Page 3: Purpose of the product life cycle
Knowledge of how the life cycle works is particularly important for a company like ASOS.com. The fashion industry is fast-moving and the individual product life cycles may be seasonable. This means that some items will only sell well during parts of the year. In addition, the lead time on the production and buying process means that ASOS.com must plan a season ahead. Fashion designers launch their new clothes collections in the same way. So, during winter 2008, ASOS.com would already have chosen and been planning for the promotion of its summer 2009 collection.
However ASOS.com enjoys an extended product life cycle due to the fact that the business has a large international market. In the southern hemisphere the seasons are the other way round to the UK. This, combined with an increasing trend to take winter holidays in sunny countries, means that summer items, such as swimwear, sell right through the year. Other items sell at unexpected times. For example, Ugg sheepskin boots would normally be considered a winter product. However, a few years ago, celebrities wearing them at pop festivals in the summer means they now sell all year round. As an online retailer, ASOS.com is not restricted in terms of space. It can offer products at times when high street retailers have to send certain categories of goods back to the warehouse. For example, ASOS.com's Holiday Shop performs very well at Christmas time.
Understanding the product life cycle also gives ASOS.com managers greater control.They are able to predict when revenue will flow in and calculate the profitability of product lines.
- They can plan the introduction and withdrawal of products. Some product lines will be highly seasonal. Other products such as classic blue jeans will have much longer life cycles and provide regular long-term revenue for the business. Managers therefore need to plan the appropriate type and level of promotion for different products.
- They can support products through the entire life cycle. They can plan pricing strategies to extract as much revenue as possible at every stage. For example; promotional discounts can be used to encourage large numbers of people to purchase a new product when it is launched. Premium pricing may apply to a new limited edition dress. Price reductions are often used at the end of the life cycle when the item is less popular and sales are declining.
Page 1: Introduction
ASOS.com is the UK's market leader in online fashion retailing. It offers own-label, branded fashion and designer goods. Its headquarters are in Camden Town in North London. ASOS.com originally stood for As Seen on Screen. The company was set up in June 2000 with just two people to bring the latest fashion trends to shoppers as quickly as possible. It has rapidly grown to become the UK's largest independent online fashion retailer. It stocks over 22,000 product styles on its website and introduces up to 1,000 new products to its ranges each week. The ASOS.com website attracts over five million visitors a month and the company currently has around 1.2 million active customers (that is, people who have bought in the last six months). It was named Online Retailer of the Year in 2008 by Retail Week Awards.
ASOS.com provides high fashion clothing for women, men and children, as well as footwear, accessories, jewellery and beauty products. It aims these primarily at a target audience of 16-34 year olds. However, as the company continues to grow and diversify its product ranges and increase awareness, it appeals to a much wider online fashion market. Over 20% of its current customer database is aged over 35. Each week ASOS.com delivers 70,000 packages to the homes of its online customers.
ASOS.com has been able to exploit the increasing popularity of online shopping to help the business grow. According to research from IMRG UK, an organisation which tracks online sales:
- around 50% of 1624 year olds buy clothes online more than once a month
- 30% of women have bought clothes online
- the total UK online spend in 2007 was £42.0 million
- there were 26 million UK online shoppers in 2007.
Online shopping provides customers with the convenience of making purchases whenever and wherever they like. ASOS.com' use of technology helps to increase sales by providing easy navigation around the website and helpful tools like the 'catwalk' option so items can be seen on moving models. The business also benefits from its visionary approach to traditional retailing by not having high street stores. This keeps its staffing and property costs down.
This case study shows how ASOS.com uses the product life cycle to ensure its product portfolio continues to meet the needs of its customers and provide up-to-date fashions in the fast-moving online retail industry.