The Future of Retail

“The appointment of an American CEO is a very good move for Argos, as long as they listen to what he has to say.”

 

Although Argos is the largest general goods retailer in the UK, with 800 stores, it is a pretty outdated idea for a business. As a catalogue merchant, it is unique in the UK but as is often the case there is a down side – when demand begins to fade. It is a mixture of town-centre bricks, clicks and catalogues in an era when catalogue shopping is now readily available from many sources online and home delivery is easy, inexpensive and convenient. Anyway, retail is on the move out of town, where our somewhat confused supermarkets are already selling everything under the sun.

Along with Homebase, Argos is now owned by Home Retail who says that sales have declined in early 2012 as Argos is particularly exposed to the “squeezed middle’s” reduced spending on its staple homewares and consumer electricals at the moment. Sales at Argos were down 7.7 per cent to £480 million in the eight weeks to the end of February. While it sold more iPads and Kindles, video game sales were down by 35 per cent: you can see why its neighbour on many high streets – the Game Group, who purports to be the market leader in selling these games – is in so much trouble.

The share price of Home Retail has fallen by 50 per cent in the past year as profits have fallen sharply so the group’s CEO ousted Argos’ incumbent MD to manage things himself. In February, Argos announced the appointment of a new MD with a strong US retail pedigree having worked at both Sears and Best Buy. He has experience of running the catalogue, internet and home services divisions at Sears. This is a good move as our retail future already exists – in the US.

I would have thought it was clear enough what the future direction of retail was in this country, so I find it amazing that management don’t do anything until things start to affect sales. Look at Tesco’s corporate sacrifice this week: announcing that they were getting rid of their UK MD for much the same reason. Sadly, you need cash flow, time and confidence to make major strategic adjustments to a business, which is quite different to tinkering with an established trading model. If the new appointment at Argos can give it confidence to start changing its business model more quickly then so much the better.

You need to look no further than the now defunct Montgomery Ward in the US for Argos’s inevitable future if things don’t change. If you chart its decline and fall you will see both the geographical movement of the retail locus that we are now experiencing and the blindingly obvious disintermediation of a shop-based catalogue business by first malls and then the internet.

Argos may have acted in time. Hopefully the new guy is up to this sizeable challenge and he can convince the rest of his colleagues that a significant rebalancing of the clicks, bricks and catalogues business is needed – and quickly if they want to survive. The company could also do with a much clearer brand position in the market. It is no longer good enough for it to be familiar and ubiquitous, there needs to be a compelling reason why people should buy from Argos rather than a price comparison site on the internet. I’m not sure I know what that is just now.

Perhaps it should go back to its roots. The Argos Catalogue was once the Green Shield Stamp catalogue. Teaming up with reward scheme like Nectar, or something similar, might make them different enough to survive and prosper, rather than decline and fall like the city of Argos in Greece that the company is named after.

Mark

 

No comments yet.

Leave a Reply