Comment: Digital move could well take Argos upmarket

By MARTIN FLANAGAN
Published on 24/10/2012 18:51

PARADOXICALLY, the Argos catalogue shopping chain has traditionally been more resilient in downturns because of its generally cheaper, value-led offering. Its customer base may have had less discretionary spending power, but the goods they wanted were not off-puttingly expensive.

However, that comforting trading backstop has not been the case in this austerity-framed recovery from a financial crash-induced double-dip recession.

Argos’s traditionally low-income customers have been worst-hit by the depressed economic climate, which has also impacted generally lower-paid public services workers than those in the better-heeled private sector.

As such, it is unsurprising that the mixture of structural retail industry change and the extended downturn it has influenced Argos-owner Home Retail Group’s strategic review to conclude a new business model is needed.

The meat of its findings is a sharp pruning of the store-based estate and a decision to reposition the chain as a mainly digital-sales led business.

At least 75 of Argos’s 750 or so shops will close over the next five years, says chief executive Terry Duddy. Those that remain will be mainly for picking up products and back-up customer service for transactions done on mobile phones, iPads, computers and the like.

Argos is just one of a host of retailers looking to step up their sales online, from electronics groups and clothing businesses to the supermarket giants.

But, probably as important for Argos in going digital is that it will also allow an expanded product range and, crucially, widen its customer base to take in higher socio-economic groups.

Ironically, therefore, in about five years time the chain is set to have changed its reliance on the lower-income consumer towards a digital-savvy clientele that takes in a richer demographic.

Argos doesn’t just want to go internet, it wants to go upmarket.

Punch is having to drown its sorrows

IN THE consumer boom of the late-1990s and early noughties, many pub companies pressed the accelerator on expansion and related debt accumulation. Punch Taverns was among those in the vanguard.

However, the chickens came home to roost with the economic downturn, surging energy bills, steadily rising beer duties and the smoking ban.

The challenge for Punch and its smaller rivals in the past few years has been to bring down lumpy-to-mountainous debts.

Meanwhile, two consecutive poor British summers have added short-term specific headwinds to the industry’s underlying financial problems.

Result: Punch and its smaller brethren are reining in expansion, closing pubs and turning to food. This is likely to last for some time.