Collaborative ASOS Porter's Analysis by Stephanie

Competitive Rivalry

consumer_behaviour — 2021-09-26 12:05:46 UTC

Bargaining Power of Suppliers

consumer_behaviour — 2021-09-26 12:06:06 UTC

Bargaining Power of Buyers

consumer_behaviour — 2021-09-26 12:06:29 UTC

Threat of Substitutes

consumer_behaviour — 2021-09-26 12:07:18 UTC

Threat of New Entrants

consumer_behaviour — 2021-09-26 12:07:39 UTC

Buyer propensity to substitute

2021-09-28 15:15:36 UTC

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.

Number of Customers

2021-09-30 15:04:03 UTC

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,
-ASOS 2021, Which countries do you ship to internationally?, viewed 29/09/21,
-ASOS 2021, Trading Statement for the four months ended 30 June 2021, viewed 29/09/21,
-Drapers 2020, Covid business continuity strategies: Nick Beighton, Asos, viewed 29/09/21,

threats of new entrants

2021-09-30 16:14:56 UTC

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

2021-09-30 16:43:47 UTC

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

Relative Price Performance of Substitutes

2021-09-30 16:54:07 UTC

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

threat of new entrants

2021-09-30 18:48:21 UTC

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

Easily Substituted Products

2021-09-30 20:32:35 UTC

"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

2021-09-30 21:02:02 UTC

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

Competitive Rivalry

2021-09-30 21:41:19 UTC

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/

Relative price performance of substitute: Threat of Substitute Products

2021-09-30 21:59:59 UTC

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.

Number of supplier factories

2021-09-30 22:06:01 UTC

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/.

Bargaining Power of Buyers

2021-09-30 23:40:36 UTC

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

Brand Loyalty

2021-09-30 23:45:35 UTC

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

Number and Size of Suppliers

2021-09-30 23:53:03 UTC

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/

Perceived level of product differentiation

2689232g — 2021-10-01 00:29:41 UTC

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.

Number of suppliers around the world

2021-10-01 08:19:29 UTC

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

Buyers Ability To Substitute

2021-10-01 09:09:08 UTC

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/

Rivalry among existing competitor's

2021-10-03 16:46:40 UTC

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