Home Retail Group has set out plans to reposition Argos to become a digitally led business.
Group results for the first half show that Argos multi-channel sales penetration increased to 51 per cent of total sales. Online Check & Reserve at 30 per cent of total sales, was the fastest growing channel.
Terry Duddy, chief executive of Home Retail Group, said: “We have also concluded a comprehensive business review of Argos which highlighted a clear opportunity to transform the business through increased investment in digital technologies.
“The transformation plan aims to deliver growth by repositioning Argos as a digitally-led business from a catalogue-led business, leading the market growth of digital commerce through online, mobile and tablet, and offering customers more products with the fastest, most convenient fulfilment options. This plan provides the right approach for Argos to achieve a long-term sustainable performance and profit recovery.”
A key element of the plan is to operate a leaner and more flexible cost base that builds n the cost efficiencies delivered over the past few years.
“Additional cost reductions will be targeted to help fund the investment in the transformation plan. The level of investment in the catalogue will be reduced over the next few years as both the size and circulation of the catalogue begin to fall. This will lead to a shift in the investment towards digital marketing as the digital offer grows,” the group said.
“Argos has reviewed its store estate on the basis of several factors, such as profitability, attractiveness of location, complexity of operations and overall fit for the new strategy. As a result, it is likely that Argos will close or relocate at least 75 stores as their leases come to an end over the next five years. By FY18, around 75 per cent of the store estate will be on lease terms of five years or less which will provide the flexibility to respond to market changes.
“Having a strong local presence will be strategically important in a digitally-led future and Argos is well positioned with its store estate. The stores will be focused on product pick-up and customer service for transactions that will increasingly be managed online or through mobile. The stores will include more innovation with web-based browsers, in lieu of catalogues, Wi-Fi which will enable customers to use their smartphones and tablets in stores, and a fast track collection service for goods purchased online or via a mobile device.”
Other elements of the plan include: repositioning Argos’ channels for a digital future; providing more product choice, available to customers faster; and developing a customer offer that has universal appeal.
In the six months to 1 September, Argos reported a slight fall in operating profit to £3.3m despite a small rise in sales to £1.69bn. HRG is targeting annual sales of £4.5bn by 2018 and is planning to invest £100m a year in the transformation plan.