Volatile trading in the weeks surrounding Black Friday have been cited as reasons why like-for-like sales at Argos declined 2.2%, according to a trading statement issued by Home Retail Group (HRG) this morning, covering the period 30 August 2015 to 2 January 2016.
Once again HRG heralded the progress it has made in its digital transformation plan, and reported that its digital store network, which includes concessions in other retail premises, contributed 3.1% growth during the period. It also pointed to significant uptake of its recently-launched FastTrack same-day service.
One-man home delivery grew 82% versus the same period last year, HRG said, with customers being offered same-day slots at on average 90% availability. It also said that FastTrack delivery achieved “the highest customer satisfaction scores amongst Argos’ channels.”
Although Black Friday was a highlight for Argos, with sales growth of 45% on the day – making it the retailer’s biggest ever single day – HRG said that the weeks before and after saw what it described as a shift in consumer demand; during the two weeks prior to Black Friday Argos did away with the £3.95 charge for FastTrack, offering free same-day delivery in an attempt to smooth out the impending peak.
Online sales for the period were up 10%, while in-store footfall fell 13%, broadly echoing the experience of the high street on Black Friday, and hinting at an online future for the event here in the UK.
In the statement, John Walden, chief executive of Home Retail Group, said: “In October Argos introduced FastTrack, market-leading nationwide propositions for both same-day home delivery and store collection, made possible by our hub & spoke distribution network. FastTrack, together with our now-proven store concession model and improvements in digital channels, drove increases in digital sales, digital participation and home delivery. I continue to believe that the capabilities being developed in the Argos Transformation Plan will position Argos as a retail leader in an increasingly digital future.”
HRG has also confirmed that it is in advanced discussions to sell Homebase to Australian retail group Wesfarmers for a sum in the region of £340m. Wesfarmers has its own DIY business, Bunnings, which has 338 stores in Australia and New Zealand, and annual revenues of AU$9.5bn.
That comes hot on the heels, of course, of Sainsbury’s bid to acquire HRG, which although initially rejected is likely to resurface; Sainsbury’s has until 2 February to make a formal offer.
Last week, eDelivery covered the story of the rejected initial bid and reflected on the attractiveness to Sainsbury’s of Argos’s highly-developed delivery network. Sainsbury’s has confirmed Argos is the jewel in the HRG crown in a recent communiqué to the markets in which it said: “Home Retail Group’s strong multi-channel capabilities and infrastructure would step change our ability to meet our customers’ needs for further flexibility and choice.”
FastTrack gives Argos an edge that no other major multichannel retailer can currently compete with – a well-resourced, same-day delivery and collection network, built around its hub and spoke store stock replenishment model. The investment in this model has been significant, however, and despite its apparent success over the peak period, there remains a question mark as to the longer term viability of the service.
The challenge facing FastTrack is one of capacity management; too much use will see it unable to offer same-day delivery slots without additional investment in resources (vehicles and staff, primarily). Yet the addition of extra bandwidth immediately creates the problem of spare capacity, which increases the cost base of a service that has already been the subject of significant investment. Too little take up from shoppers during the long non-peak periods could undermine the operation altogether.
