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Argos’ Transformational Plan - But Is It Too Late?

Wednesday, November 07, 2012
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Retailer Argos has announced a 5 year "transformational plan" which is ideal case study material for A2 business students and I would suggest is essential reading for students taking more specialist units in retailing.

It's a bold move, but perhaps inevitable given the fierce competition that Argos (and other high street retailers) have faced from the likes of Amazon and other online-only retailers. Argos' customer base is also skewed towards what is admits is "biased towards less affluent customer segments". I think we know what they mean by that!

The plan has four key elements which I summarised from various reports about the plan:

1. Reposition Argos’ distribution channels to focus on digital

  • Stores to be “focused on product pick-up and customer service for transactions that will increasingly be managed online or through mobile”.
  • Shops “will include more innovation with web-based browsers, in lieu of catalogues, Wi-Fi which will enable customers to use their smartphones and tablets in stores, and a fast track collection service for goods purchased online or via a mobile device”.
  • The catalogue “will move from its traditional position as the lead Argos channel into a supporting role”. Circulation will be cut as consumers take up digital channels.
  • First digital catalogues to be launched before Christmas

2. Provide more product choice, available to customers faster

  • "Hub and spoke" distribution model will make the most of Argos’ store network and infrastructure “to offer market leading immediacy of fulfillment on a wider range of products”.
  • Trials will begin in January 2013 to test operational aspects and the customer offer.
  • Argos will “build on capabilities in large item home delivery with express delivery options”.

3. Develop a customer offer that has universal appeal

  • Argos aims to expand its customer reach with “a more universally appealing offer”.
  • Product ranges to be extended to appeal to the broader groups by, for instance, inclusion of branded products “where a broad range is necessary to build category authority”.
  • The retailer aims to double penetration of exclusive brands to represent a third of total sales by the 2018 financial year. Argos’ portfolio of 35 exclusive brands will be rationalised to focus on fewer, more powerful brands with appeal across categories”.

4. Operate a leaner and more flexible cost base

  • Shift investment towards digital marketing as the digital offer grows.
  • Close or relocate at least 75 stores as leases expire over the next five years.
  • By then around 75% of the store estate will be on lease terms of five years or less “which will provide the flexibility to respond to market changes”.

This BBC Business interview features an interview with the CEO of Home Retail Group (Terry Duddy) who provides a little context to the change in strategy by Argos.

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