The completion of Argos’ separation from former parent company GUS last week has led retail experts to speak of the brand being “set free”.
Argos and Homebase have been spun off together as Home Retail Group, and their financial performance will now be distinct from that of data specialist Experian – the other part of GUS to be demerged. This financial freedom, says Argos managing director Sara Weller, “will make the line of connection between… Argos and the share price more direct”.
Weller, a former Sainsbury’s marketing director, announced Argos is to trial a high street “convenience store” format from next month. The first will open in Cricklewood, north London, in November. Around 35 more could follow in the next five years.
An Argos spokesman explains: “Stores will be about 5,000 sq ft, half the size of a traditional store, and one-third the size of an Argos Extra.” Each store will stock around 5,500 items, but customers will also be able to order goods from other stores.
The spokesman adds: “London is an area where we are currently under-represented. No decision will be made on a roll-out until it has been fully evaluated. If the trial succeeds, it will allow us to develop more stores in densely populated and urban areas where suitable sites are hard to find.”
Industry observers are already making direct comparisons between Argos’ move and town centre formats of grocers, including Tesco Express and Sainsbury’s Local. Some feel Weller and her team could have stolen a march on their rivals in non-food, which has little existing presence in the convenience market.
This could be vital for Argos’ future success. Retail analyst Verdict Research recently forecast Tesco will overtake Argos as the number one non-food retailer in the UK after it launched its Tesco Direct online and mail-order service (MW August 10).
Mike Godliman, a director at retail and marketing consultancy Pragma, says: “Argos needs to fight back. Quite often people can’t get to a store, so by having small stores in towns they could fill a gap for homeware, electricals and jewellery.”
He adds: “The main non-food retailers are not in the high street, whereas others such as Robert Dyas are not in every town centre, and Wilkinson is not everyone’s cup of tea. Argos is a strong brand, price competitive with good catalogue distribution. It could have ‘star of the week’ offers to attract consumers.”
Meanwhile, Alan Atkin, a senior consultant at Origin Brand Consultants, says: “Argos’ underlying message has always been one of convenience and value. Years of communication and consistent branding have instilled this into consumers’ minds. It is important that this remains a solid foundation for the future.
“It makes a certain amount of sense to stretch perceptions of the brand, which should transfer itself naturally into the convenience format.”
But others are not so convinced. Verdict chairman Richard Hyman says: “The Argos convenience store strategy is unclear. The mainstream stores major on convenience, because you can take most of what it has to offer away with you. That will clearly be much less possible at these new outlets.
“Given that the overwhelming majority of Argos customers shop at Asda, Tesco and Sainsbury’s, are they likely to reject the convenience of buying [non-food items] under the same roof, and at the same time as their groceries? Competition for Argos is going to get much tougher.”
Another retail expert wonders whether the company will suffer from its lack of customer information, in comparison to the wealth of data available to its main competitor through the Tesco Clubcard loyalty scheme. He says: “It will be much harder for Argos to have a dialogue with its regular customers and persuade them to use the new stores, whereas Tesco has a much better communication base.”
It is unclear whether Argos will use advertising to highlight its new store format. In recent years, it has tended to focus on the experience of shopping at the chain, making its breadth of range and expertise in instant supply central to its brand proposition, and using the strapline “Don’t shop for it, Argos it”. The work is a departure from its previous product-led creative, of which one agency insider says: “It didn’t win any awards, but it sure sold a lot of kettles and toasters.”
Argos has tested smaller stores before, in the early 1990s – but that project was scrapped. Weller believes things will be different this time round and if plans for a national convenience chain come to fruition she could be the toast of the Home Retail Group shareholders.
Facts and figures
• Founded: 1973
• Stores: 670-plus, UK & Ireland
• Last financial year: sales of more than £3.8bn
• Catalogue: in more than 17 million UK households
• Customers: Argos serves over 130 million customers a year through its stores and takes 4 million customer orders online or over the phone.
• Website: The Argos internet site is the second-most visited internet retail site in the UK