Analysis of ASOS Plc.'s UK Fashion Retail Operations

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Retail Theory and Practices
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Table of Contents
Introduction......................................................................................................................................3
Introduction to the company............................................................................................................3
Key relevant changes within the UK fashion retail.........................................................................4
Relevant changes within the micro environment.............................................................................5
Suggest and Discuss strategies and tactics that could be used........................................................7
Recommendation.............................................................................................................................9
Conclusion.......................................................................................................................................9
Reference List................................................................................................................................11
Appendix........................................................................................................................................13
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Introduction
The concept of ‘retailing’ products is not new; this is present in the industry from the very first
time of the corporate era. It can be defined as a more relevant systematic business process,
through which the service providers sell their produced commodities as well as other services to
the end-product users, especially by a direct selling approach. The selling rates of the products
remain dependent on a number of external factors, such as, the purchasing strengths of the end-
users, willingness of using the products or services, and the percentage of disposable incomes.
Among different types of retailing business, the current assignment would mainly shed lights on
the fashion retailing services, which has a significant role in the economic growth of the UK
business industry. Along with 7% market share and £66 billion market value, the fashion
industry becomes highly progressive as well as competitive in nature. Due to the rapid changing
expectations and requirements of the UK population, the UK fashion industry becomes enriched
in different types of fashion garments, through including both domestic and international
branded fashions.
Introduction to the company
Asos Plc. is one of the most renowned British fashion retailer, which has their main headquarter
in London, UK. The company provides their services from the year 2000, and the fashion
garments as well as cosmetic products available here are especially for the younger generation.
Apart from the fashionable clothes, the organisation also has a huge collection of shoes, beauty
products, accessories, and other wearable things. In the year 2018, the net revenue of the
organisation was 2355.2 million, which is 26% higher than 2017. The current workforce of this
organisation is comprised of around 4,590 employees. The company aims to recruit more 1500
people within the next 3 years (Asosplc.com, 2019).
Apart from this, the subsidiary website of the organisation has capacity of selling more than 850
branded products, including both the clothes and accessories, to almost 200 countries worldwide,
for fulfilling the requirements of different cultural population. The mission of the company is
becoming the world’s leading fashion destination for the fashion lover population, as it has the
capacity of providing unique as well as multi-platform experience to the potential buyers, who
can truly resonate with the organisational motto. As per the statement of Asos’s CEO, Nick
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Beighton, it can be stated that the skilful workforce of the organisation makes the company more
special, as their creative fosters the culture of creativity and innovation, along with internal
happiness (Asosplc.com, 2019) [Refer to Appendix].
Key relevant changes within the UK fashion retail
Since the company currently operates in a highly dynamic and fluctuating environment,
therefore, the operational process of the organisation might become influenced by distinctive
regulatory frameworks, collective trends of societies, government decisions, environmental
activism, technological modifications, behaviour of the consumers, and evolving legalised
processes. Therefore, in order to understand the external impacts on the macro environmental
elements of the organisation, PESTEL framework would be useful.
Political Factors- Through considering the current trends of UK political environment, it can be
stated that there might be a transition period leading to the next election period. Although the
national government trends might not be completely changed, however, Fernie and Sparks
(2018) reported that changes in the local government policies and regulatory frameworks would
influence the operational standards of the organisation. Since the local provisions play critical
roles in the UK political environment, therefore, close evaluation of the perspectives would help
the organisation in avoiding unwanted situations. Additional to this, the fluctuating tax policies
might affect the business provinces.
Economic Factors- Reports suggest that the easier liquidity of the cash flow inside the industrial
market might post greater recessions in the year 2018, which ultimately results in the increasing
inflation rate of UK economy. Although having the fluctuating inflation rate, the employment
rate is moderate to higher in the country, therefore, Banerjee and Mishra (2017) stated that the
company would build skilful workforce for creating global opportunities. The increasing level of
liberalisation trading policies would help the organisation in investing within the areas, which are
still out of reach for the company. Although the country has vibrant financial market, however,
the growing financial inequality of the societies might affect the spending behaviour of the
consumers. Reports suggest a reduction of 2% in the current GDP, along with changes in per
capita income worth of £34670, which imposes the pressure of increase product prices on the
companies.
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Socio-Cultural Factors- The UK population and societal trends provide high preference
towards the experiential services as well as products, instead of conventional value propositions.
Since the country is a growing one, therefore, the company would get more opportunity of
enriching their collection for the continuously developing younger population. Hristov and
Reynolds (2015) mentioned that the both the brick-and-mortar stores and online platforms are
beneficial for the customers; however, maintaining health and safety regulatory frameworks is
crucial for avoiding reputational damage. Additional to this, since the societal norms as well as
values differ in various demographic features, therefore, at this point, the company might face
some conflicted issues while trying to build local service teams.
Technological Factors- Focusing on advanced retail modelling through implication of
technologies might support the progress rate of the business. Shortening the life cycle of
different products increases the requirement of producing new products. The innovative and
advanced technologies would disrupt the supply chain process of the company, as they could
achieve greater access to the required information. Additional to this, Hagberg and Kjellberg
(2015) mentioned that dissemination of the mobile-first technologies would help in transforming
the customer expectation.
Environmental Factors- Extremist changes in the natural climate might increase the operation
cost of the organisation, which could be eliminated through enhancing flexibility of the supply
chain process. Regular scrutiny of the environmental norms would be required for the
organisation, through integrating the renewable and reusable technologies. Karrholm (2016)
mentioned often the fashion garments are produced depending on the environmental norms.
Higher environmental awareness level of the customers might act as a strategic advantage for the
company.
Legal Factors- Along with the environmental protection and health and safety management
legislations, the company requires integration of various other legal frameworks, such as Data
Protection Laws, Business Laws, Employment Laws, and so on. For example, Employment Act
2002, Employment and Labour Law 2019, Consumer Protection Act 1987, Company Act 2006,
Partnership Act 1890, and so on.
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Relevant changes within the micro environment
From the initiation period of the globalised modern era, the fashion retail market undergoes
through a number of changes based on the changing demands and requirements of the
consumers. In order to understand the micro environment of the organisation, the Porter’s 5
Force analysis would be helpful. According to the statement of Elbeltagi and Agag (2016),
Porter’s 5 Force strategies would explain about the competitive strengths present in the UK retail
market.
Figure 1: Porter’s 5 Forces of Asos Plc.
(Source: Created by learner)
Threats of New Entrants (Moderate)- Due to continuous changing fashion sense of the modern
youth population, it can be stated that new companies might spread their business and increase
pressure on Asos, through adopting several competitive advantageous strategies, such as lower
pricing, cost reduction, and new value proposition aspects.
Bargaining power of Suppliers (High)- As per the statement of Paul et al. (2016), the retail
sector organisations often collect their raw materials from numerous range of suppliers,
therefore, suppliers, having higher power in the current market and having dominant position
over the mother business, might reduce the profitability margin of the company.
Bargaining power of Buyers (High)- Due to the changing demands of the customers, Asos
often faces tremendous pressure for meeting the needs of societal population, as they always
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want the best fashion garments or accessories with a lower price. Rao et al. (2018) reported that
the increasing option of switching to the other competitive fashion retailers forces them in
compromising with the profitability margin. Additional to this, since Asos mainly targets the
younger population, therefore, it becomes necessary for them to continuously give discount
offers for retaining the customer base.
Threats of product substitution (Moderate)- Although the organisation provides most of the
conventional fashion products to the younger customer group, however, the other competitor
organisations have the capacity of imitating the products or services they deliver to their
customers. Swaffield et al. (2018) reported that it might be increased in case of the offering some
distinctive value propositions compared to the needs of the industry.
Competitive rivalry (High)- The current retail sector of UK is very competitive and dynamic in
nature, as there are various larger fashion retailers, like Zara, H&M, Burberry, Marks and
Spencer, and so on. Since all the organisations are the existing players of UK fashion retail
sector, therefore, their distinctive pricing strategy would reduce the overall profitability of the
company.
Suggest and Discuss strategies and tactics that could be used
Through considering the above discussed macro and micro environments of the organisation, it
can be stated that there are certain areas, which are required to be evaluated further for
eliminating the possibilities of internal or external conflicts. Such as for example, the rapid
technical advancement, changing norms of societies and the growing inequalities among the
societies might influence the business provisions of the organisation. Additional to this, the
organisation might also face challenges due to the highly influencing micro environmental
factors, such as higher competitive rivalries, high bargaining power of the customers, and high
bargaining power of the suppliers. Hence, in order to overcome such adverse situations, the
organisation requires focusing on implementation of different strategies along with some retail
theories and models (Das, 2015).
In order to deal with the macro environmental challenges, the organisation could focus on the
Environmental theory, which is based on the Darwin’s Natural Selection theory. According to
the statement of Giblin (2016), the theory mainly suggests about the principle of ‘survival of the
fittest’, as the one, who could readily adopt all the changes occurring in their circumstances,
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might survive in this long run way. Based on the above-mentioned macro environmental
obstacles, it can be stated that the company requires adopting the changing advancements of
customers and technology demands, for maintaining the sustainability of their operations.
Adoption of demography, consumer preferences, legal modifications, and technological
innovations would help the company in surviving for the long as well as prosper way.
Additional to this, it is also evident that the organisation requires focusing on enhancement of
their online stores, due to the increasing online selling percentage and preferable choices of their
customers. Such online stores would decrease the necessity of stock maintenance, developing
brick-and-mortar stores, and recruitment of retail employees, which becomes more cost effective
for the organisation. It can deal with the growing economic inequalities of the societies, along
with managing enough cash flow presence for overcoming any types of crises. Asos R&D and
marketing team would require focusing on the changing buying patterns of their target markets.
Apart from this, for aligning the technological advancement, the company could incorporate
Disruptive Innovation Retailing in their operational process (Pearson, 2017).
Apart from this, for dealing with the micro environmental factors, the company can focus on the
integration of the Retail Cyclical Theory, which is commonly known as the Wheel of Retailing.
In this theoretical framework, the organisation requires undergoing through three distinct phases,
which are entry phase, trade-up phase, and vulnerable phase. During the first phase, Asos already
focused on the penetration pricing strategy for providing high quality low price services, by
which they can effectively attract new customers to their products and services. At the trade-up
phase, the company already changed their existing pricing strategies, and provide high quality
products at moderate or high range of prices. Baldwin (2017) mentioned that it supports the
company in obtaining more market share and collecting more revenue.
The third phase describes the competitive phase, in which Asos start facing different level of
competitions, as they reached certain position, from where they can compete with other
traditional fashion retailers. Therefore, for surviving this phase, the organisation at first requires
changing their pricing policies into competitive pricing structure, by which they can achieve
proper product differentiation and high competitive advantage. Additional to this, as per the
statement of Brown (2015), in order to gain the leading position in the current competitive UK
market, the company would require focusing on different types of promotional activities, for
attracting more customers. For example, weekly offers, discounts, promo codes on first buying
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from online sites, seasonal offers, festive offers, and many others, would help in lowering the
threats coming from bargaining power of suppliers and buyers also.
Recommendation
After completing the macro and micro environmental evolution, it can be mentioned that the
organisation requires providing attention on the following list of recommendation, for dealing
with the current and upcoming challenges and obstacles-
 The organisation would incorporate proper training and orientation programs for the
company stakeholders, in which they could understand the exact motto, aim, objectives,
values, mission, and vision of the organisation.
 Preparation of proficient contingency or risk management plan would help in dealing the
external extremities.
 Integration of proper feedback system, such as 360-degree feedback process, would be
beneficial for the company, as it would help in understanding what people think about
their products and services, along with identifying the area of improvement (Patel and
Harnett, 2018).
 Effective and efficient customer service, especially the after-sale service process, is
required in both the physical and online stores, which would create a competitive
difference with the competitors.
 A well-designed supply chain management process and Just-In-Time inventory
management system would require to be incorporated for maintaining the supplying of
raw materials and delivery of the end products.
 The company requires researching and investigating about the new trends and
technologies, with the changing requirements of markets, especially of the target
customers, by which they can understand the acceptability of their products and services.
 Production of operational commodities would be performed through the implication of
RFID technologies (Khan et al. 2016).
 Differentiation in the product lining would help the company in creating a marginal line
among the competitors, which can effectively maintain the competitive position in the
UK fashion market.
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Conclusion
Therefore, based on the entire discussion about the UK fashion retail industry in the above
assignment, it can be stated that although the industry is continuously going through distinctive
changing phases, however, the organisations operating in the country like Asos Plc., have several
opportunities of improving their business provisions. The report mainly sheds light on the macro
and micro environmental analysis of one of the leading fashion retailer of UK, Asos. Analysis of
external factors reveal that the operations are mostly influenced through the technical
advancement, unequal economies, and changing social norms. On the other hand, the micro
environment reflects that the maintaining operational sustainability requires dealing with high
competition and bargaining power of suppliers and customers. Two retail theories,
Environmental or Natural Selection and Wheel of Retailing are used for developing some
competitive strategies for the company. At the last section, some recommendations are given for
overcoming the challenging phases.
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Reference List
Asosplc.com. (2019). Home. [online] Available at: https://www.asosplc.com/ [Accessed 23 Jun.
2019].
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Theory. In Marketing in Transition: Scarcity, Globalism, & Sustainability (pp. 329-329).
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Das, G., 2015. Retail shopping behaviour: understanding the role of regulatory focus theory. The
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Khan, N., Hui, L.H., Chen, T.B. and Hoe, H.Y., 2016. Impulse buying behaviour of generation Y
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Patel, A. and Harnett, D., 2018. Inventory management in a small retail enterprise. The Journal
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Paul, J., Sankaranarayanan, K.G. and Mekoth, N., 2016. Consumer satisfaction in retail stores:
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