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Suppliers' shock at Asos discount demands

Suppliers have slammed Asos asking for a 3% discount on all orders for stock received after 1 September, branding it “unbelievable”.

In a letter to suppliers, seen by Drapers, the etailer asked for a 3% discount on all invoices for stock received from 1 September onwards, to continue to “fuel joint growth” at the business.

Asos was the last business I expected to do this,” said one supplier. “To do it during the summer while people are on holidays, and two weeks before delivery, is unbelievable. It’s the first time I’ve been asked for a discount by an online pureplay. It’s usually the high street guys who blame the cost of rents and rates, and updating stores.

“Some of the bigger brands will push back and say they won’t do it, but most don’t have a choice. What else are they going to do with the stock? Asos can get away with it as they will flex their muscles, but it sends a message out to the market that it’s not the business it used to be. It is really worrying.”

One young fashion supplier branded the move “incredible”, while one womenswear supplier added: “[Profit growth has slowed at Asos] so a 3% discount would help stop that. Margins are already wafer thin [for suppliers] with Asos, so it’s a very tricky situation for most.”

In the letter Asos highlighted recent “transformational investments” it has made, including the launch and expansion of two new warehouses in the US and Germany, and greater investment in sustainability, customer acquisition and customer retention.

The letter said: “We have set our sights on becoming one of the few companies with truly global scale in the market, and we are confident that we will achieve this. Our future growth aspirations not only benefit us but also benefit you, our valued partner. We hope you will understand this necessary change and on behalf of Asos we would like to thank you for your continued support.”

Drapers understands it is the first time Asos has asked suppliers for a blanket discount.

In July Asos warned full-year profit before tax is now expected to fall between £30m and £35m, down from expectations of £35m, as a result of £47m in warehouse transition costs. It expects retail gross margin to fall by 250 basis points. Capex (capital expenditure) guidance for the full year is unchanged at £200m. Total sales at Asos were up by 12% in the four months to 30 June.

Asos declined to comment.

Readers' comments (8)

  • ASOS used to pride itself of taking an ethical approach to their supply chain.

    ASOS are no better than anyone else and completely hypocritical! There are no ethics in screwing suppliers retrospectively!

    ASOS should look at their own operational costs and supply chain inefficiencies first!

    Wonder how their internal compliance teams view this approach?

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  • darren hoggett

    A very arrogant move by ASOS in my view that could backfire. The issue here isn't just the 3%. It shows a lack of respect for suppliers for which if they give in, there is potential for further "requests" down the road in a difficult trading climate.

    If ASOS - or any other business - is not making enough money, then they need to look at how they are doing business and how to improve it without suppliers taking any retribution. The price is the price to any retailer or e-tailer. Either you accept it or you don't. You always have a choice.

    While suppliers should make a stand, it is all too predictable that many will cave in and some will have little choice, to what appears to be more about greed and bully boy tactics than building respectful mutual relationships through thick and thin.

    ASOS should seriously reconsider their demand as a matter of principle.

    Is this how you 'value' your 'valued partners'? You decide.

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  • Very very poor, a default borrowed from failing business's. As mentioned nothing to do with fuelling growth just a cheap way to reap back lost forecast profit. Really thought that Asos were better than this with their own clear strategy, clearly not which is worrying for brands/suppliers alike, not to mention that this may tip some over the edge into insolvency given the many knocks that they have suffered in the last 12 months. The common misconception that brands/suppliers can afford is a deeply flawed concept and it is a sad indictment of the industry that one of the stalwarts of E-tail thinks that this is acceptable. In effect they are saying we need some of your money to fuel our growth, don't worry you will benefit, sounds very very familiar, i can hear an echo coming from Debenhams and Arcadia etc etc and we all know what's happening there, not growth but an actual fight survival and brands/suppliers not knowing if they will even get paid, truly demoralising for all concerned and i include buyers in this.

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  • Fashion with Integrity: epitomises our approach to business.

    Strap line from CSR landing page.

    All just gone out the window, counts for nothing.

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  • Following on from last week’s hit on its share price which reflected brokers’ fears of the affect on an online sales tax, the discount ASOS is effectively demanding of its suppliers means that it has doubled down on not winning friends!

    The gamble is that suppliers will decide to comply - despite no contractual obligation to do so - and then will decide to stick with ASOS going forwards.

    If, however, suppliers hold the line and refuse to accept ASOS taking the discount, it could exacerbate the share price position.

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  • ASOS again offering 20% off everything via their EU sites today!!!!

    Now if cash were so tight for them then surely you would think they would responsibly manage and safeguard their already enhanced margins thanks to your existing buying discount / partnership enhancement investments.

    But no, present buying discounts and your additional 3% contribution will, if you are stupid enough to give away any more of your hard earned cash, continue to subsidise and fund their persistent discounting campaigns, costly affiliate programs as well as lining the pockets of those poor shareholders and senior ASOS management on stock bonus programs. You're just a supplier, deal with it, fund it and the continued loss of your brands equity as it continues to be liquidated by your trustworthy partners

    All at the expense of your livelihood of course, whilst you grovel through sleepless nights trying to compensate or refinance the lost income and even word up possible redundancy letters.

    @ASOS, take sustainable advice and only spend what you (and your shareholders) have saved. If you can't afford it don't spend it.

    @suppliers, if the above "advise" is not practiced, and it has not been to date, then your income from ASOS is possibly not sustainable or indeed future proof.

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  • The short answer in all of this is that it appears ASOS has no integrity.

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  • Screw ASOS, Screw Fast-Forward, Screw all Retailers with their arrogant ""discount"" terms which from experience increase every 5 years. What the sodding point..... every supplier just adds it into the costing anyway. You just add another level of admin.........bell ends..

    Suppliers you are the banks for those brands.Start charging interest daily.................................

    F* them all and ask them to pay 100% UPFRONT on order or have no stock at all.....

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