Zara Case Studies
Strategy Market Plan
Background of the Study
For the past 50 years, the retail industry has been under numerous changes. For example, the 1950’s saw downtowns as the center of retailing. People would often go downtown to avail of various products and services. This products and services included clothing, food, hardware supplies and banking services. A decade later, a group of retailers started offering their products and services in large department stores. The idea is to provide convenience to the shoppers. By creating a place were various retailers can offer their products and services, shoppers will no longer have to make several trips to different locations in order to purchase the things that they need. This means that retailers hoped to create a one-stop shop for their customers. As a result, big names such as Wal-Mart and K-Mart made big names in the retail industry. On the other hand, downtown or small scale and specialized retail outlets experienced a decline in the 1970s and 1980s.
From the late part of 1980s to the early years of 1990s, a new kind of retailing came in being. Home TV shopping networks as well as warehouse clubs became very popular among consumers. If one-stop department stores aimed to provide convenience to their customers, Home shopping networks brought the idea of convenience to a completely new level. Instead of encouraging customers to drive to their stores, retails brought the stores inside homes and purchasing the desired products is as easy as calling a toll free number. On the other hand, warehouse clubs offered customers the opportunity to buy products in bulk and at discounted prices. Costco and Sam’s Club are some of the warehouse clubs that earned success.
The changes within the retail industry continued well into the late part of the 1990s. Along with the success of internet, retailers were quick to recognize surfing the web as well as the use of other internet applications was fast becoming incorporated in the lives of many people around world. For this reason, they have decided to bring their stores online. The move to utilize the internet was a good decision in terms of marketing. Cable television took 25 years to reach approximately 10 million people, while computers took seven years to do the same. However, the internet was able to manage that feat in just six months. This means that retail store will have more chances of exposure if they have their own website.
Since the utilization of the internet for retailing purposes, many companies have been able to experience the benefits of bringing their businesses online. With this, a need was created to formulate strategies that focus on maximizing the potentials of internet. Nowadays, ecommerce, ebanking and other forms of ebusinesses are becoming a popular choice among the consumers and as such, it is also becoming a popular form of business for companies. Increase in sales are usually expected by companies when they launch an online store of host websites that offers their products and services.
In the retailing industry, etailing is also fast becoming the choice of companies. One of the companies that concentrate in advancing their etailing endeavor is As Seen On Screen 0r ASOS. They offer clothing and other fashion related items that are similar to designer fashion worn by celebrities but a t a lower price. They have a website where they post the products that they currently have. In addition, they show actual photos of celebrities wearing a similar item of clothing that are being sold on their site.
Despite the degree of success that ASOS was able to achieve over the years of their operation, there are still problems that they need to resolve in order to ensure the survival of their business. This is the rationale behind this paper. This paper will be presenting the conditions that ASOS are operating in as well as the various aspects that they need to focus on in order to maintain steady or increasing follow of profit. These will be done in order to be able to formulate recommendations that will help the specified company in addressing the issues that surround their business. However, the findings of this paper as well as the recommendations that will be formulated have the possibility of being useful to other ebusinesses.
Statement of the Problem
The problem of ASOS is generally related to the problem faced by most online retailers: the online consumer buying behavior. Not only does buying apparel online represent a new form of consumer behavior in the ‘computer-mediated shopping environment’ (Hoffmann and Novak, 1996), apparel online retailers also face intense competition. Attracting consumers with the limited resources available on the internet is a big challenge to online retailers like ASOS. Knowing the online consumer behaviors will let the retailers and managers of these companies formulate and develop effective strategies that will help increase the popularity and sales of clothing online.
Moreover, ecommerce is an expensive business but is also proven profitable once become effective. According to a survey, clothing belonged to the top six categories of holiday gifts in the USA during the 2000 Christmas season (eMarketer,2000) and about 8.4% of the total weekly online purchases in 2000 is the apparel category (Nelson, 2000). These results suggest that selling clothing online is an effective business especially if a company has marketing strategies that will help in the success of the online business.
According to a study of users who have bought products online, there are five main reasons why people shop through the Internet. These are convenience and ease of use; greater selection; better prices; easier comparison-shopping; and no sales pressure (Hale, 1997). On the other hand, there are also reasons why people are not attracted to making purchases online especially when it comes to clothing. The top four most frequently identified reasons why consumers are not purchasing online are ability to judge quality, security, privacy, and easier to purchase locally (GVU1998 on Novak 1999).
Based on these reasons of shopping online and ‘not shopping online’, an online retailer can now focus on what to improve on their services and what to guarantee Internet users to attract them and to be prospective customers
Significance of the Research
The findings of this research will benefit the specified company, ASOS, primarily. The benefits will come in the form of the recommendations that will be stated in the latter part of the paper. In addition, they will also find the research body useful since it will be focusing on how to interact with consumers specifically when the business uses the internet to transact with their customers. As such, the body of the research will help ASOS in formulating their own strategies and marketing plan. In this turn, this will allow them to increase their profitability by meeting the expectations of their customers.
In addition, the research will also be benefiting the customers of ASOS. This is the case since the strategies that will be recommended will be in relation to improving the services and products that ASOS provides in their online stores. Aside form this, the strategies will also be brushing on the subject of how to improve the website of the company to ensure that the needs of the customers when shopping online will be met. As such, the improvement of the way ASOS conducts business online implies that their customers will be treated to a more convenient online shopping experience.
Looking at the bigger picture, the retail industry, especially those who are selling clothes and other fashion related items, will also find the findings of the research useful. This is more appropriate with retailers who are already online or are planning to create their own online stores. This is the case since the strategies that will be mentioned in this paper will be focusing on the use of the internet as a retailing tool for success.
Any research that has been completed had a set of objectives that guided them in the process. These objectives allowed the researchers to determine the kinds of information that will be useful in arriving at the recommendations for ASOS. In addition, the objectives of the research paves the way for the management of time and resources. This is the case since researchers will not be wasting time on gathering information that will not contribute to the completion of the research.
In the case of this research, the main objective is to investigate the behavior of the consumers who shop online. This is very important since it will allow a company to make projections as well as conduct scenario planning based on previous consumer behavior. This means that trends can be determined and analyzed in order to make forecasts. In turn, these forecasts will serve as the launching point for the formulation of strategies that aims to maintain or improve the performance of the company online.
In order to achieve the main objectives of the study, specific objectives must be present. This will serve as a road map leading to the destination. The specific objectives of this research are as follow:
– to investigate the behavior of consumers who buy clothes online
– to determine purchasing trends of clothes and other fashion related items online
– to determine the factors that affect the purchasing decisions online shoppers
– to evaluate the current effectiveness of ASOS’ website influencing the consumers’ decision to purchase
Outline of the Study
History of ASOS
ASOS is the brainchild of Nick Robertson and the company’s co-founder Quentin Griffiths. It was founded on June of 2000. Coming from a company that specialized in product placement, they worked on placing products that were seen on television and films. After a while, they concluded that the market was ready for a kind of store where people will be able to purchase items that are similar to those that were worn by celebrities. The basic premise of ASOS is to offer trendy clothes similar to the designer clothes of celebrities at affordable prices.
The company was originally named As Seen On Screen. However, it was formally changed to ASOS in 2003. A year before they changed their name, the company aimed for the London Stock Exchange. To add to their product offering, ASOS began to sell shoes, accessories, beauty products as well as jewelry in 2004. In the same year they were named as the second online clothing store by Hitwise magazine after Next.
Steadily, the sales of ASOS grew. There biggest sale was recorded from November to December of 2005. This resulted to an increase in the operating profit of the company. A seventy-one point seven percent increased was noted, which resulted to ₤1.1M operating profit in 2004-2005. In the table below, it is noticeable that the growth of ASOS came only in the years 2004-2005 when there group operating margin was recorded at eight point two and seven point nine respectively.
Figure 1: ASOS Financial Performance 2000-2005 (“ASOS: Unique enough to outlast competition?”, 2005).
However, it was the company’s belief that the sales could have been higher if only some problems were quickly resolved. One of those problems was the warehousing problems. The number of orders that flooded ASOS during the holiday season of 2004 required them to ship around 2,000 to 3,000 orders per day. However, their warehouse was too small to accommodate the number of orders they got for the month of December. This brought about problems in stocking, organizing and processing items that came in large quantities in so little time.
In addition, any of the items that ASOS were not offered during that season. After the rush of Christmas shopping subsided, many items were not sold and this resulted to a loss in full price sales opportunity. Since the items left in the warehouse ware already out of season, ASOS did not have any other choice but to offer them at discounted price early in 2005.
This loss is noticeable in the table presented above. In 2004, the group-operating margin of ASOS was at eight point two percent, while its group-operating margin for the following year was only at seven point nine.
Being both in the fashion and retail industry, ASOS needs to be able to meet the requirements of both industries in order to succeed. In relation to the fashion industry, ASOS must ensure that the items they are offering are in season. Being up to date, when it comes to the latest styles, is crucial for the case of ASOS. This is due to the fact that they are capitalizing on the trends that celebrities start. If ASOS is able to maintain this ability then the retail industry requirement can also be meet since trendy or in season clothes are more profitable than those that are not. This has been proven in the case stated earlier where ASOS had to sell out of season clothing at a discounted price. With this in mind, it is the objective of ASOS to offer and deliver the trendiest in season collection to their customers.
Another objective of ASOS is to provide a pleasant online shopping experience to their customer. It is important to associate shopping with being online for ASOS’ case. It is a fact that being physically involved in shopping brings about a different experience compared to shopping online. For example,
The ASOS.com website could be improved through a variety of ways that would benefit both the company and the consumer. For example if video and audio clips were added to some pages, this could increase the interest level for the browsing customer, which could result in increased sales figures. Customer services could be improved through the addition of a live chat service on the website, providing the opportunity for customers to interact with retail staff directly about any questions or concerns they may have about their shopping experience. Other issues that would need to be addressed within the ASOS.com website include increased contact with staff, faster processing of refunds and returns and an increase in transparency which could be achieved through more comprehensive information on the company itself.
According to Proctor (2000), competition is important since it affects the success of a business venture. Proctor added that competition is more than just producing and distributing products and services that matches the needs of the consumers. Competition is about the company’s capability of positioning itself in the market so that they will stand out among the rest in the perception of the consumers.
The strength of ASOS is its utilization of the Internet. Through the Internet, it has formed a definite market segment that is composed of mainly Internet users. A firm that limits its attention to fewer market segments can better serve those segments than those firms that influence the entire market. Moreover, its core focus, which is apparel, as worn by celebrities at affordable price gives them a marketing edge for it attracts customers right away. It also gives huge discounts and has broad category coverage.
Online retailing in general is getting bad publicity nowadays such as poor delivery performance. Another weakness is that ASOS cannot guarantee specific product or brand presence. Internet selling is unlikely to be successful, as consumers like to try on clothes and see the quality of fabric and workmanship.
Ecommerce channels now represent 11% of the total UK retail business, and record numbers of products are being procured vie the internet (Thomson et al, 2005). People are attracted by low prices and convenience. In addition, they have integrated their everyday activities to technology and the Internet, including shopping. As the number of working women, who are ASOS core customers, continues to increase, they will not only need more clothes for work but are also more likely to be financially independent to purchase clothes.
Online clothing chains from overseas are successfully invading UK and at the same time, branded apparel such as Diesel, Guess and Zara are still popular among the market. Other purely online fashion etailers such as Yoox.co.uk, Brandalley.co.uk are also their main threats. Downturn in the economy could also cause buyers to cut back on overall spending.
Customer Value and Benefit
People will most likely buy from a friend than a salesperson. This one thing should be kept in mind by anyone who wishes to venture into the battlefield of sales. With that in mind the researcher must keep in mind that way a salesperson presents himself/herself and the products provides a lasting impact on the customer. It is often said that veteran salespeople can sense if the will be able to close the deal or not within the first 30 seconds of the conversation.
When people are purchasing something they are actually taking into consideration quite a few things like family and friends. Take the case of women for example, most women especially ones with kids will check if specific brand of cereal has Recommended Daily Allowance of vitamins and nutrients that their kids needs before actually purchasing a box of cereal. People want to make sure that they are getting was would be more beneficial to them and their family and of course they want to make sure that the purchase is worth the money.
This is one of the reasons why salespeople have developed a sales technique involving the features, benefits and advantages of a product or service. According to Dave Fellman (2005), The FAB formula is the idea that all products have features that creates advantages, which in turn provides benefits for the customer. This kind of product presentation makes the customer realize that the product or service being offered is of great value to them.
Cost to the Customer
Computing and Category Management
Customer Care and Service
According to Ross (1999), Total Quality Management is the incorporation of all the functions and processes of the organization (p. 1) to be able to develop the quality of the services and or/products that they offer. With this, it can be stated that customer relationship management programs are included in total quality management. The need to develop an effective total quality management is important due to various reasons. However, these reasons are still geared towards providing customers with the great business experience with the company. It is also the case that total quality management views customer satisfaction in relation to customer retention and increase in the profits.
Communication and Customer Relationship
Some researchers believe that customer satisfaction leads to customers who will keep coming back to the same store despite the growing number of available grocery stores. This results from the customers’ experience when they were conducting business with that particular store. These researchers believes that the presence of customers who are willing to spend a little more or drive a little further just to be able to shop at their preferred store confirms that customer experience, in this case customer satisfaction can help grocery stores in increasing their profit. In fact, a number of companies believe so much in the power of customer satisfaction together with other key factors like revenue and profit that they use it to measure their stores’ over-all performance.
This take on customer satisfaction brings about the concept that business must include customer satisfaction programs in their budget allocation. One such example of this practice can be observed in Sears Roebuck & Co. Other retail stores even use customer satisfaction rating as a measure for employee compensation. Employees and executives are being rewarded based on the feedback that the store gets from its customers. Businesses do this in order to foster a culture of delivering top-quality customer service that will improve financial performance. This statement simply means that businesses believe that the more satisfied the customers are the more profitable the store will be. They give much importance to on the fact that it is costly to attract customers but even more expensive to lose them (Kiska, 2004).
According to Bain and Co. (as cited in Bashkaran, 2005), the cost of gaining new customers is 6-7 times more expensive than retaining customer and a 5 percent increase in customer retention can also increase profit by 25-95 percent. But the on the average American companies lose 50 percent of their customers every 5 years. This, to a certain degree, proves that there is an indirect relation between customer satisfaction and increase in sales through increased customer retention.
On the other hand, there are those researchers who believe that customer satisfaction does not always translate to customer loyalty or retention. According to two Harvard researchers, Jones and Sasser, customer satisfaction result in varying levels of loyalty, which affects the customers’ disposition towards patronage. This means that customer satisfaction do not create loyal customers because even satisfied customers have the tendency to change stores. This change of store by the customers can be justified by the level of satisfaction that they will get from another store. Therefore, the focus of customer satisfaction must be aimed at proving the highest value bundle to the customers in order to ensure the highest level of customer satisfaction (as cited in John, 2003, p. 7).
Even though, the two examples provide different view regarding the relation of customer satisfaction and customer retention, it is evident that customer satisfaction affects customer retention. And customer retention results in increased profit since customer retention lessens the turnover rates (Reichheld and Sasser, 1990). The only difference that was actually posted by the two articles involves how customer satisfaction affects customer retention. The first example stated that customer satisfaction automatically results in customer retention while the second views that customer retention is dependent on the degree of satisfaction that the customers get.