With an online presence, a huge network of stores and an iconic catalogue, Argos has finally accepted the need to refocus on digital and move away from the catalogue-based model is has so solemnly stuck to. Once a staple of the British high street, Argos announced a few weeks ago that it intended to cut both its physical presence and the circulation of the Argos catalogue. This is perhaps a reaction to the collapse of the Index Catalogue in 2005 and the latest poor financial results from Argos.
James Bowers, in this article, asks the question of whether or not high-street catalogue businesses have any future in an increasingly digitally active retail world.
Argos is one of two extremes in the retail world. As a traditional retailer, Argos has a strong physical presence through bricks and mortar with around 750 stores. In order to cut costs in an increasingly cost-sensitive retail world, trimming the physical estate and reducing showroom space has to go hand-in-hand with increasingly internet-based sales. Indeed in 2007, 16% of Argos’ sales came from the internet. This year’s figure stands at 42% - yet at the same time the number of stores has not declined. At the other end of the retail spectrum, lie digital retailers who are moving their online successes to a physical high street presence. Here you only have to look at eBay and Amazon, both of whom have tried to open physical stores to complement their online presence. But here is where traditional retailers have the lead – it can be far easier to establish an online presence being a well-known staple on the British high street. From a customer experience angle, digital retailers creating physical presence have been far less successful than vice versa. High street familiarity with a brand translates relatively easily to an online presence as customers are already aware of the brand’s offerings. A retailer such as Argos now has the opportunity to leverage this advantage and to use the high street presence it has built up to bolster their online offering
Once the go-to store for any household goods, most consumers now prefer to look online to compare prices with other retailers. The generation that were used to a catalogue lying on the coffee table have been outplaced by a generation who will use an iPad to search for items from many different retailers. Indeed, catalogues, while the focal point of the Argos brand and for a long-time the centre-piece of the business have been outpaced by a new form of catalogue – the internet. Why would consumers choose to look in a catalogue when the internet can offer price matches, better photographs, more specifications and product reviews? Argos publishes two catalogues a year with more than 23,000 lines and once printed these prices are static for the next 6 months. With the introduction of ESLs (electronic shelf labels) across some retail businesses in the UK, physical prices can be updated instantly to match other retailers. With prices able to be updated remotely overnight, this is a far-cry from the labour and cost intensive production of a 23,000 line catalogue. Businesses that compete entirely on price, such as Argos, will be unable to cope in the new digital retail world with hard copies of catalogues that lock-in prices for a certain period. The NEXT Directory can be seen as a better example of the catalogue business: the catalogue business complements the physical business, does not form the focal point of the brand and, importantly, NEXT clothing can only be bought at NEXT. This means that prices are less easily comparable than if the products were identical, as with many of Argos’ products.
In summary, catalogue-based businesses have seen the need to change for a long time. Argos’ recent newsworthy boardroom changes demonstrate the concern they have. Trimming the physical business with effectively utilising the remaining stores will need to go hand-in-hand with new digital retail ideas in order to retain customers and to take the experience of a catalogue-based business into 2013.