Tuesday, July 19, 2011

How Innovative Retail Architecture is Boosting Profits at ASOS

Outstanding and outperforming businesses often challenge conventional industry architectures. Such organisations innovate and develop new business models on their way to above-average profits. The online fashion giant ASOS (as seen on screen) has exactly done this. In one of firsts of the industry, ASOS intends to make free global shipping a “permanent” part of its business model after international sales growth fuelled a 63 per cent jump in sales in the first quarter to £107m. International sales grew 160 per cent to £59.6m in the three months to June 30, and now make up 57 per cent of overall sales. Singapore, Russia and Australia are among the fastest-growing markets. This is impressive compared to UK high street bellwether Marks & Spencer which narrowly beat City expectations recently by declaring a 13% increase in profits in its last financial year. But ASOS business performance looks blockbuster when it is compared to other retail results. For instance the gravity of the high street downturn is spelled out in new research which shows UK retail chains have been closing stores this year at a rate of about 20 a day. The latest figures from accountancy firm PricewaterhouseCoopers show 375 retailers went bust in the second quarter of 2011, a 9% increase on the same period last year. 

So what makes ASOS special? ASOS targets internet-savvy 16 to 34-year-old women looking to emulate the designer looks of celebrities such as Kate Moss, Sienna Miller and Alexa Chung, but at a fraction of the price. While many retailers have struggled against tough macro headwinds, ASOS has prospered, benefiting from a young core customer base and the migration of spending from the high street to the Internet. The firm has a Facebook store and mobile applications. "This is about the shopping experience coming to you. That could be via apps, on your mobile, on Facebook," said the CEO. "This is the next shift in terms of how we perceive shopping online. Rather than websites that you go to I think it becomes much more part of your personalised web experience." Compare and contrast this with the fact that, despite huge outlays in the past, the new Marks & Spencer boss is to spend an extra £600m on its UK chain. 

But the unsung hero behind ASOS flight according to me is the innovation which ASOS IT department is bringing to the business. ASOS has crashed the conventional retail reference architecture and brought innovation leveraging the technology advances such as Cloud Computing, Social Media and Consumer Devices. For instance ASOS is assessing how Microsoft's Azure cloud service could be used to expose mobile data application programming interfaces, which would enable it to extend its reach through mash-ups. Daniel West, IT director, ASOS, has established an IT strategy to build for the cloud first, rather than on-premise. "We look at the cloud first and build if nothing is available." Daniel West said: "My technology design is to support our international growth. So we need to look at delivery through the cloud."

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Innovative Retail Reference Architecture (Revised V2)

See my revised Retail Reference Architecture above which reflects ASOS innovation. (Ref: The original Retail Reference Architecture). The ASOS APIs which power the mash-ups empowers young ASOS customers to bypass traditional Retail Touch Points and Work-flows and access the ASOS catalogue directly. It has merged social networking and shopping by launching the first European fully integrated Facebook Store. ASOS customers are able to buy, save, share and comment on items without needing to leave the social networking site to obtain full e-commerce functionality.

ASOS successfully demonstrate that Industry Reference Architectures are a sound and solid foundation but they are not sacred and should be chopped, changed and innovated to bring dynamic benefits to the business. I am not claiming that innovative Retail Architecture is the only reason behind ASOS success. Smart branding, clear customer segmentation, effective supply-chain and visionary leadership have clearly contributed to ASOS success. However, the contributions from ASOS IT team can not be underestimated in the analysis of ASOS success.

1 comment:

  1. The diagram is depicting the most important ideas of the Architecture ..and the bold words are also highlighting important ideas...Thank you

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