ASOS acquisition proves necessity of following the customer
There is nothing like a crisis to stimulate innovation and thank goodness, we have moved from bemoaning the fate of the High Street to fixing it. The news today that ASOS, doyen of the online space, is buying the majority of Arcadia for £295m with BooHoo picking up most of the rest is endorsement of what we have been hearing from around the world. Take note of how customers are shopping and take action or lose your relevance.
Brian Almeida, respected international loyalty commentator based in the Indian sub-continent shares some interesting data in his article also published today.
“Just the number of transactions alone on the Unified Payments Interface (UPI), a real-time payment system facilitating instant inter-bank transactions, grew from 1.6 billion in August to 1.8 billion in September to 2.0 billion in October and 2.2 billion in November, simultaneously notching steady increases in value, as per the operator, the National Payments Corporation of India. For perspective, consider that the UPI processes higher volumes than all of India’s debit cards and credit cards put together, according to Reserve Bank of India data. However, that spending marked a clear departure from the traditional pattern.”
A McKinsey report on consumer sentiment in the USA captured this mood of shoppers around the world. Convenience became one of the biggest factors driving customer loyalty. So did greater value for money.
To quote from Brian again: “From the customer perspective, online shopping makes for more seamless customer experiences than offline shopping. From the business perspective, online spending is easier to track than offline spending. Online customer activity is easier to measure than offline buying. All this makes for better returns for brands’ investments in loyalty. And invest they did, leveraging the surge in online spending, working greater value into their loyalty progammes by introducing (or expanding) points as a payment option to sweeten online spending.”
He also makes the point that to connect with young people, it is necessary to both show what you are doing for them, and prove you are helping society in general. Brian is working with Generation Unlimited, a UNICEF global initiative to help young people co-create innovative solutions for the challenges in their lives. In India, the Ministry of Youth Affairs and Sports and the Indian arm of Generation Unlimited, called YuWaah!, are aiming to help the country’s 300 million-strong youth population to transition from education and learning to productive work and active citizenship. He makes the point that loyalty initiatives that have a meaningful charitable dimension find it easier to keep connections with their customers.
So back to the Arcadia deal in the UK. There has been no shortage of comments flooding into the Loyalty Magazine mail box concerning the news that Asos has bought the Topshop, Topman, Miss Selfridge and HIIT brands from Arcadia in a deal worth £295m.
Hugh Fletcher, Global Head of Consultancy and Innovation at Wunderman Thompson Commerce said: “Once the challenger and now the predator, Asos buying up Topshop, Topman and Miss Selfridge brands would have been unthinkable only a year or so ago. But, while Asos’ stocks soared, Arcadia failed to invest in its digital offering and go toe-to-toe with the eCommerce brands attracting the British twenty-somethings that had once flocked to their own stores. As time has gone on, its more digitally savvy competitors built upon Topshop’s groundbreaking in-store experiences and loyalty schemes to create something similar – but this time cheaper and more convenient. It’s no wonder, then, that the popularity of fast fashion brands and online-only platforms, such as Boohoo and Asos, has skyrocketed.
“The pandemic has fast-tracked the digital transformation of the British high-street, with 43% of shoppers now feeling more positive about shopping online. So it stands to reason that fashion giants such as Asos, already one of the biggest wholesalers for Topshop and Topman, would succeed where other physical stores faltered. A focus on innovation (including augmented reality trials) and efforts to be more sustainable have pulled in younger consumers who are shunning the high street in favour of “cool tech” and ethical retail – our research indicated that 71% of consumers wanted to purchase from retailers with better environmental practices. With the country in the midst of yet another national lockdown, the acquisition of Topshop offers a stark warning to other retailers who fail to innovate and establish a digital offering in the same way. With consumer demand evolving at a rate of knots, retailers need to stay ahead of the curve to keep up with the demand and remain in favour.”
Elliott Jacobs, EMEA commerce consulting director of LiveArea said: “The Arcadia acquisitions show the redistribution of retail power, which now sits firmly with digitally native brands.
“The latest deal is in keeping with the pandemic’s recent acquisitions, an online giant taking a former high street powerhouse. Asos is the obvious choice of buyer for a number of reasons. Primarily, it is already one of the biggest wholesalers for the brands it has acquired, and picking up Topshop, Topman, Miss Selfridge and HIIT will allow it to further diversity its portfolio of online offerings.
“With Boohoo expected to pick up Arcadia’s remaining brands, it’s clear to all that digital is the key to retail. Digital natives are reaping the rewards of the agility that comes from digital investments. Both Asos and Boohoo are on their way to becoming eCommerce superpowers as they consolidate their positions in the new market.
“Only by investing in online capabilities will companies be able to adapt to, and predict market changes – companies that don’t make the right investments will not stand the test of time.”
There are many many more comments, but for a change, they all agreed: Online wins, High Street only loses, and didn’t we tell you this was going to happen? So why didn’t you listen? Is the gist of the quotes.
Saying ‘we told you so’, is always easy, but they do have a point. The writing has been on the wall for quite some time. The fascinating part is that all those essential parts of commerce are loyalty connected. And most of them, such as tracking whole customer behaviour, spend and browsing are so much easier online, especially if there is a prompt to log in to the loyalty programme. With hindsight it seems an absolute no-brainer.
There isn’t much positive to be said for a pandemic, but super-charging the adoption of online trading – even if the High Street store is retained for browsing and shopper experiential stuff – is one positive that may well have saved a few brands from extinction.
The sub messages are equally important:
- Youth customers require you to engage with them on their own terms and using their preferred networks;
- Sustainability is important, and so is the provenance of the item.
As long ago as 2014, the Berlin Fashion Show focussed on green, sustainable and environmentally favourable manufacture. It was a response to a report by the Institute of Public and Environmental Affairs, a non-profit organization based in China – where half the world’s clothes are made – which revealed that industry waste has had dire effects on water sources, soil and air. And according to Greenpeace, leading brands such has Nike and Adidas were failing to follow through on their promises to make sustainable fashion.
“Sustainable fashion means really making sure that within the whole process – from the start until the recycling – international brands are taking full responsibility for their supply chain and minimize harmful impact on the environment,” Ilze Smit of Greenpeace International said then.
Change is happening, albeit slower than it should, and some brands are making a show of recycling fabrics to turn them into new items, and even using re-cycled plastic in garments. With the environment firmly on the agenda this year, expect to see more pressure for brands to do more than give lip-service to their sustainable credentials. It will certainly have a customer loyalty impact.