong people strategy we would not be able to live up to that promise.† www.asos.com http://www.networksolutions.com/education/what-is-ecommerce/ Scope of the report: Here, I will discuss how still ASOS is achieving its target and maintaining its consistency in performance. The scope also included to focus on Business to Business(B2B) and Business to Consumer(B2C).The issues to be covered regarding birth of ASOS then how it has been built to reach at this stage, Development in progress, expanding abroad, organising events and their passion for more innovation. The report will also analyse Financial and Non Financial Ratios to reflect their position. Graphical Demonstration is also part of it. Key Results: Research of journals and ASOS financial statements shows the following split of its Fashion category: Women swear Clothing : 56% Womenswear Non-Clothing : 16% Menswear : 20% Beauty/Outlet/Kids : 8% There is significant growth in International markets, now ASOS is shipping to 167 countries. International sales has been increased by 95% in 2009-2010.In 2004/05, Uk sales was   94% and International sale was   6 %,   but in 2009/10, UK sales was 75% and International sales was 25%.It shows how ASOS has expanded all over the world by using its own brands and other existing brands. Currently, trading result has been issued at ASOS website and CEO, Nick Robertson has reported another successful year including highlights for the 2010/2011, Retails sales has been increased 58% on year (UK +24% and International +144 %). As Internationaly becoming an increasingly significant part of   ASOS future, Nick Robertson pleased to see International sales mix exceed that of the UK for the first time, accounting for 52% of retail sales.   http://www.asosplc.com/Doc/pdf/Announcements/Q4_Trading_Update_FINAL.pdf www.asos.com http://www.asosplc.com/Investors/Financials/Annual_~_Interim_Results/JQueryTabs.aspx?id=45 http://www.asosplc.com/Doc/pdf/Announcements/Q4_Trading_Update_FINAL.pdf www.asos.com http://www.asosplc.com/Investors/Financials/Annual_~_Interim_Results/JQueryTabs.aspx?id=45 Summary findings: The research finding shows a continuous growth in the financial and Market growth of the Organisation which is due to its strong E-Commerce bases Business Strategies. As ASOS is only online fashion retail store and up to 2010, 3 website in USA, France and Germany in their languages has been launched. It is E-Commerce who makes it not that hard to get access to one of the largest Economies otherwise it would have been quite costly to enter into larger fashion Markets such as of France and USA.Where physical presence in the form of Retail stores would have been quite challenging Financial and taking in context the strong competitors already present there. How greatly cost effective it is for ASOS, because they have Debt free financing. ASOS is one of those organisation where E-Commerce has played a vital role which are now Multimillion  £ organisation which are experiencing rapid growth due to E-Commerce base business. Chapter 2. Introduction. People thinke-commerceis just people browsing, but theres more to it than that. More and more people are using programs and agents to shop for the best deal, and thats how theyre going to be getting to your site. ~Tim Berners-Lee(June 08, 1955 ) Impact of an E-commerce on an Organisation plays a vital role on any Organisation, which has culture of Adopting this Approach and has Management to cope with approach, when most of the businesses now considering adopting this approach to enhance their performance and considering cost benefit analysis. I have chosen this topic because I mostly use E-Commerce websites and mostly read journals and Articles regarding organisations launching E-Commerce in their businesses. I strongly believe how E-commerce can cut down cost in any organisation. Many Businesses started to shift from Real time Market to Digital Market. The History of Online Shopping in Nutshell E-commerce can be described as: the sharing business information, maintaining business relationships and conducting business transactions by means of telecommunications networks where business transactions take place via telecommunications networks, especially the Internet describes the buying and selling of products, services and information via computer networks including the Internet the conduct of a à ¯Ã‚ ¬?nancial transaction by electronic means Since transactions go through the Internet and the Web, the terms I-commerce (Internet commerce), icommerce and even Web-commerce have been suggested but are now very rarely used. It goes unnoticed that E-Commerce and its underlying technology is around us since almost   4 decades. The term e-commerce was originated   to describe the process of doing   business transactions electronically using technology from the Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These technologies, emerged in late 1970s, usually allowed many organisations   to share information among themselves, typically in the form of electronic purchase orders and invoices. EDI and EFT were theenabling technologiesthat laid the groundwork for what we now know as e-commerce. The Boston Computer Exchange, a marketplace for used computer equipment started in 1982, was one of the first known examples of e-commerce. Then it was in all 1980s when we have seen proliferation of these plastic cards, ATM machines and Phone banking, which was next step in evolution of   E-Commerce. In early 1990s, e-commerce has started to include other enterprise Resource planning (ERP ), Data Warehousing and Data mining. http://www.asos.com/infopages/pgeaboutus.aspx http://sellitontheweb.com/blog/history-of-e-commerce/ http://www.sxccal.edu/msccs/ecommerce1.pdf http://www.retail-week.com/careers/etail-power-list-2010/01-nick-robertson/5019098.article The world of E-Business. The word commerce and Business doesnt have much difference. Instead it wont be wrong to say that e-commerce is a part of e-business.   Electronic business transactions involves money are â€Å"E-Commerce† activities. when we talk about E-Business, it means have think broadly as E-Business doesnt mean that it is Buying and selling goods   and accepting only credit cards. What about Customer, Marketing, Procurement? This is where E-Business broadly focussed on. Figure 1 is clearly a perfect demonstration of E-commerce and E-Business. http://www.ebusinessprogrammers.com/ebusiness/ecommerce_and_ebusiness.asp As with e-commerce, e-business (electronic business) also has a number of different deà ¯Ã‚ ¬?nitions and is used in a number of different contexts. One of the à ¯Ã‚ ¬?rst to use the term was IBM, in October 1997, when it launched a campaign built around e-business. Today, major Organisations are rethinking their businesses to switch through internet and its new culture and capabilities and this is what some see as e-business. E-business is the conduct of business on the Internet, not only buying and selling but also servicing customers and collaborating with business partners. Who is ASOS? ASOS has been established in June 2000 by CEO Nick Robertson. As Nick Robertson is Entrepreneur, he started ASOS with only 3 Employees and after 10 years, he has over 1000 Employees. Nick Robertson has started with step to step approach to capture market share. ASOS has been started in June 2000 and he submitted ASOS PLC holdings to AIM on London stock Exchange. ASOS has launched branded fashions good and then in 2004   first launched its own label product for women, then ASOS has launched ASOS Beauty in 2005 and with this consistent approach, ASOS was the first UK online store to Launch Catwalk in 2006, then ASOS own label for Men has been launched in 2007 and their performance doesnt stopped even in Recession and up to now, ASOS has their website in American, German and French Languages. ASOS has also launched ASOS Little which caters for babies for up to 24 months and Boys and girls from 2-8 years. It includes all High Fashion brands like Diesel, Tommy Hilfiger, Miss sixty and True Religion. ASOS also launched its own Magazine, Facebook page and in final Quarter of 2010, had launched three international stores, ASOS USA, ASOS France, and ASOS Germany. ASOS Mobile has been launched In October 2010, which has been designed works through all devices like Blackberry, Android, Symbian and I Phone Operating systems. http://www.asos.com/infopages/pgeaboutus.aspx ASOS and E-Business: ASOS is one of the Largest Online Retail only, catering to the Fashion Retail sector specifically in UK and Great share in International market. They share some really Interesting Results for year 31st March,2010 which clearly shows the Profits they have reaped by adopting E-Commerce as their primary Business   Strategy. The company has gained rapid growth in the retail industry in a matter of few years. Limitation of E-Business: E-Business is not free of limitations as there are areas where any organisation has to be competent and keeps spending to improve what customer demands. In E-Business, Confidentiality and privacy is always key issue which could lead to distrust and hesitation among the customers to use services online Another drawback of the E-Business is that the customers cannot have exact feel and look of the product before purchasing so it depends on the organisation that how clearly and in detail they present the product or service. In this world of internet, networks failure could cause serious disruption customers and business alike, which could result in loss of revenue and productivity. Limitation for the ASOS is that they dont have retail outlets where they could probably miss their targets who may want to see and feel stuff before they buy. Summary of history: In Brief, we can say how ASOS have utilised the E-Commerce business strategy to established themselves in the fashion retail industry having rapid growth in a matter of only 10 years and has now become the one of the Major fashion player in E-Business and it is standing proudly shoulder to shoulder with some of the more established high street competitors. The organisation is a radiant example of a successful E-Business. Procurement : The company executives took a step by step approach, in targeting the customers and implementing the business plan. They have invested in parts and specifically targeted age group after a thorough market research. If we analyse the history of ASOS, we find that it has started with some Famous High Street brands the likes of Diesel, FireTrap, Karen Millen and French Connection etc and then gradually launched its own label products in interval of years. This was a part of their business objective to enhance their financial gains by starting their own company brand. ASOS promotes welcoming ‘Like Minded talent together .It says their people have no fear to enter into the unknown market. .http://www.drapersonline.com/people/next-generation/asos/5021069.article http://www.asosplc.com/Who_We_Are/Our_History/Default.aspx?id=15 http://www.asosplc.com/Investors/Financials/Annual_~_Interim_Results/JQueryTabs.aspx?id=45 Risk Management and Financing: ASOS insisted that all of their investments have been funded using operating cash flows and if any additional working capital required, it uses short term facilities. ASOS group is continuously working to reduce Risk of Interest rates, Foreign Exchanges and other financial risk. Their hedging strategy is to hedge their future foreign currency risk for 6 and 12 months forward. That is the one of the reason that they have got DEBT FREE BALANCE SHEET with increase in net cash to  £ 15.6 million. http://www.asosplc.com/Investors/Financials/Annual_~_Interim_Results/JQueryTabs.aspx?id=45 So how did this tiny start-up become the UKs leading fashion site, at a time when traditional rivals with a much longer heritage were and are struggling? There are many reasons: the site offers something for everyone men and women of course, but also maternity wear, beauty products and kids wear. Although it does sell premium items, the average price is reasonable and accessible, the site is easy to navigate, and it is painless to return items which is more, in Fashion Statements experience, than can be said for some far more expensive online retailers. Then there is the generation it sells to, its key demographic one that expects a snappy online experience as a matter of course. E-Commerce Diagram below describes how the key elements of E-Commerce connected to each other. Information Gathering: In Gathering information for my topic, I have used two main Approaches. Quantitative Approach Qualitative Approach. In Quantitative approach, Research regarding subject has been done through collecting it and then evaluating it through application of Mathematical Models and then demonstrate the Results in the form of Graphs, Statistical data and Tabular forms. Research usually been obtained through internally generated Financial information e.g., periodically (Monthly, Quarterly) performance report/statements with Graphs and statistics as well. In Qualitative approach, it is different in nature; it is like soft data, where data has been gathered through Interview, Observation to interpret the details of finding from the research methods. In the Annual report, it is really helpful to get these data where Company senior management Interviews, statements has been reported There has been both Primary and secondary research involved in my carrying out search for discussing impact of E-Business on an Organisation. For primary search purposes, ASOS website was the main point of getting information regarding their financial and Non financial performance. Primary: ASOS website investor section has been mostly used in my Research Analysis where their Annual report for the year ended March 2010 helped a lot. Structure of report and split of information in different categories, made it easy to focus on required area. It kept engaged while doing research when organisation about us gathering information is ASOS. ASOSs consistency in achieving its objectives and hitting all budgeted and forecasted figures has been exceeding in almost every single year since it has been started. Through participative observation, being a customer of ASOS, I have experience an easy to use feature enriched website which enables the customer to purchase the desired product in a matter of few clicks. Secondary:In secondary search, articles from various weekly magazines, Newspapers, other comparison websites of E-Business, ACCA Text books, Library, Case study helped a lot. Limitation on information Gathering: As ASOS is only virtual business, all relevant information regarding their Strategy, their growth plan, further expansion strategies, the main point of getting all data is online, Magazine Articles, Newspaper. Because if business has got outlets as well then it provides opportunity to get access to any outlets and ask their Management for interview, latest developments, events taking place. No doubt, having own experience by doing that kind of primary research enhance your information gathering. Business Techniques and Models: When we talk about E-Business, its all about Businesses,Goverments and Customers who originate E-commerce.E-Commerce can be divided into further categories, considering perspectives of producers/providers and customers: ACCA P3 Interactive study manual Business-to-Business(B2B_ Business-to-Consumer(B2C) Business-to-employee(B2E) Business-to-government(B2G) Government-to-business(G2B) Government-to-government(G2G) Consumer-to-consumer(C2C) Consumer-to-Business(C2B) http://www.sxccal.edu/msccs/ecommerce1.pdf ASOS has mainly focussed on the following: B2B ( Business to Business) E-commerce is E-business enable organisations to connect their internal and external data processing systems more efficiently and flexibly which lead the operations among suppliers and partners to operate more closely, and needs of customers are satisfied and exceed the expectations. ASOS believes and confident to say that actions which has been taken   and there are still more exciting innovation in progress which will keep ASOS apart from other rivals and lead us to drive boost to sales. E-Business has impacting both party, means ASOS selling over 800 brands and plus their own internal brands as well. To some extent using other high street brands they are generating goodwill for their brands as well. It is B2B which are connecting and sharing data among themselves. There are normally 3 groups of B2B in which many E-business could fit in. Direct selling and support to Business. E-Procurement Information Sites. http://www.sxccal.edu/msccs/ecommerce1.pdf Interactive LSBF, P3 study Manual. http://www.asosplc.com/Investors/Financials/Annual_~_Interim_Results/JQueryTabs.aspx?id=45 Recent example of Business to Business is when ASOS has been targeted by Giant Super Market TESCO Plc for Fashion venture, after Tesco has found the excellent recession-Busting growth of ASOS. http://econsultancy.com/uk/blog/4255-tesco-targets-asos-chooses-venda-for-fashion-venture B2C (Business to consumer) It is another split of Classification of E-commerce in any Business, where any transaction which ends on serving products or services for the consumer. Any E-business basically do Serve consumers plus retailers as well. ASOS is ambitious doing much for their consumers, they have launched free return to their UK customers in Sep, 2009 and also started Free Supersaver delivery for UK customer which in return gave us a positive reaction and our Items per basket, Frequency of orders have all increases as a direct result of this. http://www.asosplc.com/Investors/Financials/Annual_~_Interim_Results/JQueryTabs.aspx?id=45 For Ecommerce usability is one of the largest contributors to customer conversion and retention rates. Do ASOS follow best practice? If we follow a customer process through focusing onthree key stages of the buying journey, product page, shopping basket and the checkout. The shopping basket which follows many of the best practice recommendations shows clearly that the item is in stock. For reserved items it is clear how long it has reserved this product for this helps tackle the issue of visitors returning to their shopping basket on a subsequent visit only to find the product they had added previously is no longer in stock. ASOS have tried to ensure secure access and use securely on the button wording, which improves the customers sense of trust/security. There is no ambiguity about what standard delivery costs will be, so visitors dont need to wait until they are within checkout to know what delivery costs are. Along with the product thumbnail and title, there is just the right amount of product information provided to ensure you know that you have ordered the right size, colour and quantity Making the delivery costs clear on the shopping basket allows ASOS to make it absolutely clear what the visitor will be paying in total. ASOS makes this a much more customer friendly experience by allowing you to choose other delivery options at the shopping basket stage. This ensures you are going into the checkout process knowing what you will paying and what delivery period you have specified. They clearly display which payment methods are accepted ensuring that shoppers are not confused. Business Model: According to Michael Rapas (P3 Business Analysis Interactive book),General E-business models, ASOSs Business Model was based on Merchant but then as the company business grew, the business model evolved encompassing the Merchant and Manufacturer as well: Merchant:ASOS has started as retailers of goods by using other famous high street brands like All Saints, Mango, and Firetrap etc. A virtual merchant operates only over the web (e.g. Amazon, EBay). Business was started with an Initial Investment of  £1.4m.They has marketed high street market brands and then slowly on step by step Approach. Manufacturer:   After Advertising and hitting targets of their initial strategy of selling external High street brands, ASOS has developed their own internal brands. That is how they have been called as Manufacturer, because it relies on the power of the website to get access buyers directly and then provide distribution channel. ASOS this model is based on Improved, Efficiency, and Customer Service. Brokerage:   As we know, Brokers are those who make markets,they bring together buyers and sellers together and then provide Transaction Facility.Brokers play vital role in businesses like ASOS where there are B2B,B2C markets.ASOS is now operating on combination of Manufacturer and Brokerage Models. The E-business model has always been based on IT Applications and using B2B, B2C, ASOS has chosen CRM (Customer Relationship Management) Tools to support their Strategic Growth Plans. CRM is one the Internal Business Systems Application, is a Business Strategy focuses on Customers with objectives of Maximising Turnover, Customer Satisfaction and Profits. ASOS has chosen this tool from SMARTFOCUS which helps them to keep record of Customer buying, their feedback, refer a friend, Loyalty programmes. Mhairi Brown, CRM Manager for ASOS, said that using Smartfocus will facilitate easy solution and strong marketing strategy and choosing CRM will help to achieve their goal of a Truly Customer Focussed business. http://www.onwindows.com/Articles/Asos-chooses-CRM-for-growth/2812/Default.aspx P3 LSBF Study Manual. http://www.sxccal.edu/msccs/ecommerce1.pdf This framework, was à ¯Ã‚ ¬?rst developed by Kalakota and Whinston, who knows as a Professors of Information Systems, takes a holistic View and identià ¯Ã‚ ¬?es the different components of business and technology which will combine together to form E-commerce. In ASOS, this framework applies equally as in any other E-Business.The following are built on foundation of technology: People and Organisation: People of ASOS are the all key stakeholders like suppliers, customers, Employees, Government, Other regulatory Authorities, which any organisation prioritise according to their level of power and interest in organisation. It is a interaction between People and Organisation which manage to coordinate the Infrastructure, Applications and Businesses and it leads for the functioning of E-Commerce. http://www.sxccal.edu/msccs/ecommerce1.pdf Public Policy: ASOS have to comply with relevant laws and Regulations according to their geographical location. They should follow the relevant tax policies and making sure all payments made according to the relevant Laws and Regulations. ASOS must follow internal procedures and making the most of Tax evasion policies. Company must maintain high level of confidentiality to proceeds as to retain customer confidence; this can be achieved by segregation of duties and applying strong internal control. They must also ensure that security systems are improved to keep the Organisation confidentiality policy competitive globally. http://www.sxccal.edu/msccs/ecommerce1.pdf Technical standards: In Technical standards, all data has been converted into such a way that it can be use universally, means all data can travel seamlessly across different network where it is accessed by range of hardware and software like Palmtops, Computers and other kinds of browsers. ASOS have not got only one website now for user interface and they do meet all Technical standards globally. http://www.sxccal.edu/msccs/ecommerce1.pdf The next part of the Model is Infrastructure and E-Business work by Interlink of both Technology and Infrastructure. Common Business Service : In this part of Infrastructure, once all process of creation of data and content done, its been display and transmitted for user interface, other supporting services has to play their part to facilitate buying and selling. ASOS website in very well structured and one can see how this process works. For finalising transaction on ASOS, one should be feel safe and rely before authorise any payments because of confidentiality issue. This is where Electronic payment like PayPal in ASOS, directories/Catalogues help to check out. https://marketplace.asos.com/basket Message and Information Distributor: This part of Infrastructure is the Engines and fuel, which takes data around the network after Multimedia content of website, is created. But this content then has to be transported for sending and retrieving this information of content. ASOS has its own form of transporting information. Common Examples are EDI, Hyper Text Transfer Protocol, and Email. http://www.sxccal.edu/msccs/ecommerce1.pdf Publishing: It is   Infrastructure of Warehouses and vehicles, where Electronic data and Multimedia content over the Network are stored and then transported using Publishing Infrastructure like World Wide Web(www), Web Servers transport. It depends on website how much Electronic data and Multimedia content it using. Usually HTML and JAVA are used to create Multimedia content. Some websites are Text only or some contain audio, video, graphics. ASOS website is mostly Text and Multimedia where Images has been mostly used. http://www.sxccal.edu/msccs/ecommerce1.pdf Network: Once all of the above completed, and then Network needed to interconnect globally so it could be access anytime, anywhere. As now Technology is so advanced, we can even use ASOS in our Handsets like IPhone; Android Phones etc with Network provider browsing facility, Internet, Telephone wires, Intranets are all form of communication which forms this Network infrastructure. Interfacing: This is the infrastructure where finally customer can get access to all data on website and have user interface with all application. All Technology and infrastructure components interact together to produce the Ideal demonstration of E-Business. These applications are used by Online Banking Sector, Financial sectors, Marketing and Advertising Agencies, Online Shopping. This model really helps for Senior Management to see how important within business or outside for planning and development of E-Business or E-Commerce solution. http://www.sxccal.edu/msccs/ecommerce1.pdf Analysis: Last 3 years of ASOSs Financial performance are incredible. Where UK economy is in Recession and then in Recovery phase now, in these hard times ASOS has maintained their Growth with Consistency. Records sales, Earning per share and Profit has been recorded. Following is details discussion and Analysis of Financial impact on Income, Expenditures, and Profits for last 3 years. Revenue: ASOSs revenue has shown positive signs as in 2008 and 2009, 90% and 104% increased respectively have been reported in Annual report. Then in 2010, 35% increase had made. Increase was not that significant because of increase in international sales. Huge amount of investment has been made in these years for Warehouses to increase their sales volume. Clothes of all genders, Accessories and Footwear are the main sector which result in boost of Revenue Because online user who hit on daily basis the website is increasing day by day and according to latest record, ASOS.com attracts more than 8 million unique Users in a month of which 3.7 millions are registered users and 1.6 million active users (describes as they have shopped in last 6 months).It can be seen that, because of virtual nature of ASOS, the only way of boosting their income is to attract as much users as it can. In only 10 years, its not easy for any business to be in head to head in ranking in various categories in last 3 year s. In top UK shopping website, ASOS was ranked in 2008 17th (2007:40), 12th in 2009. Figure 2.1 and 2.2 give a birds eye view of Retails sales Split for the year ended 2009 and 2010, where we can see Quarterly sales figures for UK and International, which shows a huge increase in International sales of 103% for year 2008/09 and 144% for year 2009/10. Its indication of how just through E-Commerce, without any outlets overseas, ASOS is on way to Business success. Statistical representation of Split of Sales is shown below which compare quarterly change in retail sales as compare to year 2009 ASOS has been ranked 2 year continuously in 2008(4.74%) and 2009(5.13%), 2 nd to Next with 8.96% in 2008 and 6.31%in 2009, in top 10 player as % of Market share list. Figure 1 A demonstrate their actual and forecast % of market share. Annual Reports: for References Expenditures: Because of driving business with new initiatives taken and Passion to be on top of Online Retailers List, ASOS has spent Millions in Development, Management, Marketing and Infrastructure. They have spent Millions on Warehouses for hitting its Targeted Annual sales. ASOS has spent  £20 million for new warehouse with Initial Capability of  £600 million annual sales. They have done adequate investment in IT Systems and Infrastructure, as being a virtual business; it acts as a back bone for the Organisation to capitalise on their potential growth and to take full advantage of arising new opportunities. In last 3 years, E-Marketing Expenditure played vital role for capturing a p