It is an uncomfortable truth that the catalogue showroom store format has died a painful death everywhere else in the world, except in the UK.

It is an uncomfortable truth that the catalogue showroom store format has died a painful death everywhere else in the world, except in the UK.

The new American managing director of Argos knows that better than most, given his background in Stateside retailing.

It would have been interesting, therefore, to have heard John Walden speak today, at the Home Retail final results, of his first impressions of the challenges and opportunities that face Argos.

Unfortunately, he ducked the issue and stayed silent on the subject, so the world will have to wait until October 24 and the interim results to hear him outline his turnaround plans.

In the US, the discount stores such as Walmart and the online giants like Amazon destroyed long ago the convenience and range advantage of the catalogue showrooms. Is it only a matter of time before the same pressures prevail in the UK?

Despite its recent problems, Argos is still a formidable player in the UK non-food, non-clothing market, with sales of £3.9bn last year. And it is still the second largest internet retailer in the UK, judged by site visits, having pioneered the whole concept of “click and collect”.

In this sense, Argos has done an awful lot right and yet profits have still collapsed alarmingly, although it is certainly not the only UK non-food retailer to have seen profits fall in recent years.

But rather than keep trumpeting the fact that Argos is “the UK’s leading multi-channel retailer” management need to answer the question of why EBIT margins are still heading south fast, to well below 2% this year.

If multichannel participation is now nearly half the total business in sales terms, what does that say about the trends in the other half of the business?  

Cost control has been eye-wateringly tight (if it hadn’t been Argos would now be losing money), but like-for-like sales keep falling. It is easy to blame ‘cyclical’ factors and the economy, and bemoan the fact that the Argos mass-market customer demographic is under more pressure.

It is also easy to ‘take out the bad bits’ and marvel at how good everything else looks. Argos complains about the weakness in the video game market, for example. But there is always something going wrong with some product group at Argos and, with the range width and breadth that it has, it should be able to ride above all the ups and downs.

It is telling that John Lewis is selling TVs like hot cakes, but Argos seem depressed about the market. It is also telling that the Argos claim to have held market share in consumer electricals, but they only track the market ex-Dixons, the fast-recovering market leader.

It is an uncomfortable fact that it is not the economic cycle, but the inexorable process of structural change in the marketplace that is swamping Argos, as the competition catches up with its multichannel expertise and offer more compelling products and stores.

If John Walden can’t, somehow, reverse the tide, then the world will be left wondering how on earth it ever thought it could justify a portfolio of 750 expensive stores.

About Nick Bubb

Nick Bubb has been a leading retailing analyst for over 30 years. He is a well-known commentator on UK retailing and is a founder member of the influential KPMG/Ipsos “Retail Think-Tank”.