Argos says stores a strategic advantage in digital age
By James Davey
LONDON (Reuters) - British household goods retailer Argos sees its large portfolio of 737 stores as a asset rather than a hindrance, arguing the convenience of a pickup point for goods ordered online is an important part of its customer appeal.
"We think the stores are an advantage and it's not just because we've got them. It's because we think that's what customers will need," said Managing Director John Walden on Tuesday during a visit to the group's Old Street store in central London.
Argos accounts for around 70 percent of sales at parent Home Retail Group Plc , which has posted five straight years of profit decline, hit hard by the UK's economic downturn.
The group is already a year into a five-year plan intended to reverse a slump, in which underlying pretax profit shrank to 91 million pounds in fiscal 2013 from 433 million five years before.
Argos is investing 300 million pounds ($485 million) to reinvent itself from a catalogue-led to a digitally-led business, one result of which is the revamped Old Street site, the first to be redesigned as a digital concept store.
Some analysts argue Argos, whose target is a 15 percent rise in sales to 4.5 billion pounds by 2018, has too many stores and would benefit from a downsizing.
But Walden said although shoppers were increasingly moving to online transactions, many preferred in-store collection over delivery to their homes, as delivery slots were often inconvenient.
"We actually think there will be a limit on people that take home delivery," he said, noting it was currently less than 15 percent of customers.
CLICK AND COLLECT
Walden said 90 percent of all Argos' sales still involve a store at some point, while a third of its business was "click and collect", a concept Argos pioneered over a decade ago as "check & reserve".
Argos is using the Old Street store, and five other soon-to-open concept stores, to trial innovations such as fast-track collection within one minute for customers who have pre-paid for products online or via a mobile device.
The store lacks Argos's traditional laminated catalogue, paper, pens and stock-check devices, replacing them with iPad tablets, while wall-mounted digital screens have replaced paper posters. There is also a wider range of products available and increased levels of customer support from staff.
Walden, a former executive of U.S. retail chains Best Buy Co Inc and Sears Holdings Corp , wants to develop a customer offer that has greater appeal across socio- economic groups, but denied he was taking Argos upmarket.
"This isn't for rich people or poor people or whatever, this we think is universally attractive ... We think there is lots of opportunity for more customer groups to buy more product from us."
Home Retail also owns Homebase, Britain's No. 2 home improvement retailer.
Shares in Home Retail, up 75 percent over the last year on recovery hopes, were down 0.5 pence at 192.5 pence at 1406 GMT, valuing the business at 1.6 billion pounds. The stock trades on 18.9 times prospective earnings, a premium to the 15 times multiple for UK peers, according to Thomson Reuters data.
($1 = 0.6190 British pounds)
(Editing by David Holmes)
