Presumptions aside, the thinking is sound. Online is more about what happens offline at these levels. Logistics, fulfilment, warehouses, execution, distributions – these are the buzzwords linked to success, with accepted wisdom being that even the most fabulous website and desirous product range will leave a company short if the back end of the operation is not in order.
Scale is the order of the day. To wit, do not look solely across the pond. Certainly, Amazon’s balance sheet can accommodate the acquisition of ASOS. However, consolidation in the online retail space is not Amazon’s alone. Zalando (ZAL GY) has raised 605m euros, and is focused on improving distribution and logistics, meaning it has a decision to make about buying or building, and whilst it is extremely successful in Europe, it is also concentrated in that geography in terms of revenue. It needs to find a way to expand internationally, quickly.
Consider Zalando’s next steps, and the “bargain” share prices of ASOS and Boohoo (BOO LN) which have fallen heavily YTD, but who have established international distribution. QMG data regarding online retail continues to grow at an electric pace (see UK sales growth above as an example).
With fashion, it’s all about the glamour and the romance. Expect ASOS and Boohoo to get swept off their feet.