Asos, the British e-commerce platform, has failed in its overhauling of warehousing facilities and supply-chain arrangements stating that it has proved to be more difficult than expected.
The shares of the company dropped 20 per cent in July after it announced a new profit warning, the third one in 8 months.
Consequently, it has prompted Asos to ask its suppliers for a 3 per cent discount on clothes and accessories it buys from them, as the company struggles to repair its finances.
The request to accept 3 per cent less price on clothes and accessories will help the company cut costs and improve its falling profitability.
The e-tailer is also looking at mitigating the cost of launching warehouses in the US and Germany, a ‘transformational investment’ for the business.
More on the above, Nick Beighton, Chief Executive, Asos, said “The major overhaul of our infrastructure has been bumpier and has taken a lot longer than we originally anticipated. We acknowledge that this is a failure in execution.”
He said in July that the company expected to make profits of £30 million to £35 million this year as a result, far below analysts’ forecasts of £55 million and the profits of £102 million it reported in 2018.
Asos wrote a letter addressed to its suppliers, asking them for their cooperation. “We have recently reviewed the current status of our supplier arrangements, also taking into account the significant investments we have made over the last few years and will continue to make, to lay the foundations for future growth,” the letter said.
The letter also read “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.”
Asos told suppliers that accepting lower prices would ‘fuel joint growth’ for both parties.