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ASOS is in a highly competitive market. With this, the market prices get forced down creating less profitability. In the Covid-19 pandemic, we saw a huge rise in online sales. ASOS does not provide a physical store meaning they connect with their customers all online through for example social media. Some of their closest competitors are Boohoo, Missguided or New look among many. With huge rivalry within the market, ASOS have taken to collaborating with their competition, for example, ASOS sell Missguided and New look products on their website increasing their market size.

References
http://fernfortuniversity.com/term-papers/porter5/lse/317-asos-plc.php

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The pandemic and lockdown was a stroke of luck for Asos which saw the number of its active customers rise by 3.1 million to 23.4 million as more shoppers turned to online fashion. While consumers love Asos’s reduced prices on potential purchases, encouraging them to buy more goods, the extent to which ASOS reduces their prices to keep up with other competitors such as Zalando which has had a detrimental effect on revenue. Boohoo, an active competitor which sells mainly the same category products at affordable prices saw rejection from consumers after revelations about poor conditions in Leicester garment factories.

Sources:
https://www.standard.co.uk/business/boohoo-sales-soar-leicester-factories-improve-leveson-nasty-gal-b890850.html

https://www.forbes.com/sites/katehardcastle/2020/10/15/asos-v-boohoothe-rise-fall-and-rise-of-fast-fashion/?sh=207c043c6e47

https://www.theguardian.com/business/2020/jul/13/boohoo-shares-drop-18-as-new-leicester-factory-reports-threaten-sales

https://finfoc.com/the-decline-of-asos-an-investors-perspective/

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As we can see, most of the suppliers come from Asia. This is due to the price of the local labor. Around these countries, China has great range of well-educated workers which means the training fee could be lower.  Low production cost means high in profit, high profits means high ability to create fashion clothing. Which makes it unique in the world market.
Reference
• ASOS: number of suppliers 2021 by country | Statista

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As of May 2021, the highest number of ASOS manufacturing factories are situated in China, with a total of 231. India and Turkey come in second and third place for the number of ASOS manufacturing factories, with 217 and 130 factories respectively. ASOS, a UK-based online fashion and cosmetic retailer, has 24 manufacturing factories situated in the UK.

Manufacturing factories of Primark and C&A

When compared to the Irish and German retailer behemoths of Primark and C&A, ASOS has much fewer manufacturing factories as of 2020. The German-based retailer C&A has the most manufacturing factories out of all three, with Brazil taking the top spot at 643 factories. Whereas, the Irish-based retailer Primark also has the most manufacturing factories situated in China, with 525 factories as of January 2020.

Transparency Index of ASOS

The transparency index of ASOS ranked seventh among two-hundred fashion and apparel brands and retailers measured, with a score of 59 percent. The Fashion Transparency Index is measured based on the amount of information disclosed by retailers about their suppliers, their supply chain policies and their practices as well as their social and environmental impact. The retailer with the best transparency index score as of 2019 was Adidas, with a transparency score of 64 percent.

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ASOS: number of suppliers 2021 by country | Statista

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As of May 2021, the highest number of ASOS manufacturing factories are situated in China, with a total of 231. India and Turkey come in second and third place for the number of ASOS manufacturing factories, with 217 and 130 factories respectively. ASOS, a UK-based online fashion and cosmetic retailer, has 24 manufacturing factories situated in the UK.

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Perceived level of product differentiation

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Perceived level of product differentiation

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ASOS is a British retailer engaging with the fashion industry through online presence and offerings, which seek to target the youth by providing gender-neutral and eco-friendly clothing (ASOS, no date; Forbes, no date). Therefore, the competitors within its microeconomic environment include firms with similar geographical location and target market, like BooHoo, PrettyLittleThing, and Zalando (Craft, no date).

To evaluate the product differentiation perceived by the customers within this market, surveys have been conducted. For example, in 2017, the firm formed part of Forbes’s list of Innovative Growth Companies, and a survey by Attest showed that ASOS possessed 37% of the market share, while BooHoo had 20.3%, PrettyLittleThing 4.8%, and Zalando 4.5% (Attest, 2017; Forbes, no date).

The main reason for Attest’s lead was the affordable price of its clothing; however, the quality of the clothes wasn’t praised enough by customers in comparison with its competitors. For example, about 25% of BooHoo’s customers praised its products’ quality, while only half of ASOS’s customers remarked the same thing in this firm’s products (Attest, 2017).

Therefore, the competitiveness of the industry regarding to the perceived level of product differentiation is substantial for ASOS, a firm that still leads in the market, but may eventually be surpassed by its competitors if it remains unable to match their products’ quality.

ASOS (no date) Who we are., ASOS. Available at: https://www.asos.com/about/who-we-are/?ctaref=aboutus|whoweare.

Attest (2017) Battle of the Brands: Online Fashion, Attest. Available at: https://www.askattest.com/blog/uncategorized/battle-of-the-brands-online-fashion-shopping (Accessed: September 29, 2021).

Craft (no date) ASOS competitors, Craft. Available at: https://craft.co/asos/competitors (Accessed: September 29, 2021).

Forbes (no date) ASOS, Forbes. Available at: https://www.forbes.com/companies/asos/?sh=1336221d3cb9.

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Suppliers in the clothing industry are relatively high in number which decreases the bargaining power of suppliers. The Global Apparel Manufacturing Market Size in 2021 was $825.7bn (IBIS World, 2021). 'As of May 2021, the highest number of ASOS manufacturing factories are situated in China, with a total of 231. India and Turkey come in second and third place for the number of ASOS manufacturing factories, with 217 and 130 factories respectively. When compared to the Irish and German retailer behemoths of Primark and C&A, ASOS has much fewer manufacturing factories as of 2020. The Irish-based retailer Primark also has the most manufacturing factories situated in China, with 525 factories as of January 2020.
The high number of suppliers implies that the bargaining power of suppliers with ASOS and other companies in the market is diminished while the industry attractiveness increases.

References:
- https://www.ibisworld.com/global/market-size/global-apparel-manufacturing/
-https://www.statista.com/statistics/1100017/number-of-suppliers-of-asos-by-region/

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IBISWorld - Industry Market Research, Reports, and Statistics

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What is the market size of the Global Apparel Manufacturing industry? IBISWorld's statistic shows that as of 2021 the market size of the Global Apparel Manufacturing industry is $825.7bn an increase of 5.78% from 2020.

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ASOS increased their brand loyalty by not relying merely on the traditional point system but also in its focus in providing customers with unique and personalised shopping experience. They integrated experiences such as tailored suggestions to go with the customers’ basket of goods as well as reducing risks on customers by offering a 2-month return policy with flexible guidelines. The innovations made by ASOS in delivering customers the best personal experience online paved the way in creating brand loyalty, deterring them from the threat of potential entrants.

Sources:

- https://www.retentionscience.com/blog/how-etailer-asos-takes-a-holistic-approach-to-retention-marketing/

- http://fernfortuniversity.com/term-papers/porter5/lse/317-asos-plc.php

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ASOS sells a large variety of fashion products of some of the popular brands existing.
As a well-known online retailer, ASOS has a list of competitors such as The Hut Group, Boohoo, Pretty Little Thing, Alibaba, House of Frasers, New Look, John Lewis, All Saints, Primark, Marks & Spencer, etc. that are the substitutes available to the buyers with the similar policies and overall shopping experience.

Sources:
https://craft.co/asos/competitors
https://www.owler.com/company/asosplc/competitors

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Primark is an Ireland-based fast-fashion chain with the majority of its stores located in the UK. Primark has nearly 373 locations in 12 countries, it's supply network started in 2013. As of May 2021, Primark has a total of 475 supplier factories in China. There are 104 factories in Bangladesh that supply the company with apparel and accessories.

Department, S. R. (2021, July 22). Primark: Number of suppliers 2021 by country. Statista. Retrieved September 30, 2021, from https://www.statista.com/statistics/1102388/number-of-suppliers-of-primark-by-region/.

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Relative price performance of substitute: Threat of Substitute Products 

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Relative price performance of substitute: Threat of Substitute Products 

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Notably, price sensitivity was a prominent factor of buying habits among consumers throughout the COVID-19 pandemic last year, as a study showed people were “searching for bargains” (Koch and Schewe). With ASOS, I can’t help but notice in their article they state they’ve had a “triple-digit increase in digital sales”, highlighting they switched the majority of their imports from suppliers to loungewear or activewear. I took upon the liberty of searching loungewear on the ASOS website and decided to choose the first option available, which was a lounge set of a hoodie and joggers. The cost was £32 with an additional £4 shipping.

A Google search, with the same preface of product, brings up options as low as £16.99 with £1.99 shipping from Femme Luxe; another female heavy clothing store.. ASOS derive their products from a variety of destinations globally, particularly only 4% within the UK; Turkey, China and Eastern Europe account for 84% of all it’s production (Hendriksz, 2016). With sites like Wish and AliExpress offering even lower prices than Femme Luxe, it leads question to why the price point of ASOS is so high, with success, yet competitors beat them in this area.

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For ASOS, there is always the threat of rivals as the online retail industry is booming. For example, companies such as BOOHOO have been thriving alongside ASOS. BOOHOO has seen a significant rise in sales from the previous year, 41% to be exact, rising up to 1.7 billion pounds, while ASOS saw similar rises. ASOS' sales also rose however not as significantly as BOOHOO's, ASOS saw a rise of 19% which means that BOOHOO are catching up with the retail giant and are posing a threat to ASOS with such significant rises in sales.

Citation:

https://www.cityam.com/exclusive-asos-and-boohoo-lead-the-pack-as-online-only-retail-sales-hit-record-16bn/

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Boohoo reported sales of £1.7bn in the year to 28 February 2021, up 41 per cent on the previous year. (Getty Images for boohoo.com)

Sales at the UK's 20 biggest online-only retailers have reached a record £16.4bn in the last year, rising 22 per cent from £13.2bn the previous year, according to calculations based on Companies House data.

This growth continues to be driven by the success of fashion retailers, which increased their revenues by 14.2 per cent to £6.9bn in the past year, City law firm RPC found, sharing its findings exclusively with City A.M. this morning.

Boohoo reported sales of £1.7bn in the year to 28 February 2021, up 41 per cent on the previous year, while sales at ASOS grew 19 per cent to £3.2bn.

The growth is driven by strong demand for products such as casualwear and athleisure during the early stages of lockdown, and "occasion" wear when restrictions started to ease last summer.

Other high-performing online retailers include electrical goods retailer AO.com, which saw the biggest growth with a 62 per cent jump in sales to £1.6bn. The Hut Group, which owns brands including Myprotein and Lookfantastic, saw a 41.5 per cent rise in turnover to close to £1.6bn.

Marketing and CAPEX

Whilst the online sector has been helped tremendously by the tailwinds provided by the lockdown the e-commerce companies have also benefited by its willingness to invest heavily in marketing and CAPEX to help deliver growth, explained Jeremy Drew, co-head of retail at RPC.

For example, online retailers have been investing heavily in tools such as augmented reality to enhance the shopping experience for consumers. During lockdown ASOS unveiled an augmented reality tool on its website which digitally fitted clothes onto models to show how they could look when worn.

"There's no doubt the pandemic has accelerated the growth of online retail. However, e-retailers still deserve plaudits for capitalising on that sudden shift by dramatically adding to capacity," Drew told City A.M.

"As social distancing eased, physical stores have mounted a fightback showing they are a key part of the retail mix," he added.

Source: RPC/Companies House

Another way online retailers have been able to drive sales is through more effective investment in their social media presence than some of their High Street rivals.

Online retailers have typically been quicker to partner with influencers than some of the more traditional retailers. Drew said this has enabled them to generate a higher level of engagement on social media and better sales growth among a younger demographic.

For example, Boohoo has over 8.2 million followers on Instagram, citing the success of its social media outreach as a key driver of sales.

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Exclusive: ASOS and Boohoo lead the pack as online-only retail sales hit record £16bn

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Sales at the UK's 20 biggest online-only retailers have reached a record £16.4bn in the last year, rising 22 per cent from £13.2bn the previous year, according to calculations based on Companies House data.

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ASOS sees Quadrupling of profit on strong pandemic demand – bargaining power of buyers

ASOS is obviously an online shopping brand that is very popular in the UK, so during the pandemic they were still able to operate while competitors such as Primark, New Look, etc were forced to close. So during the pandemic ASOS’ sales rose by 19% to £3.26 billion with a total of 23.4 million  customers. “the company will have to be very choosy about the ranges and prices it offers." Said by Susannah Streeter an investment analyst at stockbrokers Hargreaves Lashdown, about how COVID has effected the range of clothing the company should offer as no one is really going out and all of their prices.

Sources -

https://www.businessoffashion.com/articles/retail/asos-sees-quadrupling-of-profit-on-strong-pandemic-demand

https://www.bbc.co.uk/news/business-54535775

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"I ordered a bunch of trendy clothes from ASOS for so cheap" is a phrase that is on everyone's lips these days, especially in the Covid-19 era. Admittedly, ASOS excelled dealing with the pandemic and customers not being able to go out. They were quick at identifying a latent market and producing clothes that were so necessary and useful at the time of the pandemic spending most of the time and working at home - loungewear and activewear. ASOS as any other marketing-based business had to jump on the bandwagon. The issue is that this type of clothing is supplied in ASOS competitors' brands as well. Other issues arise speaking of the quality of ASOS clothes - other brands may have manufactured a clothing item that is 100% cotton or recycled cotton, which is mostly preferred by most customers. Comfort and practicality in clothes is most likely prioritized during pandemic (being at home) rather than style (since people aren't going out much). That said, H&M, pact, Colored Organics might have options that would outweight ASOS in quality.

Leighton, M. (2019, January 8). 8 popular companies like Nike and Patagonia that are committed to reducing environmental harm by using organic cotton. Business Insider. https://www.businessinsider.com/sustainable-organic-cotton-clothes-bedding-2019-1?op=1&r=US&IR=T

Drapers (2020, 12). Covid business continuity strategies: Jacqueline gold, Ann summers. Drapers. https://www.drapersonline.com/insight/analysis/covid-business-continuity-strategies-jacqueline-gold-ann-summers

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ASOS are one of the biggest/ well know fashion website globally, this means that they can be a threat to new competition and rivals which decide to enter market. ASOS as a business needs to keep up with there competitors by being innovative by adding new businesses and products to their page so that they can keep loyal customers, keep up with fast fashion, gain new customers and remain/ growth there share in  the market.
http://fernfortuniversity.com/term-papers/porter5/lse/317-asos-plc.php

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Strategic Management Essays, Term Papers & Presentations

Porter Five Forces Analysis is a strategic management tool to analyze industry and understand underlying levers of profitability in a given industry. Asos Plc managers can use Porter Five Forces to understand how the five competitive forces influence profitability and develop a strategy for enhancing Asos Plc competitive advantage and long term profitability in Retail industry.

Brief overview of Asos Plc

Asos Plc is one of the leading firms in the Retail. Over the years Asos Plc has redefined the ways of doing business in Consumer Services. Asos Plc is listed at London Stock Exchange (LSE) and have a market cap $ 6218.55 million (USD).

Order Now - Harvard Business (HBR) Case Study Solution

Order Now - Asos Plc Porter 5 Forces Analysis & Industry Analysis

What are Porter Five (5) Forces

In his revolutionary article in Harvard Business Review (HBR) - "Five Forces that Shape Strategy", Michael Porter observed five forces that have significant impact on a firm's profitability in its industry. These five forces analysis today in business world is also known as -Porter Five Forces Analysis. The Porter Five (5) Forces are -

Threat of New Entrants

Bargaining Power of Suppliers

Bargaining Power of Buyers

Threat from Substitute Products

Rivalry among the existing players.

Porter Five Forces is a holistic strategy framework that took strategic decision away from just analyzing the present competition. Porter Five Forces focuses on - how Asos Plc can build a sustainable competitive advantage in Retail industry. Managers at Asos Plc can not only use Porter Five Forces to develop a strategic position with in Retail industry but also can explore profitable opportunities in whole Consumer Services sector.

Asos Plc Porter Five (5) Forces Analysis for Consumer Services Industry

Threats of New Entrants

New entrants in Retail brings innovation, new ways of doing things and put pressure on Asos Plc through lower pricing strategy, reducing costs, and providing new value propositions to the customers. Asos Plc has to manage all these challenges and build effective barriers to safeguard its competitive edge.

How Asos Plc can tackle the Threats of New Entrants

By innovating new products and services. New products not only brings new customers to the fold but also give old customer a reason to buy Asos Plc 's products.

By building economies of scale so that it can lower the fixed cost per unit.

Building capacities and spending money on research and development. New entrants are less likely to enter a dynamic industry where the established players such as Asos Plc keep defining the standards regularly. It significantly reduces the window of extraordinary profits for the new firms thus discourage new players in the industry.

Bargaining Power of Suppliers

All most all the companies in the Retail industry buy their raw material from numerous suppliers. Suppliers in dominant position can decrease the margins Asos Plc can earn in the market. Powerful suppliers in Consumer Services sector use their negotiating power to extract higher prices from the firms in Retail field. The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Retail.

How Asos Plc can tackle Bargaining Power of the Suppliers

By building efficient supply chain with multiple suppliers.

By experimenting with product designs using different materials so that if the prices go up of one raw material then company can shift to another.

Developing dedicated suppliers whose business depends upon the firm. One of the lessons Asos Plc can learn from Wal-Mart and Nike is how these companies developed third party manufacturers whose business solely depends on them thus creating a scenario where these third party manufacturers have significantly less bargaining power compare to Wal-Mart and Nike.

Bargaining Power of Buyers

Buyers are often a demanding lot. They want to buy the best offerings available by paying the minimum price as possible. This put pressure on Asos Plc profitability in the long run. The smaller and more powerful the customer base is of Asos Plc the higher the bargaining power of the customers and higher their ability to seek increasing discounts and offers.

How Asos Plc can tackle the Bargaining Power of Buyers

By building a large base of customers. This will be helpful in two ways. It will reduce the bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its sales and production process.

By rapidly innovating new products. Customers often seek discounts and offerings on established products so if Asos Plc keep on coming up with new products then it can limit the bargaining power of buyers.

New products will also reduce the defection of existing customers of Asos Plc to its competitors.

Threats of Substitute Products or Services

When a new product or service meets a similar customer needs in different ways, industry profitability suffers. For example services like Dropbox and Google Drive are substitute to storage hardware drives. The threat of a substitute product or service is high if it offers a value proposition that is uniquely different from present offerings of the industry.

How Asos Plc can tackle the Treat of Substitute Products / Services

By being service oriented rather than just product oriented.

By understanding the core need of the customer rather than what the customer is buying.

By increasing the switching cost for the customers.

Rivalry among the Existing Competitors

If the rivalry among the existing players in an industry is intense then it will drive down prices and decrease the overall profitability of the industry. Asos Plc operates in a very competitive Retail industry. This competition does take toll on the overall long term profitability of the organization.

How Asos Plc can tackle Intense Rivalry among the Existing Competitors in Retail industry

By building a sustainable differentiation

By building scale so that it can compete better

Collaborating with competitors to increase the market size rather than just competing for small market.

Implications of Porter Five Forces on Asos Plc

By analyzing all the five competitive forces Asos Plc strategists can gain a complete picture of what impacts the profitability of the organization in Retail industry. They can identify game changing trends early on and can swiftly respond to exploit the emerging opportunity. By understanding the Porter Five Forces in great detail Asos Plc 's managers can shape those forces in their favor.

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Porter Five Forces Analysis is a strategic management tool to analyze industry and understand underlying levers of profitability in a given industry. Asos Plc managers can use Porter Five Forces to understand how the five competitive forces influence profitability and develop a strategy for enhancing Asos Plc competitive advantage and long term profitability in Retail industry.

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Relative Price Performance of Substitutes 

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Relative Price Performance of Substitutes 

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With a company like ASOS which sells an array of products from 168 different companies, pricing and accessibility is one of the key factors to their success. It's no lie that in the current economical climate, many people shop with finances being at the forefront of their minds. As ASOS sell products from stores in which a consumer could buy from directly, it is important for them to be aware of pricing among their competitors because otherwise, some may argue why ASOS if you can get it cheaper elsewhere? For example, a pair of women's Levi's skinny jeans at the original store costs £100, whereas ASOS have the same branded jeans selling for £95. While this may not have much direct profit for ASOS,  this kind of 'discounted rate' is something that could also entice consumers to return. Another key factor to mention is the trends that inspire clothing: as trends come and go, it is very common that you see multiple companies selling almost identical products which is something that ASOS need to be aware of when pricing. This returns back to the attitude of 'why shop here if you can get it cheaper' which consumers often have today. Failure to stay on top of the pricing at rival companies could result poorer profits and be detrimental to ASOS's so far successful performance.

References:
Who We Are | Body Positivity & Supporting Talent | ASOS
Wo Search: levi womens jeans - page 1 of 2 | ASOS men's Skinny Jeans | Levi's® GB
Getting the Price Right: Taking Pricing Lessons from ASOS - InSiteTrack

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We believe in a world where you have total freedom to be you, without judgement. To experiment. To express yourself. To be brave and grab life as the extraordinary adventure it is. So we make sure everyone has an equal chance to discover all the amazing things they're capable of - no matter who they are, where they're from or what looks they like to boss. We exist to give you the confidence to be whoever you want to be.

ASOS Marketplace

You know that satisfying feeling when you stumble across an incredible vintage boutique, or uncover an amazing independent brand, before everyone else? Yeah, we love that too. That's why we created ASOS Marketplace in 2010. The team seeks out the best fashion start-ups, so you can shop one-of-a-kind finds all the time.

People

We're serious about making sure every person in our global supply chain is safe at work and has their rights respected and protected. We set high ethical standards and support our suppliers to help them meet them. Our priorities include transparency; improving wages; health and safety; addressing and reducing modern-slavery risks, and identifying and stopping child labour.

THE LEGAL BIT

Company Name: ASOS.com
Limited Registered Address Greater London House, Hampstead Road, London, England, NW1 7FB
Email Address: Legal@asos.com
Company Register: Companies House (England)
Company Registration Number: 03584121
Authorised Representative: José Antonio Ramos Calamonte CEO
VAT number: GB 788 6225 77

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Who We Are | Body Positivity & Supporting Talent | ASOS

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Find out more about who we are at ASOS, our ASOS brands, how we celebrate body positivity, how we support talent, who we partner with and much more. ASOS.

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ASOS's top competitors include The Hut Group, Alibaba, AllSaints, House of Fraser, Farfetch, Missguided, New Look, Pretty Little Thing, Boohoo, Matches Fashion and Bestseller. ASOS is an online retailer for fashion products. The Hut Group (THG) is a digital commerce group active in the beauty and wellbeing market.

Sources :

ASOS competitors

Top ASOS Competitors and Alternatives | Craft.co

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The clothing industry is a highly saturated market wich has been hit hard during the pandemic and seen a shift in shoppers trends. With more and more brands such as M & S working to develop their online presence and a  70% increase in online retail sales during August 2021, (when compared with pre COVID levels,) Asos will no doubt come across new competition. Previous to the pandemic one of Asos's key unique points was its online status. Whilst this dominance of the online market has given it an advantage during the pandemic, it has also forced it to reposition itself in the growing market and develop new selling points. It has done this by forseeing a change in customers demands and developing a large line of loungewear and activewear, which contributed to its soaring profits which were up by £30.1m a year earlier. As well as this its: already established large customer base;  customer loyalty; strong supply chain based in China and mass global trading allow it to undercut any new competitors in terms of price and distribution. Making it a formidable presence in the world of retailhttp://fernfortuniversity.com/term-papers/porter5/lse/317-asos-https://www.theguardian.com/business/2020/oct/14/asos-profits-quadruple-as-demand-for-casual-wear-soars-in-lockdown

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Strategic Management Essays, Term Papers & Presentations

Porter Five Forces Analysis is a strategic management tool to analyze industry and understand underlying levers of profitability in a given industry. Asos Plc managers can use Porter Five Forces to understand how the five competitive forces influence profitability and develop a strategy for enhancing Asos Plc competitive advantage and long term profitability in Retail industry.

Brief overview of Asos Plc

Asos Plc is one of the leading firms in the Retail. Over the years Asos Plc has redefined the ways of doing business in Consumer Services. Asos Plc is listed at London Stock Exchange (LSE) and have a market cap $ 6218.55 million (USD).

Order Now - Harvard Business (HBR) Case Study Solution

Order Now - Asos Plc Porter 5 Forces Analysis & Industry Analysis

What are Porter Five (5) Forces

In his revolutionary article in Harvard Business Review (HBR) - "Five Forces that Shape Strategy", Michael Porter observed five forces that have significant impact on a firm's profitability in its industry. These five forces analysis today in business world is also known as -Porter Five Forces Analysis. The Porter Five (5) Forces are -

Threat of New Entrants

Bargaining Power of Suppliers

Bargaining Power of Buyers

Threat from Substitute Products

Rivalry among the existing players.

Porter Five Forces is a holistic strategy framework that took strategic decision away from just analyzing the present competition. Porter Five Forces focuses on - how Asos Plc can build a sustainable competitive advantage in Retail industry. Managers at Asos Plc can not only use Porter Five Forces to develop a strategic position with in Retail industry but also can explore profitable opportunities in whole Consumer Services sector.

Asos Plc Porter Five (5) Forces Analysis for Consumer Services Industry

Threats of New Entrants

New entrants in Retail brings innovation, new ways of doing things and put pressure on Asos Plc through lower pricing strategy, reducing costs, and providing new value propositions to the customers. Asos Plc has to manage all these challenges and build effective barriers to safeguard its competitive edge.

How Asos Plc can tackle the Threats of New Entrants

By innovating new products and services. New products not only brings new customers to the fold but also give old customer a reason to buy Asos Plc 's products.

By building economies of scale so that it can lower the fixed cost per unit.

Building capacities and spending money on research and development. New entrants are less likely to enter a dynamic industry where the established players such as Asos Plc keep defining the standards regularly. It significantly reduces the window of extraordinary profits for the new firms thus discourage new players in the industry.

Bargaining Power of Suppliers

All most all the companies in the Retail industry buy their raw material from numerous suppliers. Suppliers in dominant position can decrease the margins Asos Plc can earn in the market. Powerful suppliers in Consumer Services sector use their negotiating power to extract higher prices from the firms in Retail field. The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Retail.

How Asos Plc can tackle Bargaining Power of the Suppliers

By building efficient supply chain with multiple suppliers.

By experimenting with product designs using different materials so that if the prices go up of one raw material then company can shift to another.

Developing dedicated suppliers whose business depends upon the firm. One of the lessons Asos Plc can learn from Wal-Mart and Nike is how these companies developed third party manufacturers whose business solely depends on them thus creating a scenario where these third party manufacturers have significantly less bargaining power compare to Wal-Mart and Nike.

Bargaining Power of Buyers

Buyers are often a demanding lot. They want to buy the best offerings available by paying the minimum price as possible. This put pressure on Asos Plc profitability in the long run. The smaller and more powerful the customer base is of Asos Plc the higher the bargaining power of the customers and higher their ability to seek increasing discounts and offers.

How Asos Plc can tackle the Bargaining Power of Buyers

By building a large base of customers. This will be helpful in two ways. It will reduce the bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its sales and production process.

By rapidly innovating new products. Customers often seek discounts and offerings on established products so if Asos Plc keep on coming up with new products then it can limit the bargaining power of buyers.

New products will also reduce the defection of existing customers of Asos Plc to its competitors.

Threats of Substitute Products or Services

When a new product or service meets a similar customer needs in different ways, industry profitability suffers. For example services like Dropbox and Google Drive are substitute to storage hardware drives. The threat of a substitute product or service is high if it offers a value proposition that is uniquely different from present offerings of the industry.

How Asos Plc can tackle the Treat of Substitute Products / Services

By being service oriented rather than just product oriented.

By understanding the core need of the customer rather than what the customer is buying.

By increasing the switching cost for the customers.

Rivalry among the Existing Competitors

If the rivalry among the existing players in an industry is intense then it will drive down prices and decrease the overall profitability of the industry. Asos Plc operates in a very competitive Retail industry. This competition does take toll on the overall long term profitability of the organization.

How Asos Plc can tackle Intense Rivalry among the Existing Competitors in Retail industry

By building a sustainable differentiation

By building scale so that it can compete better

Collaborating with competitors to increase the market size rather than just competing for small market.

Implications of Porter Five Forces on Asos Plc

By analyzing all the five competitive forces Asos Plc strategists can gain a complete picture of what impacts the profitability of the organization in Retail industry. They can identify game changing trends early on and can swiftly respond to exploit the emerging opportunity. By understanding the Porter Five Forces in great detail Asos Plc 's managers can shape those forces in their favor.

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Porter Five Forces Analysis is a strategic management tool to analyze industry and understand underlying levers of profitability in a given industry. Asos Plc managers can use Porter Five Forces to understand how the five competitive forces influence profitability and develop a strategy for enhancing Asos Plc competitive advantage and long term profitability in Retail industry.

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As of the 30th June 2021, ASOS has 26.1 million active customers, across more than 200 countries. 7 million of these customers are in the UK and during covid-19 they saw their numbers of customers rise (by around 3 million).  Their target age demographic is mainly made up of people between the ages of 20 and 30 years old.

Sources:

-BBC 2020, Asos adds three million customers as profits soar amid pandemic, viewed 29/09/21, <https://www.bbc.co.uk/news/business-54535775>
-ASOS 2021, Which countries do you ship to internationally?, viewed 29/09/21, <https://www.asos.com/us/customer-care/delivery/which-countries-do-you-ship-to-internationally/>
-ASOS 2021, Trading Statement for the four months ended 30 June 2021, viewed 29/09/21, <https://www.asosplc.com/investors/latest-results>
-Drapers 2020, Covid business continuity strategies: Nick Beighton, Asos, viewed 29/09/21, <https://www.drapersonline.com/insight/analysis/covid-business-continuity-strategies-peter-wood-allsaints>

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Goods and services in the majority of markets have various substitutes that provide similar benefits to a buyer. This increased choice causes competition between brands, potentially “effect[ing] the profitability of an industry” (Strategic). However, the threat of the substitute good relies on a few factors such as buyer propensity to switch to alternatives.  If a brand has built up strong buyer loyalty, where customers have “a deeply held commitment to rebuy…a preferred product/service consistently in the future,… despite situational influences and marketing efforts having the potential to cause switching behavior" (Oliver, 1999), then buyers have a lower propensity to substitute. For example, many people who drink Coca-Cola would never switch to Pepsi despite an arguable similar taste. Therefore, Coca-Cola has a low threat of substitution due to low buyer propensity to substitute.

Citations:

https://strategiccfo.com/threat-of-substitutes-one-of-porters-five-forces/

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.105.3103&rep=rep1&type=pdf

-Oliver, R. (1999) “Whence Consumer Loyalty?” Journal of Marketing, 63 (Special Issue) : 33-44.