Crunching ASOS financial results: yes, fans do boosts sales
Online clothing retailer ASOS, super popular with the twenty-something Facebook generation, is the Zappos of Europe, building a massively loyal online community around its latest fashions. This social-savvy formula appears to be making even the company bean-counters happy, as the dot-com reported this week a fat profit and double-digit sales growth in an otherwise tough retail market. Always curious about the connection of community-building and its impact on sales, we take a look here at the relationship between its social media investment and its impact on the top line.
In case you missed it earlier this week, it’s official: ASOS is making bank. It’s now the UK’s leading online retailer, beating out Topshop.com nationally, and it just reported a 35% rise in revenues and added 320,000 customers in the last fiscal year. With much of the British retail sector hurting, how is ASOS managing such growth?
For starters, ASOS is hitting its core customers–the 16-34 demographic–where they hang out most: Facebook, MySpace, YouTube and Twitter. And, crucially, it’s built a bespoke social community called “ASOS Life,” which now counts more than 1 million devotees. All this dedication to community building has paid off in two interesting metrics: sales and social media following, which we think could be directly linked. Here’s why:
By our calculation, ASOS has increased its social media following by more than 15-fold in the previous fiscal year (spanning March, 2009 to March, 2010). And, during the same period, its customer base has grown by 25% to 1.6 million. Here’s what it looks like:
As the chart above shows, ASOS a year ago had a solid customer base of 1.2 million, but only 85,500 (or, about 6 percent) were “followers,” the most loyal of customers who sign up and participate in the ASOS customer communities. Fast-forward a year and we see that the customer base has grown an impressive 25% to 1.6 million while the number of followers has jumped to 1.37 million. In other words, they’ve managed to convert now 81% of the customer base into loyal “followers.”
If we were well-paid City analysts, we might write an investor note and coin this the “Social Loyalty Index,” (a tweak on the old retail metric of “Loyalty Index.”) Like ARPU (average revenue per user), you could see the “Social Loyalty Index” or, say, SLI, as a reliable measuring stick for investors to make a bet on future sales growth of a social-savvy company. Why? Because it’s an indication of current consumer loyalty, and future growth. If your trusted friends are part of a community you’re more likely to join and follow their shopping tips, the thinking goes.
Yes, we’re geeking out with numbers here, but we think ASOS is a model example of a company ready for this kind of financial analysis and one that can answer the question: can a company’s social media investment impact top line sales? (In full disclosure, we tried this type of fans-to-sales social media investment analysis a few months ago with Yum Brands, but it raised more questions than it answered. Plus, we came up with a lame metric, “social media appreciation”; “Social Loyalty Index” says it better, we think.)
To be clear, we aren’t saying here that there is direct causation between the sum of Facebook fans + Twitter followers + YouTube subscribers + ASOS Life members and the jump in revenues (and customer base). It’s too early to draw that conclusion. But, over time, this type of social accounting is possible. But first, let’s look a bit closer at the year-on-year growth of ASOS in metrics that both social media observers and financial analysts both might find interesting:
Over the past year, ASOS has experienced a whopping 1,513% increase in social media following. As we say above, the ratio of fans to customers is now above 80%. That’s loyalty! During the same period, revenues grew 35%.
These numbers pose a provocative thought: the strength of your fan base just might be a reliable predictor of sales. At the very least, it gives the bean counters and social media experts something interesting to talk about.
Writing and editing by Bernhard Warner, research and analysis by Brian Skepys.