Asos Closes China Business Under Weight of Alibaba Competitionby
Company cuts its losses on local operations after three years
Asos will focus investment on the U.K., Europe and the U.S.
Asos Plc has pulled the plug on its Chinese venture after failing to lure customers away from Alibaba Group Holding Ltd.
The British online fashion retailer will close its Chinese distribution center, Shanghai office and local website after failing to turn a profit since beginning operations in the country in 2013, the company said in a statement Thursday. The retreat will involve a charge of as much as 10 million pounds ($14 million).
“We’ve just not made the headway that we had hoped for,” Chief Executive Officer Nick Beighton said in a phone interview. “The Chinese market is unlike any other we operate in. Getting eyeballs on our products has proved very difficult.”
Asos isn’t the only online fashion retailer to find the going tough in the world’s second-largest economy, where Alibaba dominates the e-commerce market with a 75 percent share. Meilishuo.com, a fashion retailer backed by Tencent Holdings Ltd., is merging with rival Mogujie.com to gain scale. China’s e-commerce business is projected to expand 20 percent to 3.6 trillion yuan ($557 billion) next year, according to Shanghai-based Internet consultant IResearch.
Asos’s move reflects “better allocation of capital towards better established opportunities,” Simon Bowler, an analyst at Exane BNP Paribas, said by e-mail. “The speed at which new management have made this decision should also be welcomed.”
In its latest financial year, Asos incurred a loss of 5.2 million pounds related to its Chinese operations. The company now plans to focus investment into its core territories of the U.K., Europe and the U.S.