Argos: From stubby pens and catalogues to a £1bn mobile business

Just a few years ago Argos was a brand routinely mocked by analysts for being outdated and out of touch. However, the high street retailer has embarked on a digital transformation that has led it to becoming the first UK multichannel retailer to generate £1bn in mobile-based sales over the space of a year.

For the year ending February 28, its m-commerce revenue was up 38%, with sales through a mobile device hitting £1bn for the first time.

Aligning the psychical and digital worlds

Bertrand Bodson, chief digital officer at Argos-owner Home Retail Group, says Argos is benefitting from its forward-thinking omnichannel strategy.

Although sales at Argos fell 2.1% to £846m for the three months to the end of May due to “weaker demand for TV and tablets”, its ecommerce sales have been strong.

Bodson told Marketing Week: “Mobile is a gift for us in a world where customers increasingly want to shop on the move, and we have seen astonishing growth in m-commerce in the past 3 years.

“At Argos, we recognised this trend early on and invested in agile teams focused on optimising apps that work for customers, like Gift Finder and Kids App.”

Home Retail Group, which also owns Homebase, is currently attempting to turn itself into a “click and collect” business where shoppers order online and pick up their items at its network of branches.

The company has been rolling out a “hub and spoke” distribution network across the country, which means 20,000 products are now available for same day collection.

Bodson said that by linking the physical and digital worlds it is helping Argos move beyond its catalogue and pen-based brand perception.

Click and collect is transforming the Argos business

He added: “I think the true value of mobile is as a connector between the virtual and the physical world. At Argos, our customers like to shop cross-channel and 90% of purchases touch a store, with 35% using the convenience of check and reserve.

“It also works in reverse, with the new in-store browsers giving a real sense of the digital experience and encouraging them to try it. The big focus for us is to create a seamless journey which works for customers, however they choose to shop.”

Competing with Amazon

Online retail sales are predicted to reach £52.25bn in the UK this year, a 16.2% increase on 2014 when the total stood at £44.97bn, according to the Centre for Retail Research.

And Ben Wright, chief of research at CCS Insight, believes Argos has intelligently found a way to use its store estate to compete with the likes of Amazon.

He explains: “The secret to Argos’ success is the fact they are able to offer consumers instant gratification.

“Even with Amazon Prime, if you buy something you have to wait until the next day but if you want something at Argos they’ve made it easier and easier to get it instantly from the shop down the road.”

Moving away from catalogues

As it looks to appeal to the iPad generation, Argos is also starting to changes its 755 plus stores. Currently there are 60 digital stores – in which its famous catalogues are replaced with tablets for ordering.

Speaking to Marketing Week last month, Argos’ head of own label Alyson Lockley played down the process.

She said: “Digital stores are very much still a test as we are still learning what exactly works and listening to feedback. There are also still a large chunk of customers who enjoy using catalogues so the transition is a gradual one.”

But the move has been hailed a “masterstroke” by Kantar Retail analyst Bryan Roberts.

He explains: “If you believed the naysayers 10 years ago then Argos wouldn’t exist right now – they’ve proved them all wrong.

“The store estate is still playing a huge role and the digital changes are well designed and intuitive. I think you’d look stupid if you said Argos was outdated today.”

Over the last year, since Argos first started rolling out its new digital stores, its brand perception levels have grown solidly according to YouGov BrandIndex. Its Index score, which includes consumer perceptions of quality, reputation, value and impression, has risen 3.8 points to 22.7%.

On a list of the UK’s 45 biggest general retailers, it is second only to Ikea.

However, Wright believes the Argos brand, although “moving in the right direction,” still faces challenges.

He adds: “Argos still has a stereotypical view, much like the Post Office, where consumers expect it to have a long queue. It needs to more effectively communicate all these great changes through its marketing.

“Also, if Amazon Prime offers same day delivery – and it looks like it soon will – that would also present a significant challenge to the Argos franchise. It’s doing well to turn things around but that will mean nothing if it rests on its laurels.”