Magazine article Marketing

Argos' Sour Facade Hides a Sweet Performance

Magazine article Marketing

Argos' Sour Facade Hides a Sweet Performance

Article excerpt

Despite the surprise failure of Chesterman, Argos' sales keep on rising. Marketing investigates the reason why a grey appearance can prove popular with the consumer

A visit to an Argos catalogue showroom is reminiscent of two experiences. First, a Polish department store: the ambience is cold, the colour scheme is garish, the experience of shopping is strictly utilitarian. Second, Argos ten years ago. Fundamentally it hasn't changed.

Still, an odd assortment of people shuffle around the formica-topped counters, thumbing through the catalogue of kitchen goods, lighters, shavers, clocks, sports goods, furniture (to be delivered -- not in stock), hair dryers, vacuum cleaners, toys and TVs. Still the brands are reassuringly familiar: Philips, Tefal, Kenwood, Moulinex and Morphy Richards. Still, the catalogues are firmly bolted to the counter. The procedure is simple. Look through the brochure, find what you want. Fill in the seven digit product number on the form. Present it at the till. Pay (cash or credit). Present your voucher at the counter and within minutes you should be presented with your goods.

Argos' recent decision (Marketing, March 18) to close its pilot Chesterman Furnishings operations got the company in the news for all the wrong reasons. Argos claims sales for the first year of operation were just |pounds~3m against set up and operating costs of over |pounds~6m. It rather tersely explained that, given the "current and future economic background, the timescale for Chesterman to make a contribution was far too distant." So Chesterman had to go.

Failure is a rare thing for Argos, a firm which dominates its sector by a marketing strategy which, at first sight, doesn't look remotely like a winner.

On a typical Saturday Argos is doing brisk trade. Lynette Baker, aged 23 and Robyn Smith, 26, two Australian secretaries living in London, came eight underground stops to buy an iron because they heard that it would be cheaper at Argos. John Lane, a retired civil engineer, has travelled down to London for the weekend. He has come to Argos for the first time on the recommendation of his hotel receptionist -- to buy a calculator. "Yes, it's all right soft music and soft sell, but I can't see how to fill in the form," he says.

Argos' modest image belies massive achievements. Launched in 1973, financed by the proceeds from Green Shield trading stamps, Argos is today ranked as the third largest catalogue showroom retailer in the world behind US operators "Best Products" and "Service Merchandise". It is the UK's leading retailer of small electrical appliances, number two in jewellery and one or two in toys. It has 285 outlets. Index, the sole UK rival has only 96, of which 50 are within the stores of its parent company Littlewoods.

The Argos creed is quality merchandise at competitive prices, and a shopping system which is quick and convenient. It has all the buying power of the big high street retailers with whom it competes, but less of the overheads.

In 1992, a vicious year for UK retailing, Argos increased its group sales by 8.3% to about |pound~1bn. With only 11,000 employees, that's a massive |pounds~91,236 in sales per employee. Profit before tax was 15% down on the previous year, largely as a result of the Chesterman disaster, but it was still a creditable |pounds~52. …

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