Argos has launched a same-day delivery service that is taking the fight to its retail rivals in the hotly contested battleground of fulfilment.

Home Retail boss chief executive John Walden says the service, which will be available to 96% of the population and only exclude the most remote parts of the country, will revolutionise online shopping.

Customers are able to order as late as 6pm and still receive a delivery by 10pm, for the surprisingly cheap sum of £3.95.

Walden says Argos is able to offer the service at the competitive rate because of the development of its hub and spoke distribution network, which involves one large hub store restocking smaller nearby stores.

The retailer is hiring 3,300 drivers and leasing 800 vans in order to deliver products from hub stores to customers’ homes on the same day.  Customers who choose in-store collection on the 20,000 products included in the Fast Track scheme will not have to pay anything for the service.

Martin Newman, chief executive at consultancy Practicology, believes the move could have large repercussions and help Argos take the game to Amazon when it comes to fulfilment.

New benchmark

“It has given them parity with Amazon and possibly an advantage,” says Newman. “Rival retailers will be thinking this is the new benchmark that we have to live up to.”

Walden claims that the costs of the Fast Track service will not have a “material impact” on Home Retail.

However, Barclays Capital analyst Chris Chaviaras questions how much the initiative costs and says he “errs on the side of caution because I think it will probably cost more than it will give them”.

“It is very brave for Argos to do this, I’m pretty sure they will have worked out their economics because Walden is a good chief executive but they have by far the thinnest margin business,” he says.

The same day service is primarily targeted at fellow generalist retailer Amazon and the moves the etailer is making with one-hour deliveries through Prime Now, Chaviaras believes.

Argos’ same day delivery will force specialists, including Ao.com and Dixons Carphone, to start thinking about how they can replicate it, according to Chaviaras. “I do not think anyone will be rash when reacting because it is so costly,” he says.

No membership fee

Walden was keen to stress that Argos Fast Track differentiates itself from the competition because unlike Amazon it does not charge an annual subscription fee or charge customers for click-and-collect as John Lewis does.

“The thing about offering an annual membership is you would argue there is an increased likelihood that people would use you because they have paid a large sum to have an annual membership”

Martin Newman, Practicology

“Argos is making it more convenient for customers but it does not necessarily increase the propensity to buy,” says Newman. “The thing about offering an annual membership is you would argue there is an increased likelihood that people would use you because they have paid a large sum to have an annual membership.”

Newman believes Argos should consider introducing a dual proposition for its same-day delivery, including offering the option of annual membership or one off payments.

However, he concedes that the array of options for customers is already confusing. He says:  “Fulfilment has become a battleground as online and high street retailers have volleyed a confusing array of options into the market.”

Argos’ headline-grabbing move appears to be an effort to gain cut-through in increasingly confusing and competitive market places.

“Walden understands he needs to stay ahead because he sells commoditised products and this is his way of differentiating,” says Chaviaras. “The delivery proposition is very important but what is more important is to sell the right products. Operationally they are amazing, but going into Christmas I am cautious if they have the right product.”

Customer engagement

Argos may have taken the lead in the battle over fulfilment with the launch of nationwide same-day deliveries, but it is a long way off winning the war.

Newman concludes: “Fulfilment is the current battleground but the next one is customer engagement.

“Fulfilment is great and will help you capture market share, but that on its own is not enough. At the end of the day it is about range value and service and building a relationship.”