The better the question
What should a growth-oriented company do to fuel more growth?
ASOS engaged the EY Reshaping Results team to help it identify new opportunities to unlock value in an increasingly competitive marketplace.
In early 2020, ASOS was at a crossroads. After close to two decades of stellar performance, the UK online fashion retailer found itself faced with increasing competition, profit and growth headwinds, and challenging operational issues resulting from the simultaneous implementation of two state-of-the-art international distribution centers.
To address these issues, CEO Nick Beighton instituted a comprehensive plan to refocus the business and set it on course for the next stage of its growth. As a pioneer in online fashion, the company had enjoyed first-mover advantage, but market competition had put pressure on margins, creating a need for greater efficiencies and flexibility.
However, as a relatively young, fast-growing company, it had neither the experience nor sufficient internal capacity to deliver value transformation programs.
Beighton had not previously employed outside consultants. “I was always very proud that ASOS had the capability internally and was able to think differently,” he says. “We were always able to turn left when others turned right.”
But, having been introduced to EY teams, he reconsidered that stance. “I realized that it was a great moment for us to re-examine what we do. The EY process and challenge has built on and complemented that internal capability to assist us with the next level of growth.”
The better the answer
A focus on cost and cash
EY teams drove value by identifying, quantifying and prioritizing cost and cash opportunities.
“We could see that the opportunity for the organization was massive,” says Beighton, recalling his brief to the EY team. “What we were less clear about was how we extract the right fuel to fund our growth aspirations.”
Mona Bitar, UK&I Consumer Leader, Ernst & Young LLP says that the approach of EY teams was to help the ASOS leadership team look at their business as an external investor would: “We took an “outward-in” approach and challenged the team to think about their business in a different way.” She adds that it was important to bring the executive team on a journey, ensuring they were engaged so they felt comfortable and accountable for owning targets and plans.
The EY teams focused on a rapid diagnostic that covered extensive areas – including looking at the product range, customer segmentation, supplier performance, logistics, inventory and support functions – and was able to identify significant opportunities to help super-charge ASOS’s ambitions. This was achieved by bringing together people from a number of service offerings, including Strategy; Restructuring and Turnaround Strategy; Valuation, Modeling & Economics; and Consulting, as well as retail professionals – all working as one team.
The COVID-19 pandemic posed an additional challenge and meant that the EY team had to present their findings to ASOS on a video call. Beighton praises the way EY adapted to the unexpected new working conditions: “I was impressed with their ability to pivot with the new circumstances and still bring us solutions, in a moment when I’m sure EY staff’s lives were turned upside down in the same ways our lives were turned upside down,” he says. Indeed, many of the key team members on both sides have still never met face to face.
The better the world works
Different ways of working and increased agility
The work EY teams have done with ASOS has helped the retailer to change the way it thinks and given it the confidence to pursue its ambitions.
ASOS incorporated the EY team’s findings into its three-year strategic plan, helping to enable it to set clear and ambitious targets. To achieve these, the company has established an enterprise-wide value transformation program, which EY teams are now helping it to shape.
Had we not reshaped ourselves, we would not have had the ability to buy that brand that we so dearly wanted.
ASOS incorporated the EY team’s findings into its three-year strategic plan, enabling it to set clear targets to achieve its ambitions. To do so, the company has established an enterprise-wide value transformation program, which EY is now helping it to shape.
Beighton believes one of the reasons the relationship between ASOS and EY teams have worked so well is that both are purpose-led organizations. “That helped build and maintain trust,” he says. “At the core of what we’re doing, we’re both aligned on achieving outcomes in a way that suits both of us. Also, when you have bumps in the road during the process, it allows you to recommit to trust. You can say, I disagree with this, you disagree with that, but actually, we both want something that’s better. So it brings you back together.”
The work of the EY teams has already started to bear fruit, with strong savings in cash and costs made in the first year.
As Beighton explains, it also helped enable the company to achieve a long-held ambition. “During January, the comfort we’d built in the business and the cushions we’d built in terms of greater earnings and cash flow – programs EY was working with us on – enabled us to buy Topshop [and other Arcadia brands],” he says. “Had we not reshaped ourselves, we would not have had the ability to buy that brand that we so dearly wanted.”
As ASOS prepares for business in a post-pandemic world, it has identified clear efficiencies and now has a smart strategic plan, making it more resilient, better prepared for the future and, ultimately, able to continue inspiring and delighting its fashion-loving 20-something customers in a way that is difficult for others to copy.