Argos to lose 75 of its 700 stores over the next five years

Argos has said that it plans to close at least 75 of its 700 stores over the next five years in a bid to focus on online sales.

However Clive Longbottom, an analyst at Quocirca, has warned that it will “not be easy”, for the Home Retail Group, which owns the brand, to implement this.

He also pointed out that the company’s “five-year transformation plan”, has gone against promises it made back in May ruling out any “mass” shop closures when it appointed John Walden to head up Argos.

At the time Mr Walden described the archaic form filling and catalogue system as “unusual” claiming that the showrooms needed an overhaul, something Mr Longbottom agreed with, telling ChannelBiz: “Argos does seem to be a bit of an anachronism at the moment – its shops are boring and the butt of jokes (little pens and laminated catalogues – even though there are interactive electronic booths in many of the shops nowadays).

“It seems to have replaced Wigfalls, Kays and other catalogue sales outlets in the minds of people, and Woolworths as to its perception of standing as an outlet – down towards the bottom of the group.”

And the Home Retail Group has similar feelings. In a review published today it admitted Argos faced some “challenges” such as preferences from its customers shifting from stores to online. It added that Argos’s offering was “biased towards less affluent customer segments” and that its focus on the catalogue business was “constraining its ability to compete” in a digital marketplace.

Mr Longbottom added: “The last time I went into an Argos “showroom”, it felt more like going into a branch of QuikFit.  There was no feeling that this was a retail “experience” – just the front end of a wholesale warehouse.  Whereas some people may make a special outing to go to e.g. John Lewis or Debenhams, I can’t imagine that they would get up on a Saturday morning with a thought of “OK, who wants a day out at Argos?

“To my mind, Argos has become the emergency shop, only to be used when e.g. a kettle or a vacuum cleaner breaks and you need a replacement quickly.  It does, however, have a lot of agreements with others – for example with credit card companies such as MBNA where points gained are converted into Argos goods, and many places use Argos gift vouchers as loyalty or first-time-buyer gifts.”

He also warned that Argos would have to do a lot better than the newly planned online, mobile and tablet channels, claiming that the website was currently “not good.”

“There is little actually offered on the front page – just a set of different areas that may (or may not) be of interest to a passing buyer. My view has always been that Argos on-line is a good amount more expensive than elsewhere.  However, having compared some of its “What’s hot” items with Amazon, Argos does actually seem to be well priced – but it doesn’t seem to make much of this in its advertising anywhere,” he told ChannelBiz.

The Home Retail Group also plans to phase out the catalogue to a “supporting role”, with circulation reducing. It said it would begin to conduct a small regional trial in January next year,  for a smaller catalogue with a more heavily edited range that directs customers online for the latest prices and the full range.

Stores will be focused on collecting products and customer service as well as be equipped with more web-based browsers in place of catalogues.

However, Mr Longbottom warned the strategy could be hard.

“This is not going to be easy for HRG, and I think that shareholders can expect further problems while it tries to transition itself.  If HRG cannot get its strategic plans across to the financial investors, they will drop it like a hot potato, and then we start to move into the possibility of a private equity purchase – which has had bad outcomes for others where this has happened over the last few years,” he said.