Group81@Sophia-Suppliers Are Starting To Lose Patience With ASOS plc

ASOS (LSE: ASC) has fallen out of favour with the market over the past year as the company has issued numerous profit warnings. However, as the company tries to impress the market by discounting products to drive sales, the company is alienating its suppliers, which could be really bad news for the company.

Struggling for growth ASOS

It’s no secret that ASOS has been struggling. A strong pound, a fire at the company’s main distribution warehouse and increasing competition are the three main factors that have dented the company’s sales and profitability over the past 12 months.

Still, ASOS has been able to grow sales over this period by discounting its products heavily. Discounts of 20% to 25% are common according to suppliers.

To some extent, this discounting has worked. The company’s total revenues expanded by 30% in constant currency during the year to 31 August. But this growth came at the expense of ASOS’s gross margin, which fell by 640 basis points during the three months to 31 August.

Trouble brewing

Unfortunately, it seems as if things are only going to get harder for ASOS. Indeed, it has come to light recently that as a result of the company’s discounting, suppliers are now considering retracting their items from the company’s website.

ASOS has not always had a trouble-free relationship with its suppliers. In particular, some UK retailers have prevented the company from selling their products overseas. This latest spat, however, does appear to be more of an issue, as some suppliers have accused ASOS of “damaging their brand” due to discounts offered. One supplier was even quoted as saying that NEXT’s (LSE: NXT) new online and catalogue service, Label, was emerging as a viable alternative to ASOS’s current offering.

Still, no retailers have pulled away from ASOS yet. Nevertheless, last year the company’s aggressive discounting over the Christmas period was a major concern to suppliers. A repeat of heavy pre-Christmas discounting could be the last straw. So, things could change over the next few months.

Label  

Next’s new online fashion venture is a threat to ASOS’s dominance, although the venture is not trying to become the next ASOS.

Label was launched earlier this year, fronted by supermodel Jourdan Dunn and stocks brands such as Diesel, Superdry, Hobbs and Nike amongst others. Further, Label is no ordinary fashion website. It’s been designed to complement Next’s existing online offering, not boost it. Indeed, when discussing the potential for Label, Next’s management stated that:

“We are concerned that some might be tempted to exaggerate the potential of this new business, and we should stress that it will be naturally constrained by the fact that we intend to only sell premium brands and will not discount in order to recruit new customers…”

This is great news for suppliers who feel that they’ve been let down by ASOS. What’s more, Next already has a successful online and catalogue business, which it can use to boost Label’s exposure, operational efficiency and customer fulfilment.

Only time will tell

Still, only time will tell if ASOS’s suppliers decide to turn their back on the company, and if you’ve not got time to keep track of developments, then the Motley Fool is here to help.

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Group 81-Sophia:Tesla in China: Slow Sales Acceleration and a Brand-Name Dispute!

tesla副本 2

NEWS

Elon Musk, Tesla Motors’ (TSLA) chief executive, has big hopes for China, a country that should be a natural for his electronic cars. The world’s largest auto market has notoriously awful smog problems, and the Chinese government has made the pollution fight one of its top priorities. Last month, for instance, China’s State Council agreed to exempt electric cars (as well as plug-in hybrids and fuel-cell vehicles) from the 10 percent tax normally assessed on new autos. And the government on July 13 said electric cars would make up at least 30 percent of its vehicle purchases by 2016.!

That creates opportunities for Tesla. China is “genuinely committed to electric cars,” Musk said during a call with analysts last month. “It’s not just about favoring local manufacturers.”!
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There’s been one problem: While Tesla Motors started Chinese deliveries of the Model S in April, the Palo Alto (Calif.) carmaker was proceeding without certainty that it had rights to its name in the country. A Chinese businessman running a skin-care company had registered the rights before Musk and his team.