Argos has reversed years of LFL sales declines and been able to capitalise on the tablet PC boom, but was that through luck or good judgement?

Argos has reversed years of LFL sales declines and been able to capitalise on the tablet PC boom, but was that through luck or good judgement?

It is easy to say that Argos got lucky with the tablet PC boom last year, but as the famous golfer Gary Player once said “the more I practice the luckier I get” and Argos has certainly had many years of practice at the mechanics of multi-channel retailing.

Having pioneered the concept of “Click and Collect” in this country, Argos was certainly lucky to stumble upon a must-have electrical gadget where the ability to check on product availability was a key attraction for the consumer. The participation of the “Check and Reserve” service at Argos is, in fact, about double the average in technology like tablets and laptops (and e-readers no doubt).

If consumers know what they want and are keen to have it quickly, then Argos has always been a good choice and the convenience of collecting the product in-store when it suits them is a powerful draw for the consumer, even if the Argos lead in this field has been much eroded by the competition.

The upshot of all this was that Argos sold 1.2m tablet and e-reader devices last year, which sounds like a healthy share of the market, although we shouldn’t forget that Argos’s definition of the electricals market excludes the fast-improving market leader of Currys/PC World (as Dixons don’t supply their figures to the GFK market monitor), so Argos’ claims about electricals market share needs to be taken with a slight pinch of salt.

Nevertheless, Argos’s position in electricals is much improved - quite a change from this time last year, when the big boom in digital TV sales in the London area (which was so striking at John Lewis, by way of contrast) seemed to be passing Argos by.

Of course, the boom in tablet PC sales will start to anniversary in the second half of this year and Argos has warned that the growth will almost certainly slow down, so we must be wary of assuming that the positive trend in LFL sales at Argos is sustainable. And having long complained that “if you take out the bad bits, things are really good”, Argos is open to the objection that “if you take out the good bits, things are still really bad”.

But for the boom in tablet PC sales, 2012 would have been another tough year for Argos, despite its multi-channel prowess and the relentless cost reduction focus, and operating margins remain painfully thin. As the biggest general merchandise retailer in the country Argos can’t escape the continuing pressures on discretionary consumer spending.

One advantage Argos has in its ambitious plan to reinvent itself as an online-led retailer is that all those tablet PCs it has sold are increasingly the mobile devices that consumers are using to order online…but Argos’s smooth adaptation to the demands of mobile e-commerce is not incapable of being matched by others and mighty Amazon and Dixons and John Lewis remain formidable rivals in electricals (notwithstanding the demise of Comet).

And although Argos has the store estate to offer a “Collect in-store” service for customers at nearly 750 locations across the country, those 750 stores carry a formidable fixed cost burden and the Argos chain will not prosper unless it is more than just a bunch of pick-up points for online ordering.

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”.