Asos sets the fashion in logistics

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Online sales of clothing and footwear in the UK grew by over 40 per cent last year according to the UK E-Retail report from research firm Verdict. Growth in the sector only lagged slightly behind that of pacesetting electrical retailers and was comfortably ahead of overall online market growth.

Clothing and footwear is now the third largest online market – sales topped €1.7bn last year. However, online sales represent a lower proportion of total sales in this sector than in others – a phenomenon that is due to a number of factors including customers” desire to see and try on clothing before they buy and the business models of low cost retailers many of whom have yet to venture into e-commerce.

”Virtually all value fashion retailers – who have had a profound impact on the broader market – have yet to develop a transactional presence,” Verdict notes. ”For some of these players, the development of a transactional website may not be fully suited to their business models – and the high outlay involved in creating a comprehensive fulfilment and logistics system may be at odds with their low cost business models.”

Impressive growth
That is not the case at ASOS. The pure-play clothing retailer remains a bellwether in the online sector. The company posted an impressive 116 per cent rise in turnover during the financial year 2006 – 2007. On average, the company has been growing at 80 per cent per year since it was formed in 2000.

”The business continues to grow following significant investment in people, infrastructure and marketing,” chief executive Nick Robertson told shareholders earlier this year. ” remains the second most visited online clothing store in the UK behind, attracting over two million visitors per month. Of these, seven per cent make a purchase resulting in 140,000 orders per month.”

ASOS, which was originally called ”As Seen On Screen”, has extended its range from celebrity fashion for women by adding menswear, jewellery and beauty products to its portfolio. But the core of its business is still the fashion conscious 16 to 24-year-old woman who buys new clothes most months.

Despite its strong growth, things could have turned out very different for ASOS. The company suffered a potentially disastrous set back when its Hemel Hempstead warehouse was severely damaged in the Buncefield oil depot fire nearly two years ago. The explosion affected the company’s warehouse so badly that it had to be shut and its website stopped taking orders.

The incident happened at the peak Christmas period, when the company was facing rapidly growing demand for its high fashion items, but ASOS soldiered on even working while builders repaired the warehouse roof. After the explosion and fire, ASOS decided to invest in logistics, a shrewd move that has given the retailer an edge in a market in which competitors are usually only a click away on the internet.

The company’s first step was to outsource the management of its warehouse to Unipart Logistics. The warehouse workforce, which now stands at over 200, was transferred to the logistics services company along with the running of a 55,000 sq ft distribution facility. One of the first decisions under the new arrangement was to install a warehouse management system to replace existing paper-based systems.

Unipart Logistics included a radio frequency network to allow data captured from handheld bar code reading terminals to be transmitted to the company”s warehouse management system. The investment in technology has led to significant efficiency gains. Initial improvements resulted in a 32 per cent reduction in the cost of handling each unit in the warehouse.

”With the internet, the walls have gone,” explains Robertson. ”Every year the bar is raised. Customers expect more and we are now looking at same day and hourly delivery slots. At the heart of this is logistics. It is 50 per cent of the picture. If a customer places an order and doesn”t get it, that’s 100 per cent failure.”

Using the tools and techniques as part of the ”Unipart Way”, Unipart Logistics was able to map processes in the ASOS logistics operation and monitor improvements through key performance indicators and improved communication between warehouse staff.

”The introduction of a new and improved warehouse management system, a new six day, two shift pattern and a reconfigured warehouse have all contributed to a substantial reduction in average costs,” says Robertson.

Receipt to location times in the warehouse have been reduced by approximately 80 per cent since the changes, and that includes confirming that goods received exactly match the images on the web site. Once picked, goods are checked against the customer order, packed and are ready for delivery in time to meet a next day delivery promise. It is a case of continuous improvement at ASOS.

Delivery options
Cut off times for next day delivery have been progressively pushed back from two o”clock to three o’clock and now to four pm. Customers are offered a choice of delivery options – next day courier, normal postal service and, in the future, maybe even same day delivery.

The critical area of returns handling and crediting customers is already a same-day operation, compared with two to three days previously. Unipart Logistics also achieved a saving of five per cent on transport and delivery costs.

They are impressive results when one considers that the warehouse handles 24,000 SKUs, each with an average shelf life of six to eight weeks. The rapid turnover means the warehouse operation must cater for the introduction of 3,000 to 4,000 new lines each week.

And the future will see a big expansion in warehouse space. ASOS will begin to use a larger warehouse by Christmas with a total floor space of 320,000 sq ft arranged on a series of mezzanine floors. By next year the company”s entire warehouse operation should have moved into the nearby facility.

Working in partnership with Unipart Logistics, we can expect ASOS to continue to respond to the ever-changing environment and the dynamism of the online fashion world.

Dan Meadows is account director for Unipart Consumer Logistics.


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