Et Tu, Ecommerce?

It's not just the high street that's struggling. The darling of ecommerce, Asos, saw 40% wiped off its share price yesterday as it revealed growth had been disappointing.

Regular readers will know this column has been predicting a bloodbath for high street retailers this Christmas, which will almost certainly lead to some very dire warnings and even closures in the first quarter next year.

The huge names on the high street are all struggling as M&S, John Lewis, Next, Debenhams and Superdry are among a list of many familiar retail brands that are issuing profit warnings or reportedly finding the going incredibly tough this festive season.

But now we have Asos warning that growth is lower than expected. I have to be honest -- I did not see that coming. It is one of those names you always expect to see alongside Amazon as raking it in through ecommerce. When the alarm bells are ringing at Asos, and not just the high street, you know things are bad.

There are two major reasons for disappointing growth. One is in the headlines run by the major news outlets. The ecommerce giant simply didn't expect to see so much discounting continuing through the year. It's no secret that prices have had to be kept low as retailers daren't stop their sales. But the discounting carried on into Black November, where Asos is now publicly admitting a 20% off deal led to a very poor November.

It is now publicly wondering if it should have matched more aggressive price discounts at other high street and online stores.

I've said it before, and I'll say it again, Black Friday is usually bad news for retailers, but in the current year where they haven't been able to ditch the discounting, it was always going to be disastrous.

Dare they stop the discounting in December? Of course not. And then New Year will see the traditional sales before the figures are in -- and some very big names are going to be in big trouble. 

There is a second reason for Asos reporting poor figures. According to an interview in The Drum, the team there is admitting they will need to do more in brand advertising next year. They admit dialling down brand advertising from 6% of revenue to 4% was a mistake this year, and will put the budget in to rectify this in 2019.

There are also hints in The Drum article that investments in AI and voice had perhaps not performed as well as hoped. 

So, it sounds like it's a case of back to the proverbial drawing board for the ecommerce brand with regard to ad strategy. It's fortunate that is only reporting lower than expected growth. The growth is still there to fund a return to higher levels of brand advertising.

As for the high street, that luxury might not be available to some big names if they report in January they are in the red, rather than just experience poor growth. 

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