Feature

Brand Health Check: Argos

The retailer's operating profits have plummeted by more than £50m.

Brand Health Check: Argos

Argos seems as much a part of the British high street as any retailer, yet it has been in existence only since 1973.

Its vital stats seem impressive: it has more than 750 stores, attracts 130m customers a year, takes 26% of sales through online, and claims that 18m UK households, covering about two-thirds of the population, have an Argos catalogue.

It sells 35,000 products, from cheap signet rings to £2000 3D TVs. However, the numbers are not stacking up. Operating profit for the six months to 27 August plunged from £54.4m in 2010 to £3.4m this year. Argos blamed the weak consumer electronics market for the decline.

Now, Asda has Argos in its sights. Last week the supermarket launched a campaign to highlight its cheaper prices on gadgets. That followed the supermarket's use of the same tactic on toy prices earlier in October.

Argos is not ignoring its challengers. It launched a home-shopping channel on Sky in the summer, followed by a £4m multimedia ad campaign to promote its same-day collection service for online orders. This service, it says, gives it its unique offer. However, even here Asda is getting on the act, with same-day collection trials in selected stores since last year.

Is there still a place for Argos? We asked Hilary Large, marketing director of personalised gift business Getting Personal and a former Littlewoods' marketing chief, and Toby Horry, managing director at digital agency Dare, which works with Sainsbury's.

 

HILARY LARGE marketing director, Getting Personal (ex-Littlewoods)

Argos' results tell a sad story, that the brand is bearing the brunt of the economic crisis. It is starting to look like the retail behemoth that was Woolworths: a brand with a lack of clarity.

The store portfolio is huge and not all of it is in good repair. Long queues, coupled with a distinct lack of any 'retail-tainment' mean that there is little to compel the consumer to stay.

If Argos' pricing architecture were right, this would be a lure for the consumer, but even this one of the four Ps is underwhelming. Most typical Argos consumers can buy everything that the retailer sells in the raft of discount variety stores (B&M Bargains, Home Bargain, Poundstretcher), which have sprung up in post-recession Britain.

These stores do not have the fixed cost-base of Argos and can therefore sell these items for much less. Price-conscious consumers find these discount variety stores more compelling and probably closer to home.

Remedy

- Instead of rolling out more stores (see the mooted Far East expansion), start to retrench from the existing portfolio, reducing leases, staff and other costs. Then, use powerful incentives to drive customers to shop online and shop from the catalogue - 'flick to click'.

- Invest in a brand rethink. Argos can leapfrog the discount variety stores and become the low-price variety player online. It could invest savings from store overheads in pricing architecture.

- Use remaining parts of the store portfolio as regional collection and distribution hubs (a convenience factor that the likes of Amazon cannot compete with). It could become the family store on the web.

TOBY HORRY managing director, Dare

[BX] So, Christmas is approaching, the Coca-Cola lorries are rolling down from the hills, the girls at Marks & Spencer are preening themselves and the Argos catalogue is being rifled through by eager young kids: but will that weighty tome be in as many households this December?

Hindsight is a cruel mistress: very accommodating to commentators, yet aloof from marketers when they need her most. Regardless of the strengths or weaknesses of Argos' pricing strategy, I can't help but feel that its advertising leaves it open to attack.

The ads are lovely to watch and charmingly put together, I'm just not sure I'd want them in the trenches with me. The work I've seen seems to be selling the end benefit of a trip to Argos (eg enjoying the Dales), rather than the benefits its customers would like to know about: the products and the prices.

I've always believed that Argos is taken for granted. If it were Japanese or Swedish, we'd marvel at its store concept rather than gripe. It is the Tardis of retailing, the ultimate conjurer's trick. You want a 16-plug adaptor? The people at Argos have got one. You want a paddling pool you can swim in? Watch them pull it out of the hat.

Remedy

- Stop competing in the same way as every other retailer and celebrate the magic in the method: it's why Argos can lower its prices, it's why it can give goods to people in an instant.

- Pull the product out of the hat. For the most part, it is invisible in-store, so use the advertising to do what the catalogue does: show off the goods. The current work doesn't seem to love the range enough.

- Get dirty, but in a popular way.