Asos must 'tread carefully' in light of brand revolt to over-discounting, say retail experts
Asos will have to tread carefully to appease consumers, suppliers and maintain its brand image, according to retail specialists, after the e-retailer reportedly drew heavy criticism from brands for over over-discounting.
The company's heavy and frequent discounting and promotions has already been described as a “blunt tool” by chief executive Nick Robertson.
However, Asos is currently offering 20 per cent off to all ‘premier’ customers and has slashed 25 per cent off new Autumn/Winter ranges.
Retail experts believe the issues that have arisen mirror those previously experienced in the grocery sector over the last two decades.
Ian Humphris, founder and managing director at specialist retail agency, Life, said: “P&G, Coca-Cola, Unilever; they have all put pressure on grocery retailers for selling cheaper for the last guy.
“Asos is saying it’s the fastest growing online clothing retailer, and telling retailers to give it the discounts if they want to reach that market. And the brands are asking themselves if they’re going to grow with this retailer and suffer the consequences of discounting or not supply and miss out on the sales.”
The delicate balance of negotiation is now a cycle Asos will be permanently in if it is to appease consumers – who are hungrier than ever for a bargain thanks to the race-to-the-bottom strategy of the grocery sector and online retailers like Amazon - and its suppliers.
However, James McGregor, a director at Retail Remedy, argues that Asos doesn’t command the same power as the likes of Tesco, Sainsbury’s or Asda among suppliers and will have to tread carefully.
“Retailers supplying grocery don’t really have anywhere to turn so if they leave Tesco then they risk taking 30 per cent of their market away. River Island – for example - has its own website and retail outlets which it can fall back on.”
Humphris believes it is only in “extreme” circumstances that any relationships between Asos and its suppliers will be severed – despite the Sunday Times report claiming that some are already looking to get out of contracts.
McGregor is unconvinced and fully expects that a number of the brands Asos partners with will choose to walk away.
In either case, Asos continuing down the path of big discounts is a dangerous one and it runs the risk of becoming known as a pure-play value retailer, he added.
“They’ve got more to say than that and want to be seen as their own brand in their own right rather than a good place to come for cheap discounted fashion. What they don’t want to forget about building their brand which Tesco or Morrisons and that whole sector have done - they’ve become discounters effectively. Purchase decisions are made on how expensive an item is and not why they should go to one particular retailer because of what it stands for," explained Humphris.
“Grocery retailers have trained consumers to be value led and those are the behaviours Asos is starting to adopt. They have to be careful or they’ll become no better than a TK Maxx."
Asos has an own-brand line as well as high street and designer partners including New Look, Birkenstock, French Connection, and River Island.