The celeb-alike fashion site that's grabbing the 'Heat' generation

500 new items and 3 million hits a month – and the share price is soaring: Judi Bevan checks out ASOS
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The Independent Online

Imagine all the fashion shops of Oxford Street available at a click of your mouse and you have some idea of ASOS, the only listed British retailer right now where sales are growing at 80 per cent a year.

On the website you can find more than 8,000 outfits and accessories, many of them remarkably similar to those worn recently by Sienna, Kate, Victoria and friends. You can even see pictures of your favourite celebrities wearing the original, or watch a video clip of a model twirling in the outfit of your choice.

If you don't have the right belt, bag or bangle to go with that new dress, don't worry; a choice of accessories will pop up alongside the garment. Do you need a pair of sunglasses for summer? Just upload your photograph and click, click, click to see how the latest designer shades will look on you. Thank you, broadband.

You had better be quick, though, because 500 new items are added each month and when they are gone, they are gone – or WIGIG, as they say in the retail trade. As the managements of Zara, H&M Hennes and Topshop know, creating the impression of scarcity is a wonderful way to keep that stock turning over fast, and that cash-flow flowing.

When ASOS announces full-year figures tomorrow, it will provide some welcome news in a depressing retail firmament. Analysts expect profits before tax of at least £7m – more than double last year's £3m – on turnover of £80m (up from £43m). They also expect the website's founder and chief executive, Nick Robertson, the great-grandson of Austin Reed, who gave us the quintessentially English menswear brand, to make bullish noises about future expansion plans. The company will shortly open a new warehouse that should see it through the next five years, and Robertson wants to increase the range on offer. "We hope to double the number of brands within 18 months," he explains.

Robertson is also in discussions with Sir Philip Green, owner of the Arcadia group, about selling Topshop clothes in the same way he already sells Karen Millen, Kookai and French Connection. Topshop has its own online operation running alongside its retail stores, but if the right deal were to be struck, it could make sense for both sides.

Even without it, ASOS is the second most popular online clothing site to Next, with 4.6 per cent of the market, and some analysts are forecasting it will be number one within months.

Robertson started his career in the advertising industry with Young & Rubicam in 1987, but by 1995 he had co-founded Entertainment Marketing, which specialised in product placement around celebrities. Five years later that morphed into ASOS, which was launched on AIM, the London market for growing companies, at the height of the dot-com boom that quickly became the dot-com crash. The company struggled with capacity restraints and technical problems until 2004, when it made its first profit.

Since then, the site has grown to attract three million visits a month. Even the Buncefield oil refinery explosion at Hemel Hempstead, Hertfordshire, which damaged ASOS's warehouse and closed the website over Christmas 2005, failed to set it back.

Typical ASOS customers are young working women who read Heat and Grazia, like to party and do not yet have mortgages. More than half of women in the UK between the ages of 16 to 24 now buy clothes online more than once a month. And with 55 per cent of all households having broadband, that figure is likely to rise, especially as Robertson has attracted an impressive management team from "bricks and mortar" retailers such as M&S, Topshop and Selfridges.

In the past year ASOS shares have risen dramatically to 324p, outperforming the retail sector, admittedly a pretty mixed bag, by 300 per cent. It is reasonable to expect the shares to mark time at some stage but the stellar performance has attracted the attention of the investment bank Cazenove, which recently produced a 30-page circular describing the speed of growth as "staggering" and is forecasting a further jump in profits to £12m for 2009.

To those who criticise ASOS's blatant exploitation of Britain's celebrity culture, Robertson has a robust reply: "All we are doing is showing clothes in the context of celebrities, which is what magazines have been doing for decades."

High-street shops are left out in the cold

Online retailing may be the growth story of the moment but it is still relatively tiny compared with the industry as a whole. The specialist research company Verdict estimates that UK online sales will hit £15.2bn in 2008 – up from £6.4bn in 2004; but that is still only 5 per cent of the entire retail market.

By comparison, though, last week proved dismal for traditional "bricks and mortar" retailing, with research showing consumer confidence at new lows. And although spending on food and in "feelgood" areas such as entertainment and clothing remains resilient, people are staying clear of "big ticket" fridges, TVs and furniture.

Profits at the electrical retailer DSG International fell from £295m to £205.3m due to what chief executive John Browett called the "challenging environment". Profits at the group's UK computing division – mainly PC World – halved. A restructuring of its troubled Italian arm resulted in a one-off impairment charge of £390m.

At Kesa Electricals, which owns Comet in the UK and Darty in France, chief executive Jean-Noël Labroue said there had been a clear slowdown in growth in the past six weeks.

Meanwhile Debenhams, or Debtenhams as it is now known due to its heavily geared balance sheet, rushed out a statement showing better sales than feared. It was to no avail, and investors continued to shun the stock. Although British Retail Consortium figures for May showed sales growth of 1.9 per cent, analysts believe this was mainly due to much better weather than last May. The British retail climate is expected to carry on cooling.