Global online shopping powerhouse ASOS is losing traction in the Australian market, as the lower Australian dollar makes overseas shopping less attractive.
ASOS’s results for the four months to December 31, 2013, released yesterday, revealed the online retailer’s global sales increased by 38% to £335.7 million ($A616m) in the period.
But despite the strong sales, analysts and investors were more concerned about the retailer’s slowing offshore growth, particularly in Australia and the United States.
ASOS international growth for its rest of the world category, which includes Australia, Russia and China, slowed to 19% for the four months compared to 26% in the previous quarter.
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Australia continues to dominate this market for ASOS, making up 40% of its international sales.
Announcing the results, ASOS said the Australian market had been impacted in the last period by a lower Australian dollar.
“The Australian trading environment was a little bit subdued. Some macro factors there, the Aussie dollar was some 13% weaker year-on-year and also we changed our trading stance,” an ASOS spokesman said.
“We reduced the number of promotions we’re running generally and so this will have affected our Australian business in the short term, but in the long term it will give us a much more robust and healthy retail offer.”
ASOS founder and chief executive Nick Robertson told British reporters the rest of the world was being dragged down by Australian results.
“On a like-for-like basis because of the Australian dollar we are about 15% more expensive than we were this time last year,” Robertson says.
Retail Doctor Group chief executive Brian Walker told SmartCompany ASOS should have anticipated Australian sales growth wouldn’t remain as strong.
“You wouldn’t build your business model in a country like Australia based on it always having a strong dollar,” Walker says.
“Everyone knows the dollar is cyclical, and when it’s reliant on the exchange rate they know it will have peaks and troughs, so this is no great surprise.”
Walker says online sales have been maturing in the Australian market.
“There are challenges ahead for the online community and the most successful players are in an omni-channel environment with both a physical and online store. Over 80% of online players have physical stores too,” Walker says.
“ASOS could become an omni-channel retailer by creating a physical offer. This would give the brand more meaning than just being online.”
Walker says the online space has become very competitive.
“It will be rationalising. The online offer is predicated on convenience and speed. If those variables are completed competently by each player, the next point of difference is price. After that it’s how you keep your brand fresh.”
ASOS saw strong growth in Europe for the four months, with growth up 69%. It ended the period with 7.9 million active customers, 41% ahead of the prior year.