There can be no denying that retail – online as well as physical – needs to evolve to meet consumer’s changing habits. However, this week’s seemingly depressing results from Asos clearly show that keeping up comes at a cost.
The retailer, once the go-to example of modern ecommerce, lodged a 68% drop in profits year-on-year, in what it describes, somewhat understatedly, as a “disappointing year”. But the reasons for the poor showing are not just that the market is difficult, but that to stay ahead and to grow costs money.
For sure, the market that Asos operates in is now much more competitive and crowded and there are many new kids on its block stealing its lunch. That, my friends, is the price of progress. However, Asos is a forward thinking company – an ethos that created its earlier successes that it wants to continue – but that comes at a cost.
The retailer has been clever in that it has looked overseas for growth – and now sees 60% of its revenues coming from abroad. But to service this growing overseas market it has had to invest heavily in technology, distribution and marketing. And that costs.
In fact, it has spent the best part of £80million across 2018 and 2019 in making this happen. This is the price of progress.
Asos still manages sales growth and is still a thriving business. 2020 looks likely to see the retailer do even better once the new platforms and global structure have bedded in, but still it shows that progress is expensive.
And this is the biggest challenge facing retailers across the board. It is all well and good to identify changing shopping habits as the thing that is making retail conditions difficult, but keeping up with those changes is time consuming and potentially really expensive.
The Catch 22 is that while retailers struggle to get the technology and systems in place to meet these changing demands, they are also having to dig deep into dwindling cashflows to make it so.
Add in Brexit uncertainty and you have a tricky set of circumstances for all retailers.