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Asos profit warning is an opportunity to get discounting right

Asos’ recent profit warning will have stirred up mixed emotions in the sector.

On the one hand, M and M Direct and MySale will be anxious about the knock-on effect on their upcoming IPOs. Meanwhile Boohoo, which will release its first full-year results on Thursday, saw its share value dip following the Asos announcement and issued a statement last week reassuring shareholders that all was well.

But many retailers will be relieved – perhaps even smug – to see Asos bitten by its own aggressive discounting strategy. As Drapers reported last month, indies in particular were getting frustrated by the “Asos impact” on their own sales. Tempers were rising as prices were continuously slashed, so it was time for a wakeup call.

Worryingly there has been a lot of talk about local or “zonal” pricing, as if this could somehow prove to be a silver bullet for the etailer. Yes, it will help Asos to be able to adapt its prices to local markets, but this must go hand-in-hand with a more balanced, controlled approach to discounting and promotional activity and more investment in technology.

If Asos gets it right, it will be better for the UK’s retail industry as a whole.

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