ASOS Plc: A Global Fashion Retailer Serving Young Adults

Overview of ASOS Plc

Company background and competitors

In the British online fashion segment, ASOS Plc has remained one of the top companies serving its customers with quality products. As per the reports, the company was founded in the year 2000 in London which primarily focused on young adults. Throughout the years, the company has made various acquisitions which has allowed it to expand its operations significantly and therefore, the sale of the company has been also increased to significant extent in 2020. Primary competitors of the company include Boohoo Group, Alibaba, Zalando, Zalora and so forth.

ASOS Plc operates in a clothing fashion industry targeting young customers with different types of high-quality fashion products. The current analysis on the operation of the company reveals that the company targets customers aged between 20 to 30 years.  The company has been able to expand their reach globally with the offering of different high quality branded products that include dresses, vests. Shifts, trousers as well as other products including nightwear, lingerie and swimwear (asosplc.com 2021).

ASOS Plc follows a multi sided business model that assists it to serve different types of customers as per their needs. The company also distributes its products to different fashion companies which allows its to expand its reach to significant extent.

Literature review

As per the prominent researchers, it can be noted that the primary goal of an organization is to increase its revenue for which it analyses its financial situation with different financial metrics.  The goal of the profitability analysis is to figure out how well the business is doing currently. It should be noted that the net income number by itself is not particularly useful in measuring the efficiency as well as growth of the firm unless it is combined with other data like sales, cost of products sold, operational expenditures, investment capital, and etc. As a consequence, measuring the profit rate can help to motivate the company’s final outcome and comparability. This is the sole criterion by which the company’s total efficiency can be measured. In past decades, the financial profession has placed significant importance on the link between firm value as well as financial ratios.

When it comes to stock investing businesses, it has been apparent that investors must take certain precautions and consider a number of criteria. The stakeholders of the business can address the company’s distinctive characteristics and how they affect revenues. Further, it has been also apparent that financial ratios can give value – relevant information’s towards the stakeholders which can be further used to evaluate the operational efficiency of the business. by looking at the predicted cash flow as well as the company’s assets, organizational structure, technology, and other resource researchers may calculate corporate value. Financial ratio analysis, particularly performance metrics are becoming critical financial decision-making tools for firm managements in assessing financial sustainability and development potential. Other data, on the other hand, might be suppressed in executive interactions (Annualreports.com 2021).

The opponents of the ratio analysis claims that the information’s found from the ratio analysis is only based on the historical performance of the company and therefore the same can change drastically over the years. They have also added that any certain change in the historical financial performance can impact the present condition of the company negatively therefore the future growth potential of the company can also get impacted by this. Also, it can be also noted that the inflation changes of an economy changes over time which can actually impact the financial condition of the company. Trend analysis does not always generate the actual result about the company since there might be certain aggregation impacting the results. Further, it can be also claimed that utilizing data from the past and forming a judgement based on it is not a practical judgment since pre-change versus post-change operational figures cannot be compared under any conditions.

Target Market and Product Offerings

Additionally, ratio analysis includes different financial elements which some company can include and some cannot hence the comparison of ratio analysis between two companies can become challenging if sufficient amount of data is not available within the analysis. The results from the ratio analysis can be deceptive since the profit and loss statement is made with present costs and the balance sheet is based on the historical data. Therefore, it can be noted that the ratio analysis has different types of benefits and disadvantages affecting the operation of a firm (Gasparian etal 2018). However, if used correctly, the analysis can produce sufficient amount of financial information’s towards the internal and external stakeholders which can be further used to make fruitful decisions.

Commercial operations

In the commercial area of operations, ASOS appoints the acquisition strategy that assists it to expand its operation all across the globe and also to increase customer satisfaction.  For ASOS as well as all the consumers, the purchase of these renowned British brands is a major deal, as the same assisted the firm to push forward with its multi-brand framework. Recent analysis has found that ASOS has been instrumental in their recent online success, and now that they’re in ASOS hands, the firm will continue to expand them by leveraging their product, marketing, technological, including logistics experience, as well as working closely with important strategic channel stores in the UK and throughout the globe.” This purchase provides a compelling prospect in favor of its goal of becoming the world’s most popular website for fashion-conscious customers. These are powerful brands that have a significant following among the core customers (Vogel 2020).

ASOS are well-established in the US and in the Germany, 2 of their major strategic regions.  Being at the heart of the ASOS multi brand strategy, which is supported with a handpicked edit of the greatest merchandise from the most pertinent companies across the world. This deal allows us to bring legendary brands throughout, allowing the firm to layer their core competencies on top of them and develop them into prominent digital-first businesses. ASOS will seek to re-engage providers and replenish inventories to meet our future trade expectations for the balance of the fiscal year. We’ve engaged with the administration to assure sustainable supply consistency, and the firm has taken on again and placed certain purchase requisition as a result. 

ASOS has been an online fashion retailer for 20 years. This digital site operates by curating the most fashionable things from a wide range of businesses and pairing them with its own. This technique has not only helped ASOS sell their items, but it has also helped them become the top online shopping destination. Approximately 80,000 branded and custom items have been collected by the firm. ASOS started out as a website where people could buy clothes and shoes. The firm has now released a smartphone app between Android and iPhone users. The merchandise will be sent to their current address after they have settled for it.  With the help of acquisition, ASOS have been able to provide different types of high-quality products at a very competitive price which enabled them to expand their customer reach. Further, it has been also found that ASOS researches about the current fashion trend and makes their products as per the customer demand that assisted it to expand its profit margin. With the help of 24*7 customer service, the firm has been able to penetrate into different markets, allowing it to achieve the competitive edge (Guo, Wang and Wei 2018).

Business Model and Distribution Strategy

Rising earning levels in UK, evolving trends in fashion, shifting shopper tastes, , the desire for improved lives, and technological improvements all combine to create significant growth prospects for ASOS. ASOS may increase its product range, add more diversity to its product line, as well as engage in technology advances to take advantage of these possibilities and improve its business efficiency. in both the online and physical segments that have a stronger brand awareness, ASOS faces competition from leading retail operators since it operates in an extremely competitive business. The fashion sector, particularly ASOS, has benefited from digital change and technical improvements. Customers’ interests are shifting in the United Kingdom, and internet buying has surpassed mall shopping in popularity, particularly after the breakout of the new Coronavirus.

In the United Kingdom, ASOS has risen to prominence as the most popular online retailer since ASOS is one of the most polluting businesses, the fashion industry is subject to stringent environmental regulations. On the other hand, ASOS’ business plan, focuses on achieving growth while adding social value and reducing ecological consequences. The most significant environmental effect is due to carbon emissions from product transportation since ASOS is solely an online retailer, factory operations, including packaging. As a result, ASOS’ Carbon 2020 policy intends to reduce carbon emissions, reduce energy usage, and increase renewable resources.

Notwithstanding demand dropping as a consequence surpassing pay increases, the retail sector continues to flourish. Internet sales now account for 17.2% of all retail sales in the UK, continuing the growing trend in online expenditure. Because of the strong acceleration in online sales growth, there is a growing avenue for new merchants to enter the industry. Currently, ASOS.com is the internet king of UK retail online sales, but rising competition threatens the company’s supremacy.  To analyses the current financial position of ASOS and its competitors, it is essential to conduct ratio analysis of the company (AREAS 2018). The results from the ratio analysis are shown below which will be further discussed and analyzed.

From the financial ratio analysis section, it can be noted that the gross profit ratio of ASOS has been significantly lower than Boohoo Plc in both 2021 and 2020 and was close to Alibaba Group. The increase in selling price of the product indicates that the product sale of the company has been significantly increased in 2021 despite of the negative impact of covid 19. Further, it can be noted that the current ratio of ASOS Plc was lower than both of its competitors. The lower amount of current ratio indicates that the firm has significant amount of risk towards default and hence it should strategically position itself to improvise the situation. The quick ratio of the company has been also lower than its competitors and lower than industry average (Herman Ruslim 2019). The quick ratio lower than industry average indicates that the firm does not have enough liquid assets to pay of its current liabilities. Therefore, ASOS should be aware of the situation as currently ASOS is very much dependent on its stock level. If due to any economic uncertainty stock level reduces, ASOS will have a very hard time in competing in the market.

Conclusion

On a concluding note, it can be stated that this analysis has presented the current situation of ASOS Plc, a famous clothing company. The analysis has shown that the company had very much financial distress with comparison to the two of its competitors. Further, it has been also evident that the liquidity position of the company is not at par which shows that the company might have to concentrate towards its decision making to implement sound changes to its operations which in turn will improvise the financial situation very significantly.

References

(2022) Annualreports.com. Available at: https://www.annualreports.com/HostedData/AnnualReports/PDF/LSE_ASOS_2020.pdf (Accessed: 4 January 2022).

Acceleration Of ASOS Brands Strategy (2022). Available at: https://www.asosplc.com/news/acceleration-asos-brands-strategy/ (Accessed: 4 January 2022).

AREAS, B., 2018. Financial analysis. growth, 30, p.10.

Gasparian, M.S., Kiseleva, I.A., Korneev, D.G., Lebedev, S.A. and Lebedev, V.A., 2018. Strategic analysis of risks when implementing investment projects. Espacios, 39(27), p.16.

Guo, B., Wang, J. and Wei, S.X., 2018. R&D spending, strategic position and firm performance. Frontiers of Business Research in China, 12(1), pp.1-19.

Herman Ruslim, M., 2019. The Effect Of Financial Ratio On Company Value With Inflation As A Moderation Variable. Jurnal Akuntansi, 23(1), pp.34-46.

Vogel, H.L., 2020. Entertainment industry economics: A guide for financial analysis. Cambridge University Press.

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