What Retailers Can Learn About International Expansion From ASOS
The impressive growth of online fashion retailer ASOS across the globe demonstrates the consumer appetite for fresh retail brands, as well as the revenue opportunities available to companies that take the plunge into a new market. ASOS’s expansion from the UK into Continental Europe and the US, and later the rest of the world, earned the brand a rich customer following and established it as a household name on an international stage. Numerous other brands have tried to emulate its success since, so the retailer’s decision to pull the plug on its Chinese operations, having struggled with the market for three years, was likely met with surprise.
Internationalisation is an enticing prospect for ambitious retailers, but as ASOS has shown, it is not without challenges. As many brands have found, a strong performance within the core market does not guarantee success elsewhere. With the recent news that sales have increased by 30% since withdrawing from China, clearly this was the right decision for ASOS to make.
Brands looking to expand must take time to understand new markets and, most importantly, the local consumers. With this in mind, what lessons can other retailers learn from ASOS to give them the best chance for success when embarking on international expansion?
Seek early wins
A gradual approach to going international is most often the best, especially if you need to build a business case for a more full-on strategy. ASOS made international shipments available from its UK website in 2006, which helped identify the potential in various markets.
Online traffic data offers valuable insight into where the customers shopping in your ecommerce store are based outside of your core market. Using this data to pinpoint where to go first, ASOS launched its French, German and US websites in 2010. As consumers were already engaged with the brand, expansion into these countries was very straightforward.
Set up a clear hub
A local hub provides a base from which companies can enlist employees with local knowledge and gain a better understanding of the local retail landscape and consumer nuances. Many brands look for countries similar to their home market first, as they provide an easier transition. Due to the common language and cultural similarities, ASOS established its first international offices in Syndey, Australia, in 2012, followed a year later by a US office in Rochester, New York.
With a burgeoning middle class of 340m consumers that has had only limited access to many Western brands so far, the Chinese market is an extremely enticing opportunity for growth-driven companies. Therefore, ASOS’s Chinese distribution centre and a Shanghai office followed in 2013. However, cracking the Chinese market is a more challenging proposition than expansion into a Western country, as the clothing retailer soon discovered.
Understand and adapt to challenges
Recognising the specifics within new markets and adapting to them as early as possible is critical. As ASOS illustrated, even the most successful brands can struggle. In China, local regulations had a huge impact on its operations. In particular, the local postal service made it more difficult to ship clothes from within China than from outside the country. Chinese washing regulations also required ASOS to replace all clothing labels to meet with compliance. These factors can have cost implications that significantly affect business performance. Identifying potential competitors ahead of time will also serve a retailer in the long run. The dominance by online giant Alibaba, which commands 75% of the Chinese fashion market, presented an additional challenge to ASOS.
Recognise differences in shopping behaviour
Customer shopping habits and preferences differ from country to country. Brands that hope to expand successfully must understand the consumers within each individual market and avoid a one-size-fits-all approach. Everything from fashion styles and payment preferences to frequency of shopping and returns must be accounted for. The size of a country can also create vast contrasts within one market. While ASOS was offering one fashion range per season, China is so large it encompasses multiple climates, resulting in a demand for cosy, knitted jumpers in one part of the country when customers in other regions are shopping for beachwear.
Growing a brand internationally is not always going to be simple. Be prepared to test new approaches and adapt to what works in each particular market. As ASOS has demonstrated, brands can be required to change focus or even step back from a market altogether – or risk financial damage.
Retailers today have the benefit of technological advances that make it easy to set up country-specific websites, as well as access to customer data that offers valuable insight – both of which make approaching internationalisation more straightforward. But whilst there can be huge rewards gained from expanding a brand globally, it is not something to be approached lightly. ASOS’s announcement to turn its focus on strengthening the UK, EU and US markets shows that the retailer is by no means stepping away from its international operations, but has taken stock of where continued momentum will come from.