Argos needs to build on multichannel strategy

The job losses spelt out in Wednesday’s Comprehensive Spending Review can’t be good news for retailers. While at least we now know how bad the impact will be, the uncertainty created in the minds of those affected will do nothing for their propensity to spend.

Few parts of the retail economy will be unaffected, but some have more to fear than most. Discretionary general merchandise at the mass end of the market is likely to be among the worst affected sectors, and this week’s interim results from Home Retail Group showed Argos is right in the eye of the storm.

A 6.5% like-for-like decline and a 32% decline in operating profit show just how tough it has been for the catalogue chain, and puts it firmly among this year’s weakest retail performers. As the only general merchandise specialist of its size, it is bound to be hit hard by the downturn, but the question being asked is how much Argos’s problems are about the market and how much about the business.

Argos is a well run business and has some formidable strengths. Its original model lent itself well to the multichannel age and the company has capitalised on this fully, with an excellent web offering, an iPhone app that already accounts for 1% of sales and pioneering services such as check-and-reserve and kiosks, which have improved the store experience. It is investing in refurbishing its stores, putting more products on shelves for shoppers to play with, for example.

But fundamentally it remains a catalogue shop, a unique and almost eccentric format that, if it didn’t already exist, wouldn’t be invented today. It’s a model that pre-dates supermarkets plus innumerable online rivals selling virtually every general merchandise category Argos does.

And there’s the biggest issue Argos faces today.

If someone wants to buy a toaster, they can either make a special trip to Argos and back, queue twice and wait on a chair that is nailed to the floor to collect it.

Or for the same price they can throw it in their trolley with their baked beans and milk while they’re in the supermarket anyway.

This week’s news on job cuts signals that life is only going to get harder for retailers generally, and Argos in particular. And what that means is that the good work going on to reinvent the experience needs to be accelerated and be more radical to give the Argos format a compelling reason for its existence in the decade ahead.