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Comment: Strategy refresh is just what Asos needs

Katie Imms

Asos is one of many retailers that admits it has tightened its returns policy, as figures reveal that 26% of brands have recorded an increase in returns over the last two years.

The etailer has suffered from a tough few months, which culminated in a set of disappointing half-year results earlier this year (April). 

It was hit by the need for heavy investment in its technology and logistics to stay ahead of the pack, while discounting bit into its margins.

Group revenues were up 14% to £1.3bn for the six months to 28 February, but its pre-tax profit fell 29.9% to £4m. A frustrated-sounding CEO, Nick Beighton, said Asos was “capable of a lot more” and unveiled a “refreshed” strategy, including a crackdown on serial returners and a thorough review of its profit offering. But will this be enough to stem the sudden downturn in profit growth?

The changes to its returns policy, announced to customers on 2 April, quickly hit the headlines. While shoppers are still entitled to a full refund for goods returned within 28 days, they can now exchange or opt for a gift voucher for unwanted items received within 45 days. But the controversial part was a warning that Asos is going to clamp down on “serial returners” and will deactivate accounts with an “unusual” pattern of returns activity.

For an etailer celebrated for its quick, easy and free returns, this has caused quite a stir. It is no secret that returns are increasingly problematic for fashion brands, particularly online. Barclaycard recently revealed that the UK takes back £7bn worth of purchases every year.

This has only been heightened by the increasing trend to “snap and send back” – consumers buy an outfit solely to post on social media, before returning it. It is not a pleasant experience to open a new purchase only to find it has been worn by someone else – I once received a top with boob tape still attached.

Although the easy and free returns offer has helped set Asos apart from its competitors, and cement its longstanding and loyal customer base, it wasn’t there to be abused. The clampdown has been a long time coming. While Asos claims the changes are to ensure returns are “sustainable” for both the company and the environment, there is no shame in admitting that it needs to minimise costs and improve its profit margin, especially in light of its first-half results.

Asos is one of several etailers to update its returns policy

Nevertheless, it was a risky move. Some customers’ accounts were – rightly or wrongly – blocked, and it led to some angry comments on social media. “The new @Asos returns policy is all well and good until you get your account suspended,” read one of several tweets.

Although the crackdown on serial returners has attracted a lot of attention, there are bigger changes afoot at Asos. The etailer has committed to restoring “product newness” in its ranges after several categories, including men’s tailoring, accessories and footwear, and women’s evening dresses and swimwear, performed behind expectations.

This has triggered a much-needed review of its offer. During the six months to 28 February it axed 280 brands – including some that were “more established, premium brands” – and added more than 190. It would not disclose the names of the brands.

It is not the first time Asos has recognised the need to consolidate its offer and refocus on its core customer. After a previous unexpectedly sluggish period of UK sales, co-founder Nick Robertson came to the realisation that “Asos wasn’t clear in its proposition”. In an interview to mark Drapers’ 130th anniversary in 2017, he said: “We had £400 handbags on our site, but we’d decided to focus on twentysomething fashion, nothing more, nothing less. And guess what: 0.1% of twentysomethings can afford £400 handbags. So they were out, gone.”

It has now made a similar decision, renewing its focus on brands that are “smaller, fresher and up-and-coming”, alongside millennial and Gen Z favourites such as & Other Stories.

An injection of more exciting, emerging brands, coupled with its evolving in-house offer, Asos Design, should give the business a much clearer USP and identity. Plans are underway to improve Asos Design’s presentation and price points, and a new campaign will focus on increasing awareness of the range.

The refreshed product offer, combined with the fruits of its heavy operational investment during the first half, should put Asos back on the track to profit growth.

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