Argos this week unveiled plans to “redefine multichannel convenience for a digital age”, as it put digital shopping, rather than its catalogue, at the heart of its business in a five-year transformation plan aimed at achieving sustainable growth.
Shoppers will primarily buy from the Argos of the future online or via mobile devices, with catalogues and a smaller store estate playing a supporting role – company will close or relocate around 75 stores over the next five years.
Customers will be able to buy and take delivery of products faster, while a new IT infrastructure will allow the business to tackle the challenges of big data, providing customers with more relevant and personal offers, and consistency across its channels.
The move follows a six month business review and comes as a 37% fall in benchmark profits was announced. It will mean reengineering the processes of the UK’s second biggest internet retailer, currently built around its trademark catalogue offering, around a digital future. The transformation plan will be underpinned by a three-year, £175m investment aimed at boosting sales to £4.5bn a year by the end of its 2018 financial year.
It was announced as the value retailer’s parent company, the Home Retail Group, unveiled half-year results showing that sales dipped to £2.53bn in the year to September 1, compared to £2.567 billion at the same time last year. Argos sales were at £168bn for the half-year while sister company Homebase took £787.3m. Group pre-tax profits rose to £51.1m from £29.4m last time after an exceptional £35m boost relating to the closure of its final salary pension scheme. However, benchmark pre-tax profits, before exceptional items, fell by 37% to £17.9m from £28.3m last time.
The company said that multichannel sales made up 51% of its total sales. Its fastest-growing channel remains online check and reserve, which now accounts for 30% of sales.
Terry Duddy, chief executive of the Argos’ parent company, the Home Retail Group, said: “The transformation plan aims to deliver growth by repositioning Argos as a digitally-led business from a catalogue-led business, leading the market growth of digital commerce through online, mobile and tablet, and offering customers more products with the fastest, most convenient fulfilment options. This plan provides the right approach for Argos to achieve a long-term sustainable performance and profit recovery.”
The move comes as consumers spend less, but opt to shop via mobile and online technologies rather than the catalogue. Some 440m visits were paid to Argos’ site in the last year alone, while mobile shopping represented 7% of total sales, bringing in more than £100m.
In the new-look Argos the store will remain key but it will be focused on fast track product pick-up and customer service for transactions made primarily online or using mobile devices. The role of the store was emphasised as the place where most Argos sales take place. “Stores continue to be a key component of the Argos multi-channel model where, consistently for the last five years, nearly 90% of all sales have involved the store,” said the results announcement.
Home Retail Group said it expected to close or relocate at least 75 Argos stores in the next five years, while at the same time it would work to move store leases to five years or less, giving it the flexibility to respond to changes in the marketplace.
The in-store catalogue will be replaced with web-based browsers and customer wi-fi, while circulation of the paper catalogue will reduce. Express home delivery options will be trialled, while the supply chain will be built on a hub and spoke model.
Argos also aims to widen its appeal. While more than 70% of UK households currently shop at the business, it has historically been biased, it said today, towards the less affluent customers who buy more frequently – and have also been hit hardest in the current financial downturn. As it looks to expand its customer reach, Argos says it will extend its product ranges while rationalising its portfolio of exclusive brands.
Early wins in the strategy include a recently-relaunched website, with clearer navigation, search and a one-click Check & Reserve option, speeding up transaction times. Customers will be able to place home delivery orders direct from the mobile app, while a transactional iPad app will launch before Christmas.
The Home Retail Group said: “Argos will continue to upgrade digital customer experiences, with the aim of exceeding the market growth in online sales and traffic by FY16, while building its customer data collection with the aim of reaching 12 million registered customers by FY15.”
