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Argos results: The importance of balancing innovation with tradition

As Argos's parent company, Home Retail Group (HRG), announced its annual results, it also revealed its plans to launch 200 new digital stores for the coming year. More intriguing though, was the confirmation that customers are still fond of the classic Argos catalogue.
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HRG’s annual results saw a 14 per cent rise in annual pre-tax profits, with like-for-like sales increasing by 0.6 per cent at Argos. While Argos’s digital push is taking a while to bed in, the company is having to maintain a careful balance between its online development and its well-known traditional elements, to keep customers happy.

John Walden, chief executive of Home Retail admitted he had been surprised by the ongoing demand for the Argos catalogue – the company had planned to cut the print run by 50 per cent as part of a five-year modernisation programme.

“I would have estimated at the start of the plan that it would have dropped off faster. But I’m happy to see it is something Argos is known for uniquely,” he said. When customers think of Argos, more often than not, the image of the huge catalogue will be the first to spring to mind. 

As a shopping tool, it may seem redundant when considering Argos’s attempt to improve the customer experience by bringing in tablet computers. It raises the question of what actually contributes to the ultimate retail experience. Flicking through the pages of an Argos catalogue it seems, is part of the package for many, and a distinctive part of what makes it memorable.

Richie Jones, head of marketing and ecommerce at Saltrock said that some consumers still like, “the calendar prompt of a seasonal brochure ‘landing’ through the letter box as a prompt of purchase”. It may not be as fancy as the swanky digital screens the retailer is rolling out, nor as speedy as the free Wi-Fi and voice-activated computer systems, but it’s part of the fundamental Argos experience. The company currently still prints more than 20m copies of its catalogue every year across two seasonal versions, and though the focus is very much on digital development, it’s interesting to see Walden’s acknowledgement of the importance of traditional elements to customers.

Peter Veash, CEO of The BIO Agency, suggested that the real necessity for the retailer, when attempting to bridge the gaps between its online and offline approach, is consistency. “We don’t care if we’re shopping using the Argos mobile app, Argos.co.uk or visiting a physical store – we expect a consistent experience from the retailer that is true to the brand we know and love. The challenge is to recognise this by ensuring our journey across devices and between the digital and real worlds is as seamless as possible,” he explained.

It’s a tricky task for companies to achieve – research carried out earlier this year by e-commerce software company EPiServer found that most retailers are struggling to deliver the sophisticated mobile commerce experience that consumers now expect. The company’s annual report looking into the behaviour of 1000 smartphone and tablet users across the UK, found a drop in satisfaction from an average benchmark of 47 per cent, down from 55 per cent from the previous year.

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John Lewis – recently named as the most desirable retail brand for job seekers – came up top on the retailer table, with 75 per cent agreeing that it provided a consistently good mobile strategy across its apps and mobile site. Phil Streatfield, partner at LCP consulting, believes that John Lewis is an example of a business, “that has built on its brand presence with intelligent technology”. Fundamentally, “you still feel valued as a customer despite the way the technology is used to facilitate your experience,” he added. 

The critical element for retailers of measuring customer behaviour, is far easier with online channels and modern attribution models. Tom Manning, head of PPC at Forward3D pointed out that, “the one journey that’s often missing is the one from online to offline and vice versa – exactly what Argos are now trying to build their business model on. Click and Collect, mobile payments and coffee shop apps that store your favourite order are all interesting glimpses into omnichannel, but the dots are still yet to be fully connected.” 

For many other retailers, the multi-device approach of consumers has provided headaches as they hurry to adapt their strategies. David Bowen, commerce product manager at EPIServer noted: “It adds complexity for retailer mobile strategies. Online retailers need to explore these trends and evolve their approach to mobile.”

While Argos’s annual sales were up 1.1. per cent to £4.1bn, Freddie George, analyst at Cantor Fitzgerald said, “we still need to be convinced, that the recent Argos initiatives will improve earnings above and beyond the current momentum from the improving economic outlook.” It’ll be interesting to see whether Argos’s commitment to delivering all elements of omnichannel to improve its presence will pay off, with its competitors also watching the company’s movements closely.

In January 2015, online marketplace eBay announced 1m Click & Collect purchases at Argos, following a commitment to offer items from 65,000 sellers for collection from the retailer by Christmas. It proved a canny move, allowing various sellers to make use of a high street presence that they may not have had access to otherwise.

Argos though, has seen Marks & Spencer and John Lewis among the companies which have waded into the Click & Collect waters, and will be fighting to stay abreast of the market.

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A total 46 per cent of Argos sales are now over the internet, and a quarter of sales come from mobile devices. Walden admitted: “The digital revolution continues to dramatically alter the way consumers communicate, learn, shop and are entertained. Retailing in particular is experiencing disruption and change.”

It’s a steep learning curve too, for the retailers, as Walden knows. Paying attention to customer demand and feedback has shown that the predicted paths and expected patterns in consumer behaviour aren’t always reliable. The unexpected ongoing desire for Argos catalogues perhaps reflects that while we may expect businesses to keep up with change, customers don’t always like the companies to be the ones enforcing it.

Many retailers are continuing to adapt to the challenges of taking an omnichannel approach. Streatfield said: “The sector will need to quickly adapt to a net reduction in sales through conventional stores, an increasing demand for click and collect rather than speed of fulfillment, and the challenge of growing returns.”

The ecommerce and delivery market landscape is still undergoing change, and for those businesses which have established heritage, ensuring they maintain the traditional elements for which they’re recognised is key.

Additionally, the focus on developing a number of touch-points for consumers also means some crucial areas of service can suffer through lack of attention. Streatfield said: “Over a third of UK retailers who claim to be omnichannel retailers have experienced an increase in customer complaints.” A focus on the front end of the customer proposition, without an operating model and back-end capability that can deliver on these promises “isn’t working”. 

Even John Lewis, widely-regarded as a business doing omnichannel pretty well, had some kinks to iron out when its online service failed to live up to its customer-pleasing reputation

It’s a challenge most are approaching with excitement as well as hesitancy, but as Argos pushes on with the announcement of 200 more digital stores, it seems that retailers have to be brave to see results.

Tim Barton, director of strategic alliances at iVend summarised: “A seamless experience between a retailer’s bricks and mortar store, their online outfit and mobile offering can be the difference between a conversion or a lost sale.”


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