A fashion disaster: how ASOS lost its throne to Shein (and Gen Z)

In 2021, ASOS was top drawer. Business was booming as the pandemic had a hugely positive impact on sales, primarily from the exponential growth in sales of leisurewear. Cut to two years later and it’s a much gloomier picture for the fashion marketplace. Hit with nearly £300 million in losses and the prospect of sales continuing to fall by as much as 15%, ASOS is facing a fashion disaster unlike anyone would have predicted. Of course, two years ago no one was anticipating the country jumping from a pandemic into a Cost-of-Living crisis. But the economic downturn, while obvious, is not the only cause for decline- there are other factors at play.

The online fashion category has seen aggressive newcomers like Shein resonating with shoppers in a way that ASOS hasn’t been able to do recently – through price, relevancy, platform experience and its uber-responsiveness to fashion trends. In fact, Shein hit £1bn UK sales this year, edging into the top 10 of UK apparel retailers and is now close to usurping Zara and ASOS. It’s also winning in the relevancy stakes through the recent purchase of Misguided, appealing to the younger, fast-fashion consumer.

ASOS has Topshop in its arsenal but it has failed to recreate its dominance of the 2010’s, hinting that a physical presence was key to Topshop’s magic, making you wonder if ASOS's loyalty to the brand does much for today’s shopper. It has been long understood by behavioural economists that if you touch and feel a product in store, you’re more likely to buy it. It’s why brands like Zara pushing shoppers back into their own physical stores to continue benefiting from free in-store returns is a stroke of genius. I’ve never seen my daughter return Zara products in store and not come out with replacements, sometimes even spending more.

Of course, ASOS was revolutionary when it started out. A warehouse amount of choice at the touch of a button. But this availability of choice has become a poisoned chalice. The marketplace user experience works for brands like Amazon because your mindset is that you go on the platform knowing what brand and product you want to purchase so despite thousands of results being returned, the experience isn’t fraught with friction. Conversely, in explore mode, if you search “black dress” on ASOS, you get 5,489 results with 15 drop down filters to narrow your search. Shoppers are fatigued by this choice overload.

Retailers like Shein make shopping the ‘black dress’ significantly easier by allowing people to filter by dress style in one click, represented by images not filters. The platform also gamifies the shopping experience through couponing, discounts and influencers, tapping into shoppers who are thirsty for more frictionless, entertaining and creative commerce experiences. Commentators may be looking at ASOS's downfall as a sign that consumers are turning away from fast fashion, but it is here to stay. These category disruptors are the proof, the Cost-of-Living crisis – the cement.

Research into Gen-Z shopping behaviours found that when it comes to what finally influences their purchase decisions, the generation is less altruistic than it likes to think it is. There is a value-action gap between purpose and purchase for brands.
Buying fashion will always be a “want” not a “need”. Nothing is to say that the likes of Shein or Zara couldn’t find themselves at the end of the runway too. The key to success is unlocking new areas of growth by remaining relevant and continually delivering leaps in brand and customer experience. Commerce, creativity and conscience now need to walk the catwalk together.

For ASOS, this means addressing the flaws in its system- improving its experience and working hard to balance the duality of being on trend and value for money. If it can get a handle on this big task to plug the customer drain, it might just survive.

This article was originally published in CityAM