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On the shop floor with... Sara Weller, managing director, Argos
Archived article dated Monday June 29th 2009
Lots of companies bang on about being truly multi-channel and many consultants are making a good living from flogging retailers various solutions that will supposedly enable them to seamlessly add channels to their stores businesses.
The reality is that few companies today offer an integrated multi-channel experience and the many consultants buzzing around aren't really able to offer a seamless solution because life just isn't like that.An exception is Argos which continues to be held up as a leader of the multi-channel pack and which has been helped by the fact it has always been a strange hybrid beast operating a mixture of catalogues and stores. Adding the internet into the equation was a lot easier for Argos than it has been for most other retailers.
Sara Weller, managing director of Argos, suggests it is equally hard for high street retailers to suddenly add catalogues to their existing operations, which is why she remains unconcerned by the launches from Tesco and more recently Asda.
“There is plenty of competition but we're absolutely focused and there is a clear sense that if we do well, and we've the capability to deliver well, then there is no reason we can't maintain a good distance of advantage. It is not straightforward, adding catalogues. And it is not only logistical issues,” she explains.
Weller points to the many differences in running stores versus catalogues. These include having to buy ranges in a catalogue gradually and for the items to be in stock for a full six months, and to then clear all the stock ahead of the next catalogue.
There is also the issue of pricing being set in a catalogue for its six-month run - there is no option to increase prices mid-term. The bottom line is that you are effectively running two separate businesses - stores and catalogues, with few synergies between them.
Weller says it is also a big cost to produce catalogues. At Argos each issue costs £2 (with 50 per cent of this offset by supplier contributions), which equates to £40 million per annum as Argos distributes 20 million books twice a year.
From each catalogue Weller says the company derives around £100 of sales, which helps it clock up £4.2 billion in annual turnover. This compares with the £20 to £25 that Tesco is currently earning from each of its catalogues. With such overheads and a lack of synergies between stores and catalogues the big question for the likes of Tesco and Asda is just how much of their catalogue sales are incremental?
It is a different story at Argos, where the synergies across various channels are gained from what Weller calls the 'shopper journey'. “Customers typically start at home with a catalogue then nip onto the internet to see if the item is in stock at their local store or elsewhere,” she says, before adding that an increasing number of people are then choosing to order goods for collection in-store through the company's 'Click & Collect' service.
Around 40 per cent of Argos customers now shop in this multi-channel way and the migration to using the internet as part of the shopping journey is growing fast - at 50 per cent per year. Weller says other retailers have tried to copy 'Click & Collect' but offer inferior services as they cover only a small number of stocked items or do not allow for immediate pick-up from stores.
The reason for this is that most retailers do not have as accurate a stock file as Argos, with Weller stating that when she joined the company five years ago it had a one in 1,000 failure rate but that this has gone to a “phenomenal” one in only 5,500.
Because of the key role that the company's 730 stores play in the shopping journey Weller does not foresee the day when Argos offloads its shops and moves to a virtual model. The company also benefits from its unusual store configuration that involves on average only 3,500 square feet of expensive trading space while behind the scenes each unit also has up to 7,000 sq ft of back-room for fulfilment. Another area of 10,000 sq ft on the next floor is used for storage.
“It's a very low-cost model with a lot of this cost sitting upstream in the distribution centres. And unlike most retailers our sales space is very low and we are not necessarily on prime retail space,” explains Weller.
In-store is where quite a bit of the action is taking place at the moment with the company “working hard to make sure we give more inspiration
And, in keeping with Argos' reputation for using technology, Weller says many experiments are being undertaken. 'Smart store checkers' are now trialling in two stores, allowing shoppers to look at pictures and details of products; check the availability in nearby stores, and to reserve the items.
There is also a move to introduce more ordering/payment kiosks into stores as the card-accepting units now handle 20 per cent of payments. In new format stores this can reach 30 per cent. This is part of a concerted effort to redeploy staff from behind the traditional tills and to instead use them to help customers more on the shop floor.
Argos is also trying to help customers survive the recession through its introduction of 250 'Value' lines and various 'Wow' deals that are embedded throughout the catalogues. This has helped the company retain its customer base although Weller admits that the way shoppers buy has changed somewhat.
“People at the top-end are still buying and the 'Value' brands are stable. It is in the middle territory that has changed with people previously buying a £25 kettle but now it might be only £15. People are working to a budget and if prices go up then they are still spending the same amount as they would have before,” she explains.
Pricing is not, surprisingly, a big issue for Argos. And not just because it is a regarded as a value operator but has to hold its prices for the full six-month lifespan of each catalogue. Weller says she therefore watches prices like a “hawk” and will reduce prices where possible in order to maintain competitiveness.
Of more concern to the City right now is how Weller and Argos are pushing through prices increases and how that is affecting the top-line. Some indication of how successfully this sensitive issue is being handled may be revealed on Thursday (June 11) when parent company Home Retail Group issues its interim management statement.
glynnd@theretailbulletin.com
Tagged as: Argos | Sara Weller
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