Was ASOS’ 40% decline really a surprise?

In former times, business landscape was not as intricate. Companies could select which aspect of their business model they would bring forward in terms of unique selling point. When they fulfilled this promise, they could flourish. Is it having an excellent customer service, being the most competitive price provider or having the trendiest or most premium selection of products. Once they made up their mind, it was mostly enough to stick to that and deliver on client expectations. As long as, of course, sufficient marketing efforts were made. But, how has business changed over the years? 

The retail landscape is more competitive than ever.

First of all, the business scenery has never been more competitive. With the rise of internet giants like Amazon and Zalando, the customer is now experiencing more than ever how it is to be spoiled rotten. They get high quality products at the lowest possible price and with the best service, no questions asked. But how sustainable is this model?

Where retailers in the past could only chose one feature as USP, they now have to deliver the best experience on every single aspect in business. If not, we will make them pay. And we certainly have all the resources to do so. We can yell about our bad experience all over the internet. And in one second, every single one of our friends will be warned to not buy or even consider that particular brand. We became cruel and ruthless.

Imagine looking for a jacket at an online retailer. I first browse websites to find the retailer with the best price. If I buy it now, I expect to have it tomorrow. And of course I order multiple sizes. The ones that don’t fit me as expected, I can always send back for free. That’s normal, no? Oh and when I have remarks, I expect the best customer service. Because that’s what customer service is for.

On top of this, retailers need to have attention for one extra layer that’s no longer an option, but a real undeniable must. Environmental responsibility, the well-being of people and overall ethics are inseparable from the business environment. Consumers take this at heart and so should the retailer. Shortcomings on this subject will no longer be forgiven and forgotten.

How will retailers of all sizes cope?

Retailers, big and small, struggle to deliver flawlessly on every aspect. The smaller ones feel the pressure to try and fulfill all the consumers’ needs created by the big ones. And those giants are now starting to show cracks with minimal to zero profit. With stock markets starting to reflect doubts in the sector, we have to ask ourselves: how sustainable is this model really?

The multinational retailers will be able to endure this situation for some time. But how will it affect the smaller ones? The ones without billions up their sleeves? They play the same game and they have to go with it.  In the end, we will no longer purchase from retailers that can’t deliver. Will the smaller retailers disappear and will mostly big retailers rule the world? Who will then challenge them to lower their price? Who will require them to upgrade or differentiate their product portfolio?

Back to the roots…

The business model is suffering and the moment of truth has come. Asos is already one example where value drops because of inferior business circumstances. If a retailer of this size already feels consequences to this extent, what will the outcome be for smaller retailers?

We have to ask ourselves if the model of Treacy & Wiersema is outdated or if it can once again be the Holy Grail for business. Of course we must note that the Olympic minimum for either of the aspects on the model has been increased over the years. What used to be ‘quite ok’, can now easily be ‘below expectations’. And, when retailers would want to put a specific focus on one of the aspects, they will need to think out-of-the-box and be disruptive before they can again claim that specific position in the market.

How shall business change the future? Will the model of Tracy & Wiersema make its re-entry and oblige retailers to focus again? Will they be able to be disruptive and thus, challenge the status-quo?

Time will tell.


ASOS stock value on 18 October 2018: 6050 GBX
ASOS stock value 28 January 2019: 3294 GBX
Source www.londonstockexchange.com

Written by Peggy Storme – Junior Consultant BrainTower

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