2.1 ASOS’ SUCCESS STORY
ASOS is one of U.K’s largest online fashion and beauty e-tailer. It caters to a high volume of student shoppers of the 16-24-age range and is yet successful in drawing one in six 25-34 year olds to shop from it as well (Mintel, 2013). It is the third most popular website for buying clothes after eBay and Amazon. Its tremendous success in the U.K and international market in the recent years combined with its unique business strategy model (see figure 2.3) denies the thought that a pure player lacks the ability to attract customers in huge numbers.
2.1.2 ASOS Business Model
The business model applied by the management team in the ASOS is a continuously evolving business model, which helps in defending their competitive position by undertaking strategic reorientation. The main strategy adopted by ASOS is cost leadership with differentiation, which is done by providing a wide range of products at relatively lower price. It is concerned with the process of selling cheap clothes in celebrity style (Arussy 2005). This decision of cutting down the price was made to appeal its young customers. Pricing plays a very major role in ASOS business model.
The international market of ASOS provides larger part of revenue so shipping has been made cheap or free on a global level. The process for returning the products is also easy which provides consumer ease and satisfaction. ASOS considers the customers as an integral part as is also stated by Arussy (2005) confirming that customer service is a very vital part. The company gives much emphasis to the technology in building up its business model and structure of online marketing. ASOS started selling a limited range of Primark clothing in June 2013 for a brief period. In April 2013, it also launched its value fashion line Style Steal. Both of these were part of its business model to expand internationally and reach countries such as China and Russia (Mintel, 2013).
ASOS’ Innovative Developments
There are few other innovative developments as well, which have helped ASOS in gaining competitive advantage over its competitors. It introduced 2D virtual fitting in its website which helps the customers to see which apparel fits them properly. The company also introduced the service of next day evening delivery, which assured the delivery of products between 6-10pm if order was placed before 12pm the previous day. The company entered into collaboration with ByBox, in April 2013 where customers were provided the facility of returning the unwanted products to the lockers. All these have led to the growth of the company (Bennett 2013) in a complete different manner from the others.
As seen in fig 2.5 the year-on-year percentage growth for the brand’s U.K sales rose for each quarter of the 2012/13 financial year, with a significant rise of 49% in the fourth quarter. One of the major reasons for this was its apt decision to cut down prices on its own label products to appeal to its hard-up young customer base.
ASOS is also witnessing growth in this domestic market with UK sales rising from £205.3 million in 2011/12 to £276.0 million by the end of the 2012/13 financial year as can be seen in figure 2.6 (Mintel, 2013). This represents a change of 34% in total UK sales. The main factor of growth for ASOS is the international business of the brand in the countries such as US, France and Australia, where its website is working particularly well.
Annual UK and International Retail Sales for the year 2011/12 and
2012/13 (ending 31 August 2013)
2.1.3 Kotler’s Stimulus-Response model
The above-mentioned statistics show that it is key for any marketer to develop and strong customer relationship management as the dynamics of consumer buying behavior are constantly changing and evolving which means companies must gain an understanding of buyer characteristics and the decision process in order to tailor their marketing efforts to their target segment. This model helps understand ASOS’ success as pure-player better thereby suggesting methods to understand consumer’s buying decision process (suitable for ASOS’ young target market) for further growth and development.
The buyer purchase motivation and factors that affect the decision process can be analysed by using Kotler’s (2008) Stimulus Response Model (see figure 2.7). The black box represents how an individual comes to a particular decision. Inputs enter the black box where they are turned into a set of observable buyer responses. This model can suggest how consumers will respond to various marketing efforts and other stimuli such as the marketing mix even though many make decisions on an unconscious level.
It is a combination of marketing stimuli and the buyer’s environment that activates buyer decisions and eventually brand choice. The fashion conscious under 25’s (Mintel, 2012) consider clothing to be a top priority. For this the retailers need to distinguish themselves from competitors through effective strategic marketing if they want to increase brand awareness and equity.
The Stimuli-Response model highlights the characteristics affecting consumer behavior, which are strongly influenced by cultural, social, personal and psychological characteristics (figure 2.8). Even though most factors are out of control for the marketers but they must be taken into account when researching buyer behavior as characteristics in a consumer’s background affect what happens within the buyer’s black box. A brand that fits the black box aptly safeguards brand loyalty and frequent purchasing from its customers.
Marketers must understand the demographics of their target segment and what influences their behavior and decisions. Reaching customers on a personal level as ASOS already does by making attempts to update its website by providing various sections such as editor’s choice and today’s look and outfits etc. This is done with the idea that it will certainly help the customers to fulfill their requirements.
This particular strategy of the company to understand and recognize the need, demands, choice, taste and preferences of the customers has helped a lot in the success of ASOS. This is in congruence with the thought of (Shaw et al 2010) that the customer experience is a blend of the brand’s performance across all platforms, and should ensure that the experience or ‘excursion’ as it is referred to by Chevalier and Mazzalovo (2008), must be something memorable and different as we do not consider all of the elements of an experience only those most noticeable (Dibeehi, et. al 2010; 110).
Also, psychological factors are key for fashion retailers targeting the youth market, as young consumers are skeptical but also impressionable. They build brand associations through recommendations and personal experiences therefore it is the role of the marketer to identify and engage with the consumers and understand their behavior.
Consumer decision process
A buyer must pass through five stages before he or she reaches a buying decision. The buyer moves through the purchasing cycle when considering to buy a new product shown in figure 2.9. The model further depicts that after going through the various stages of the purchasing cycle the consumer is either dissatisfied which leads to brand rejection or gains satisfaction, which leads to brand loyalty and repeat purchase.
2.1.4 CHAPTER SUMMARY
To summarize, applying Kotler’s model to ASOS once can comprehend that if marketers can create brand conversations through satisfaction and purchase, preference will be optimized in the current competitive fashion segment. Clothing line is one of the most competitive segments where retailers fight for gaining customers and then tries to come up with various techniques to retain them at their end. As explained by Kotler, the retailer is bound to understand the thought process going on in the mind of the customer while taking the purchase decision. This holds true in case of ASOS as well.
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