Asos case

28962_Asos

6/6/08

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www.thetimes100.co.uk

Strategic growth in the fashion retail industry
Introduction
asos.com is the UK’s leading online fashion store for women and men. Launched in 2000, the online retailer targets fashion conscious 16-34 year olds. On asos.com there are 9,000 products available at any one time, with 450 new fashion items added every week. Theseinclude women’s fashion, menswear, accessories, jewellery and beauty products. asos.com attracts 3.3 million unique shoppers every month and has 1.8 million registered users. An online service of this scale requires a substantial background operation to fulfil orders and to provide customer service. Five years ago, asos.com had just 550 square metres of warehouse space. Today, to meet growing demand,asos.com now has 32,500 square metres of warehouse space – equivalent in area to nearly five football pitches. In April 2005, asos.com employed 47 permanent staff. By February 2008, it had 250 employees. These human and physical resources are needed to meet rapidly increasing demand. Sales increased by 90% year on year for the 12 months to 31st March 2008. In April 2008, there was a daily averageof 220,000 unique visitors to the asos.com website. The growth in sales translates into profit. Group profit is likely to be in excess of £7 million.

CURRICULUM TOPICS • Ownership • Growth • Market segments • Organisation structure

GLOSSARY Shareholders: persons owning or holding a share or shares in a company. Alternative Investment Market (AIM): the junior market, established in 1995, bythe London Stock Exchange providing trading facilities for shares of smaller companies. Market capitalisation: this gives a measure of a company’s value, it is calculated by multiplying the total number of shares issued by the company by the current share price. Capital: money, buildings, machinery, equipment etc. Memorandum of association: sets out the main details of a company including itsname, purpose and the number of shares it can issue. Articles of association: sets out main arrangements for control and the internal running of a company.

Ownership and management structure
asos.com is a public limited company (plc). This means that the business is owned by shareholders and that its shares can be purchased by the general public. asos.com shares are traded on the AlternativeInvestment Market (AIM), which is part of the London Stock Exchange. Joining AIM has several advantages for a growing company such as asos.com. AIM-listed companies do not need to comply with the strict rules that must be followed by businesses listed on the main London stock market. They do not need to meet any size threshold, either in terms of market capitalisation or the numbers of shares that theyissue. This means it is easier and cheaper to obtain an AIM listing. It provides smaller companies with a chance to raise capital through the sale of shares. This capital can be used to finance growth. As a limited company, asos.com is required by law to have a memorandum of association and articles of association. A memorandum of association sets out the name and purpose of the company and thenumber of shares it can issue. The articles of association sets out the rights of shareholders, the roles of directors and other factors that relate to the control and management of the company. These documents establish a company as a legal entity. Without this legal framework, the business would not be able to issue shares.

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The asos.com board consists of two non-executive directors and three executive directors. Non-executive directors do not have day-to-day operational responsibilities for the business. They are invited to join the board because they bring experience and qualities that can guide the strategic direction of the company.

Growth
GLOSSARY Non-executive director: outside director...