In the face of digital dominance should Argos change its business model?

In the face of digital dominance should Argos change its business model?

The latest results from Argos were not unexpected but has left many wondering about the future of Argos and its operating model.

At the beginning of the last decade, Argos went from a slightly quirky retailer with short pencils and chits of paper to a serious player in the newly developing internet arena.

Capitalising on its understanding of single pick distribution and efficient photography and content creation, Argos skilfully exploited its already popular ring-and-reserve service to become the pioneer of click-and-collect.

Online retail moved into a new era of multichannel excellence. But the last few years have seen Argos struggle and overtaken by competitors. So is there still room for a catalogue and showroom model in today’s digital world?

Let’s start with the catalogues. Most purchase decisions begin with Google and consumers are now adept at navigating through websites, using complex search and navigation.

A catalogue with cumbersome indexing can surely add little value to this. Much more seriously, a catalogue has the detrimental effect of setting prices at fixed points in the year.

This gives the traders the constraint of not being able to move prices above the published catalogue price while at the same time having to react quickly to reduce prices to match online traders who change prices several times a day.

It also means consumers have little assurance they are getting the best deal, unless they also check the website. And if they have to go to the website, what does a catalogue add, especially if it is functional rather than inspirational?

And is the showroom worth the investment? Showrooms have many advantages. Customers can view products before buying, they can have them instantly and without waiting at home all day for a delivery.

But is it practical? In a world of infinite choice, no retailer can carry a full range in-store. So if you want the convenience of the store, you must sacrifice choice. Some people will but they are well served by supermarkets. Most won’t.

And after two decades of making little improvement in the field of home delivery, finally, things are getting better. Home delivery and returns are not the nightmare they once were, even on big-ticket.

Buying an unseen product becomes far less risky if you can have it the next day, and send it back painlessly. As logistics improve, and retailers offer better service online, the value of showroom convenience diminishes.

So how do retailers compete? Customers haven’t changed their basic requirements for choice, value and convenience. But what that represents in their mind is changing rapidly, driven by technology and the advance of social media.

Rich content, both visual and technical, together with logistics information needs to be available quickly and on multiple devices.

And democracy has arrived in retail via product ratings and blogs. How to harness the new world of a mobile, Twitter generation profitably will challenge retailers in the next few years. But the answer is unlikely to lie in a giant ‘book of dreams’.