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UK fashion etailer Asos has switched distribution gears – and will now send US orders directly from its UK fulfilment centre, a move that would reduce inventory levels and potentially avoid new tariffs. 

Its decision is likely to be watched carefully by other retailers looking for similar savings.

Asos will close its Atlanta distribution centre in the second half of the year, expecting a £190m impairment charge for doing so – but says it expects a £10m-£20m annual ebitda benefit from 2026 onwards as a result. 

“Having successfully transformed the US into a profitable market over FY24, Asos sees further opportunity to re-invest in the areas that matter most to its customers by optimising its global distribution model,” it told investors this month.  

“If Asos ships orders directly from the UK to the US, the parcels would likely qualify for the de minimis exemption,” confirmed Chris Clowes, executive director at logistics consultancy SCALA. “When Asos imported inventory in bulk to stock the US warehouse, the shipment … would be subject to US import tariffs at the time of entry.” 

But Asos told The Loadstar: “Regardless of any de minimis duty changes, we believe the best outcome for our US customers and stakeholders is to mothball Atlanta and fulfil orders from our centre in the UK and a smaller, more flexible local US site.

“Under our new operating model, there are no plans for all US-bound shipments to be under the current de minimis threshold, and we expect to be subject to some import tariffs on the share of UK-fulfilled orders. While potential changes to US tariffs and de minimis duty changes remain uncertain, we have made conservative assumptions as to how this may evolve in our financial modelling and guidance.”

Asos has been blighted in recent years by having too much inventory. It has managed to reduce stock levels by about 50% in the past two years, to the point where 80% of its stock has only been on sale for six months or less. 

It said in its 2024 annual report: “Two years ago, we had far too much inventory – c£1bn for c£4bn of sales, with a very large intake of new inventory arriving over the following year. We faced the problem head on and cut intake dramatically, restructured the way that we buy, and prioritised speed and net realised margin.” 

And it believes the new distribution system will require even less inventory. 

“Launching its new commercial model which requires lower stock holding, Asos can offer better access to product for its global customer base while further reducing its distribution capacity and increasing the efficiency of its operations,” it said. 

Mr Clowes added: “These changes not only reduce costs, but also enable a broader range of products to be offered to US customers, potentially increasing sales.

“However, it will take time for these benefits to materialise, due to significant upfront costs. Moreover, moving fulfilment back to the UK may not lower logistics costs overall; especially as last-mile delivery often tends to be the most expensive element.” 

And he believes that the warehousing change represents a strategic error. He explained: “This costly move [to close the Atlanta warehouse] reflects a substantial investment in long-term infrastructure, which unfortunately failed to align with slower-than-anticipated regional growth. This has been further impacted by fierce competition from the likes of fast-fashion retailers Shein and Temu.” 

Mr Clowes added that changes such as this should be phased, rather than sudden. 

“At SCALA, we typically recommend taking a phased approach to this type of warehousing network shift, reducing risks while enabling businesses to adapt more effectively to market conditions.” 

But Asos said it was confident about US sales. 

“Asos remains excited about the opportunity in the US market and believes that its new operating model will better serve its US customer-base, while generating a better return on investment. Asos opened a local US office in 2024 and will continue to grow and build its local presence which it sees as crucial in building great customer experiences.

“The US remains a core market for Asos, which it believes can return to sustainable revenue growth and generate c8% ebitda margins in the medium term.” 

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