Asos’s well-known ambition is to become ‘the number one fashion destination for twentysomethings globally’ and with global sales clocking on for £2bn it would appear that they are well on track to achieve that ambition. However with a hugely impressive +33% sales growth in the last 12 months I wonder whether that growth is sustainable under their current model or is it worth them looking at how the likes of Zalando in Europe have adapted their business model to becoming more of a marketplace – the model Alibaba operate so effectively in China.
Whilst Asos effectively operates as a retailer today, owning and holding all of the 70,000 lines from over 850 brands, this business model is one that many platforms with huge traffic to leverage; Amazon, Zalando etc are moving away from and towards a more hybrid model. At such breakneck growth Asos will surely have outgrown their enormous shed in Barnsley by now and will likely be facing challenges as to how quickly they can open new warehouses to support their growth, not to mention the cost to support this. Zalando recognised this challenge back in 2013 and very consciously made the decision away from opening more warehouses and from being a pure retailer to becoming a marketplace, or ‘digital platform’ as they prefer to call it.
Being a marketplace for fashion, in the same way that Amazon is for pretty much everything else you’d buy online, enables Zalando to leverage their huge online audience of 17m members across Europe and earn commission on sales of 3rd party brands without ever having to hold the stock or even deal with the logistics, which is the responsibility of the 3rd party retailer. The model is attractive from a brand perspective because you can get to launch into new markets (via a marketplace like Zalando in Germany) test and learn without having to launch a localised website, local payment options or commit your stock in advance – you only pay commission on net sales generated through that platform.
Asos are understandably protective of the customer experience and end to end journey, which no doubt is a key reason why the marketplace model doesn’t appeal to them – they wouldn’t want to risk outsourcing that journey to another retailer and their logistics partner who might not deliver to the same speed or standards that their partners do. Zalando overcome this potential issue by insisting you operate with the same carriers that they work with in each market to ensure consistency of delivery/service – for example this has to be DHL in Germany, PostNL in the Netherlands etc. As a brand this can be tricky to integrate with new carriers around Europe, but ultimately the customer experience is more consistent so the end customer is likely to be more satisfied with the service and shop with you as a brand again.
Customers are very much used to the marketplace model now with several items in the same order coming from different suppliers at different times so as long as you communicate that well, the customer experience shouldn’t be diminished. Asos could also operate a hybrid model in the same way that Amazon do and offer a ‘fulfilled by Amazon’ service whereby they would buy the stock from retailers as they do today but give these brands/products prominence in the same way that Amazon do for Prime products for Prime customers.
And what about international markets if Asos adapted the marketplace model? This would no doubt be the most complex issue for Asos in developing this model in a way that serves its 232 international markets well. Whereas Zalando and Amazon operate local websites for each marketplace and Asos could no doubt do this for the 7 markets where it has websites it would need to find a solution for customers shopping on the UK website from markets like Singapore, Denmark and The Netherlands.
It’s also worth saying that although Asos do already officially run a ‘marketplace’ it’s never been fully integrated into the Asos.com experience and as such receives very little traffic (relatively) and attention from customers, something that Amazon also realised in the early days before deciding that the only way to make the marketplace model work was the fully integrate those products and brands into the main Amazon.com experience.
Ultimately I don’t believe customers would see a big difference in the Asos experience if they did decide to move towards a more marketplace model and probably many consider that Asos is a marketplace already, offering them a huge choice of brands and products in one place.
However, with competitors increasingly moving towards the marketplace model (including LaRedoute in France and many more traditional retailers around the world) to enable them to scale their growth more effectively and efficiently it will be interesting to see what they do in this space.
I’m sure Asos have considered this move towards marketplaces before and will do again – my view is that it will be a matter or not if but when.
Let’s see…
crossborderecommerce 