Improvement of ASOS Company Logistic System

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Table of Contents

Introduction
The Context of the Problem
Three Solutions to the Problem: Improved Logistics
Improving Site Performance and Design
Company Growth through Integration
Eliminating Two Solutions
Creating an Action Plan with the Remaining Way to Solve the Problem
Conclusion

Introduction

The British company ASOS is an example of a company that has very successfully adapted to the new age of the Internet. The brand launched its online store in 2006 and began selling its clothes and shoes. The new generation of millennials was the company’s target audience. Now the total revenue of ASOS is growing very fast. ASOS demonstrates how online commerce can allow the company to become an international market leader. The promotional events held by ASOS and the wide range of products help the economic growth. However, the current measures are not enough to ensure such intensive growth.

The Context of the Problem

The emergence of online commerce has opened up new opportunities for both manufacturers and consumers. The world economy has evolved significantly with the advent of the Internet. A powerful logistics system made it possible to deliver goods worldwide and provide services remotely. Large firms managed to create a particular model of doing business on the Internet. Its features include incentives, a focus on the global marketplace, and the integration of new technologies to drive growth. All of this saves customers time and, during discount periods, saves them money. The Asian, U.S., and European sales market has moved almost entirely online, and major local and international leaders are emerging.

The sharp decline in ASOS quotations at the end of 2018 led the media to believe that the end of the era of online shopping was near. Sales are no longer as intense as they used to be, and therefore profits are down. The reason for this is the fact that traditional online retailers cannot keep up with a market ruled by infrastructure companies. Shoppers are no longer satisfied with waiting weeks for an order and demand next-day delivery. However, due to logistical difficulties, not every company can meet this demand. This level of quality is not yet available to many companies. In addition, revelations about the nature of sales promotion have driven some customers away from retailers.

ASOS should have thought about competing with stationary retail outlets, where customers can hold goods in their hands and start using them immediately, without waiting for order delivery. Promotions and special offers have spoiled European and American shoppers. That is why they are often unwilling to accept discounts of less than 50%, for example, during the pre-New Year period. ASOS, an experienced player in the market, has to take this factor into account. The company monitors sales dynamics and, if necessary, can pull up the statistics by stimulating marketing activities. However, it did not do so, for example, when the stock collapsed at the end of 2018.

Three Solutions to the Problem: Improved Logistics

Solutions to the problem can include ways such as teaming up with other companies, changing the existing logistics system to focus on Amazon’s experience, and improving the site to meet customers’ high expectations. Long delivery times are one of the most common customer complaints. Amazon, the largest online commerce site, deals with this problem quite effectively. In particular, the company has begun reserving space for its shipments on cargo ships. This helps the company get rid of go-mediators, which will make the delivery process faster. Amazon is also working with its fleet and testing drone delivery. The company plans to create a flying warehouse, which will also reduce logistics costs.

ASOS should consider using Amazon’s expertise. The company does continue to implement a single warehousing system between the U.K. and the U.S. and promotes the development of partners’ operational capabilities. In addition, the firm’s investment in improving logistics is significant, and there are known cases of building partnerships with firms in this area. However, more intensive measures, such as those taken by Amazon, are needed. Amazon’s separate, powerful analytics system calculates the most economical way to deliver packages. It calculates the shortest route for each parcel, saving the company millions of dollars in fuel costs. ASOS’s revenue allows the firm to budget extra money for better logistics.

Improving Site Performance and Design

The Internet is a significant source of growth for the company, but the retailer’s surge in popularity has repeatedly caused numerous website glitches. In addition to technical errors, some questions are raised by the ASOS interface, which would lead to improved customer satisfaction. Although the company has several subsidiary brands, its advertising is poorly represented. In addition, there are problems with positioning – most customers know ASOS only as a clothing store. Moreover, the case analysis mentions that visitors to the site and its primary customers are women and men between 16 and 34. People in this age category make up only twenty percent of the total number of online shoppers. Accordingly, some aspects of the ASOS site and its appearance could be improved.

The solution to this problem has to do with site analysis. As noted in the case study, the staff at ASOS is now organized by hierarchy. There are separate departments that deal with specific tasks. Therefore, it would be advisable to assign or create a department that would conduct a UX audit to verify the site’s usability. The result of a usability audit is usually a document that explains the site’s problems in detail and suggests solutions and notes best practices as examples. Due to the customer information collected on the site, online retailers know exactly what customers are looking for. Accordingly, ASOS needs to make sure that the site is performing as well as it should in order not to lose profits.

Company Growth through Integration

The integration process leads to the merger of companies operating in the market. Horizontal integration is the merger of companies producing the same type of product. Its benefit is to reduce costs and increase market share. After this type of merger, the product made remains the same. Companies resort to vertical integration to reduce operating costs. The company already has a successful integration experience, for example, with Topshop. ASOS then reported results for the second half of the fiscal year 2020. According to it, even in a pandemic, there was an increase in profits. Immediately after the merger, a significant increase in traffic was recorded. Accordingly, integration can be an effective way for the company to grow further.

Eliminating Two Solutions

The company should not consider a website redesign only based on aesthetic needs. Changing the external interface has no direct correlation with an increase in the company’s income. And in an attempt to create the perfect site, clients and performers lose a lot of time that could have been spent on more productive changes. Website redesigns can cause an adverse reaction, even if the previous site was far from perfect. It is necessary and keeps in mind that radical modifications often lead to unpredictable consequences. All of the above suggests that ASOS should pay attention to other ways to increase company growth and profits.

Vertical integration coordinates the various components of an industry chain in an environment where bilateral trade is not profitable. While this type of integration usually reduces some risks and transaction costs, it also requires significant upfront capital investment. Moreover, the effectiveness of such coordination is often questionable. Horizontal integration increases resource efficiency, lowers prices, and lowers costs. However, weaker competition and increased concentration of sellers in the market worsen the efficiency of resource allocation, which poses a threat to monopoly. Integration is not the best way to develop ASOS because efficiency is questionable and monetary costs are high.

Creating an Action Plan with the Remaining Way to Solve the Problem

ASOS sales growth seriously slowed down late last year due to the difficult situation caused by a new strain of Omicron coronavirus infection. Revenues fell by one-fifth, the exception being the local U.K. market. One should pay attention to Amazon’s experience. The company has shown tremendous growth and has a talented supply chain. Moreover, Amazon’s automated technology increases customer satisfaction with service quality. Boeing rentals and cargo ship seats ensure that the company delivers quickly and smoothly. After purchasing electric vans, Amazon can now claim that express shipping is environmentally friendly.

Robotic systems such as Kiva movers have fully automated the process of storing, picking, and packing goods. With the help of robots, the Internet giant reduced operating expenses by 20%, which amounts to 22 million dollars per warehouse in monetary terms. Its network of postal terminals allows customers to receive their parcels conveniently and without queues. In addition, it allowed the company not to lose revenue due to FedEx’s decision to stop deliveries. ASOS can successfully use all these logistical methods. The fact that regular postal distribution points are far away from buyers was the cause of buyers’ complaints, as well as confused delivery dates of goods.

A common reason for a customer to refuse an order is inconvenient delivery and receipt conditions. The need to wait for a courier or the inconvenient location of the pickup points worsens the customer’s inclination to make purchases. The best way to overcome the problem of returns and increase customer satisfaction would be to improve logistics. For now, ASOS promises next-day delivery of orders only in the United Kingdom, while this option is available to Amazon users in countries other than the United States. ASOS’ investment in logistics is still significant, but the company does not resort to such radical methods as, for example, renting seats on planes.

Conclusion

ASOS grew quickly in online sales, but new solutions need to be implemented to ensure further growth. Of the three paths discovered, two had to be found unsuitable for one reason or another. Thus, the only possible way to ensure further development of the firm is to improve the logistics. Logistics costs can be reduced by eliminating unproductive operations, such as cargo handling. ASOS needs to ensure optimal warehouse locations and eliminate activities and intermediaries that do not add value for consumers and other supply chain participants. Optimizing the use of vehicles by capacity and mileage to minimize delivery costs and other solutions can also increase company profits. ASOS should choose this path to ensure the company’s growth.

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