Online fashion retailer ASOS has posted impressive sales growth for FY2011, with international shipping up 141.8% year-on-year. Australian sales were especially strong, which has encouraged the retailer to set up a dedicated site for the market in 2011-12. ASOS is one of many foreign retailers looking to Australia to increase online sales due to their ability to undercut domestic retailers.
For the 12 months to the end of March 2011, UK-based online fashion retailer ASOS reported retail sales growth of 57.7% to GBP324.1m. This result was boosted by international sales that increased 141.8% to GBP140.0m, accounting for 43.2% of total retail sales for the period and 52% in Q4 2011. ASOS has identified Australia as one of its most rapidly growing markets, which reached the milestone of delivering GBP250,000 of sales in one day. The retailer is set to launch a dedicated site for the Australian market in 2011-12, which will allow it to showcase a more adapted product offering, given the differences in seasonality, and deliver a more tailored experience.
ASOS has been putting extra effort into building its brand awareness and customer loyalty in Australia by offering market-specific promotions and supporting Australian designers. At the end of January 2011, the retailer offered a 20% discount on its ASOS-branded collection to celebrate Australia Day. Furthermore, in the same month, ASOS approached the Australian Fashion Council to express its willingness to collaborate with "fresh new Australian designers who have something compelling to offer, initially in menswear," and indicated that it would offer paid work placements for designers later in 2011. The retailer also offers free shipping to Australia as part of its free global shipping trial, which is a rare bonus for Australian consumers, given the country's remoteness from other mature markets (it should be noted, however, that ASOS uses a less favorable exchange rate to offset part of the additional shipping costs).
Along with its dedicated effort to crack the Australian clothing market, ASOS is benefitting from Australian consumers' enthusiasm for online shopping, especially at foreign retail sites. This is due to the fact that the Australian dollar has appreciated significantly in the last two years, and online purchases of up to A$1,000 ($1,074) are exempt from the 10% Goods and Services Tax (GST) and import duties, often making clothing from international online retailers cheaper than items available in Australian stores. Additionally, there is a much wider range of labels available online than offered by domestic retailers, which have struggled in recent years. According to the Australian Bureau of Statistics, sales by specialist clothing retailers fell by 3.2% in 2010.
ASOS is not the only foreign retailer keen to profit from this situation: four major US department stores - Bloomingdale's, Macy's, Saks, and Barneys - have recently started shipping to Australia, and the UK department store chain John Lewis also plans to begin shipping to the country in August 2011.
As well as being undercut by international e-commerce, domestic retailers are also under threat from an influx of international brands setting up physical stores in Australia. Many international retailers now have some presence in the Asia Pacific region, making it easier to overcome the logistical barriers of entry to the Australian market. For example, Gap arrived in Australia in August 2010, and the first Zara store opened in April 2011, which was judged a great success by local media.
International online retailers are to some extent dependent on the continuing strength of the Australian dollar and the GST exemption, both of which could change. However, ASOS's extremely wide product range, together with its decision to invest in direct engagement with Australian consumers, suggests that it is likely to be successful in the long term.