The rise of ASOS and the Ecommerce boom - it's here to stay

When the UK went into its first lockdown just over a year ago, ASOS’ market cap sat at £1.049 billion. Exactly a year later, it had risen to £8.138 billion.

In one of the most economically damaging years of the last century, ASOS posted above-average sales and built its market cap close to the record highs of 2018. But how did the online retail giant achieve that and what lessons can we take from the current eCommerce boom?

How lockdowns changed consumer behaviour

In order to understand the wider trends, we need to get a grip on the factors driving them. More specifically, we need to look at people and how their lives changed in 2020.

The anxiety and uncertainty that came with the pandemic had a profound effect on everyone, but the first shift in consumer behaviour came out of practicality. Across the world, initial lockdown restrictions required everyone except essential workers to stay at home.

Buying goods was no longer a matter of walking into a familiar store for many consumers, so the need to explore online options grew. Online retailers picked up on this shift early and adapted to meet demand.

That one consumer shift impacted every other point that follows here, as ecommerce businesses like ASOS predicted it would.

Clever investment at the right time

It was never going to be enough to rely on pre-pandemic infrastructure to cater to the new normal. ASOS’ established online customer base and global distribution network positioned them well, but heavy and proactive investment was still needed to meet the moment.

The online retailer invested £119.4 million in marketing over the course of its 2020 financial year. That’s approximately £40 million more than they spent on marketing in the financial year just before the pandemic.

An unprecedented surge of consumers were coming into online retail markets, and positioning became everything. ASOS’ increased spending helped drive traffic to their platform, increase brand awareness and establish their site as a trusted

It wasn’t silly spending, either. ASOS focused on digital marketing on social media platforms, web browsers, and online brand partners. Understandably, businesses being established in the ecommerce boom are now dedicating the bulk of their marketing budgets to optimising the digital marketing tools available to them.

Online shopping: from obscure luxury to essential service

The popularity of online shopping before the pandemic primarily came down to spending disposable income on non-essential items that had to be shipped. That hasn’t stopped in the last year, but consumers who were previously sceptical of ecommerce were given more accessible reasons to try it out.

Food delivery apps like Deliveroo used to market their fast food options almost exclusively. It made sense to – it’s more efficient to keep an established consumer base within the most popular product range, after all.

In the last year, Deliveroo has entered partnerships with Sainsbury, Morrisons, Waitrose and other supermarkets to offer groceries and other essential goods. Suddenly, sceptical consumers had a reason to punch in their credit card numbers and order online.

This was mutually beneficial for businesses too. Online retailers gained access to a new consumer base and supermarkets could start making up for plummeting sales through online sales.

Platform optimisation

The consumer distrust that kept so many people from trying online retailers wasn’t just founded in tech scepticism. People tried online shopping in one form or another well before 2020. A combination of confusing sites, broken transaction systems, unreliable order tracking and lacking customer support turned it into a one-time experiment for many, though.

ASOS’ total customer base grew by 1.5 million people in the last financial year. They wanted to lose as few new customers as possible. They made sure to optimise their online platforms and bolster customer support and cyber security, as did many ecommerce businesses.

The emphasis on building consumer trust outside of the usual demographics has clear short and long term benefits. It’s one of the biggest indicators that ecommerce isn’t just a temporary measure – it’s here to stay.

Smart brand integration

So new consumers were becoming more comfortable with online retail for the things they actually needed. It wouldn’t be long before they extended their searches to other possibilities.

ASOS’ clothing range was well-aimed at its target demographic, which was largely based in the UK, roughly middle class and in the 16-34 age range. The retail giant spent £265 million on acquiring Topshop, Topman, Miss Selfridge and HIIT in the last year.

Those brands are now exclusive to their online store. Most telling is how ASOS explained this huge outlay to investors. While all four brands were seamless editions to their existing catalogue, they were significantly more established in the US and Germany.

Given that half the company’s sales came from outside the UK in 2020, stakeholders didn’t need much convincing.

A new emphasis on consumer retention

Retaining the new consumer base is the key to sustaining the momentum of the ecommerce boom. At a business to business level, the pressure is on ecommerce retailers to keep themselves attractive to new and old customers alike.

Online shoppers move at the speed of their internet connections. A bad customer experience isn’t cushioned by practicalities like walking to another store, anymore. The moment they close an app out of frustration, a competitor is ready to offer a hand at the next Facebook ad.

The positive is also true: most consumers would still prefer going through a platform they already know and like. Their information is already punched in and they’d rather not set it up again elsewhere. That’s great for encouraging repeat transactions with minimal marketing spend, provided ecommerce businesses can deliver.

Ecommerce is here to stay

Where shopping online could be a clunky experience because of a lack of infrastructure and investment, that’s something businesses can no longer afford to ignore. ASOS invested in the areas that positioned them well and made their service easy to use. They adapted to seismic industry changes with smart acquisitions.

Very few ecommerce businesses can invest the amount of money they did, but the blueprint for sustainability and growth is there. With smart decision making, businesses can turn a profit at almost every level of ecommerce. That’s’ the way the industry is moving, and not just in the short term.