Asos reduces reliance on promotions as ‘transformation’ continues

Despite revenues falling 18% year-over-year in the six months to March, Asos’s CEO insists the retailer is “delivering” against its turnaround plan.

AsosAsos made more than 60% of its sales without any promotion or discounting in place during the first half of its financial year, as the business shifts focus towards building brand affinity.

Having identified back in November it was too dependent on promotional activity and “seductive” performance marketing, the online retailer has invested £30m in brand-building. As a result, more than three in five sales were not part of any promotional activity during the first six months of its financial year ending 3 March 2024.

Despite this progress, Asos did see its adjusted gross margin fall 260 basis points, which the brand attributed to planned discounting designed to clear old stock. The retailer indicated it was “ahead of plan” on clearing old stock.

Revenues across the group declined by 18% year-on-year to £1.5bn. In the UK specifically, sales decreased by 16% year-on-year, and active customers declined by 13%. The average basket value did increase slightly by 3%.

Asos’s CEO José Antonio Ramos Calamonte identified back in October 2022 that the company’s over-reliance on promotional activity, and a lack of brand investment, had slowed its growth that financial year. Today (17 April), he told investors, amid the steep revenue decline this year is one of “continued transformation”.

“Under our Back to Fashion strategy, we set out three priorities for the year – to offer the best and most relevant product, to strengthen our relationship with customers and to reduce our cost to serve,” he said, referring to the company’s turnaround plan.

Ramos Calamonte claimed the business had delivered on each of these priorities during the first half of the year.

Inside Asos’s plan to ‘rebuild’ its brand affinity and marketing team

As well as remedying a reliance on promotions to drive sales, Asos has set out to rectify is overly promotional marketing strategy. Speaking to Marketing Week in November, senior customer director Dan Elton acknowledged the brand “had a singular marketing approach for quite a while” and this centred around performance marketing. In a bid to shift focus, the company invested in its first full-funnel brand platform, ‘Asos Your Way’.

Focused on returning to its “roots of cultural marketing, content marketing and organic social media”, Asos worked closely with influencers to launch the first iteration of “experiential guerilla marketing campaign” called ‘ASOS IRL’.

The retailer has introduced what it describes as an “always-on” social and influencer programme, which involves working with more than 300 “micro and mega influencers” globally each month.

While the business is not looking for immediate pay-off as it switches its strategy towards brand-building, the team have seen some positive early signals from this activity. Asos used test and control groups to isolate the uplift generated by the campaign activities, reporting a 10% uplift in new customers and a 2% uplift in organic web visits.

The retailer also opened a physical pop-up shop in central London as part of its brand focused push. The campaign achieved a combined paid and organic reach of more than 30 million unique users, with the activation driving a 17% year-over-year uplift in branded search.

Overall, marketing spend decreased by 8% year-over-year in the six month period. However, as a percentage of revenue, marketing spend is up 70 basis points and represented 6.7% of revenue.

Importance of product

In his review of the six month period, Ramos Calamonte said Asos was foremost focused on the product it offers.

“Asos’s relationship with consumers is most critically about exciting them with the most relevant product,” he said.

The Asos CEO highlighted the company’s ‘Test and React’ strategy, which sees it bring product from design to site in three weeks. Items under this model now make up approximately 5% of own-brand sales and around a third of own-brand sales in the category in which they are launched.

“Once we have product that is more relevant and a proposition that genuinely inspires our customers, we will then turn up our marketing to amplify our brand message,” Ramos Calamonte explained.