ASOS has revealed that its pre-tax profits fell 87% to £4m for the six months to 28th February against the same period in 2018. This is despite shares being 13% higher and actual sales rising 14% in the period.
The online fashion retailer said in its recent interim results statement that marketing changes meant a fall in visits to its websites and a drop in its search engine rankings.
So what happened?
Reduced marketing spend
Everybody knows that if a company is looking to reduce their overall spend, the first thing that goes is the marketing budget. And it seems this is what ASOS was looking to do as their warehouse costs increased as they started to invest in automating their Euro Hub. ASOS explain that they “reduced performance marketing in the second half of FY18 to manage down demand and protect profitability whilst the Euro Hub was operating on a manual basis. However, the impact has been felt to a greater extent than anticipated…with softness in organic traffic and new customer growth, primarily through direct and SEO.”
Disruption to web experience
In its report, ASOS state that “multiple customer navigation changes to our websites and our release of 200 local web experiences, which whilst strategically the right thing to do, had an impact on SEO rankings in the short term. We have been working hard to rectify this and are now seeing early signs of recovery in our key SERPs.”
Major changes of this sort should always be tested slowly at first to minimise any negative consequences, such as a huge drop in search rankings. ASOS’ plan was to provide a unique web experience for users depending on which country they were in, hence the 200 local sites. But it sounds like ASOS made these drastic changes all in one go without drip feeding them into their overall strategy and doing thorough testing beforehand.
Realising the mistake, ASOS has not only resumed its digital marketing activity but has begun to “upweight” it and has undertaken a refreshed marketing approach. The results? Improved new customer acquisition and some offsetting of the softness in organic acquisition.
Melanie Smith, digital marketing manager at Run2, said:
“It looks as though ASOS reduced their overall marketing efforts and spend, especially in Europe and this severely affected rankings and traffic. It’s so important to be consistent with marketing all the time, especially with long-term strategies like SEO. With ecommerce being more competitive than ever, even big brands like ASOS can’t afford to take their foot off the gas. Now that they have picked back up their digital marketing activities they’ve started to see some progress which just goes to show how invaluable it is.”
At a time when many major brands are increasing their digital spend, Next for example recently doubled their digital marketing efforts after it delivered “higher than expected” returns, it seems that ASOS might have made a bit of a misstep!