Argos invests £10m in same-day delivery despite ‘uncertain’ Black Friday shopping habits

Argos owner Home Retail Group is betting big on its new same-day home delivery and collection service Fast Track after revealing it has invested £10m in a marketing push to help alleviate what it claims is “uncertainty” around Black Friday and Christmas shopping habits.

The new service, which runs seven days a week with around 20,000 products eligible for order, will be heavily promoted across TV, online and instore, in the run up to the peak shopping season and will form Argos’ key advertising in the quarter.

Speaking at an investor presentation this morning John Walden chief executive of Home Retail Group said that trading at Argos, which saw sales fall 3.4 per cent to £1.7bn in the 26 weeks to 29 August, will be “less predictable than usual” during the important Christmas period.

“… as both retailers and customers determine whether to repeat last year’s unusual Black Friday pattern. The combination of this trading uncertainty, an increased level of investment in the launch of Fast Track and the underlying profit reduction from Argos’ challenging first half, mean that at this stage of the financial year we expect the Group’s full-year benchmark profit before tax to be slightly below the bottom end of the current range of market expectations of £115m to £140m.”

Last year many UK retailers were caught out by the popularity of Black Friday which saw Argos’ digital channels registering over 13.5 million visitors, three times as many as it had on Black Friday in 2013. Despite the four-day event driving a 45 per cent uptick in like-for-like sales, Argos’ overall growth for the 18 weeks to 3 January 2015 was just 0.1 per cent.

However, the retailer confirmed today that it will once again participate in the sales event as it looks to “win” during the sales frenzy.

“We have made a number of changes, some of which I am hesitant to share about promotions,” added Walden. “All retailers have reflected on the capacity challenges everyone had last year whether that was instore, on websites or home delivery. The truth is all of us were shocked by the traffic volumes so expanding our capacity has been an important part [of the changes].”

While it is still left to be seen what levels of traffic will be generated during Black Friday 2015, investment in inventory and website capacity will be a “big deal” added Waldon. “We are planning to compete… we have designed to be competitive and designed to win and not step back.”

Elsewhere Argos reported challenges in boosting revenues from electrical products and high-priced items. However, there are changes on the way – the retailer has teamed up with eBay to allow customers to trade in unwanted gadgets, whilst offering a ‘toy price promise’ where Argos promises to make up the difference if a toy is sold at a lower price elsewhere.

These changes has led to many of Argos’ metric scores increase ‘significantly’, according to YouGov’s BrandIndex. Argos’ Buzz score (whether a respondent has heard something negative or positive about a brand in the last two weeks) shows an improvement of 6 percentage points (+4 to +10), indicating the Fast Track service has been recognised by consumers.

Encouragingly for Argos, this looks to have translated to an increase in the number of people that would consider purchasing a product from them. YouGov’s Purchase Consideration metric points towards a score of +57 (achieved the week following the announcements), which is the highest level the score has been for a number of months.

Overall sales at Home Retail Group slid 2 per cent to £2.6bn. Mobile commerce at Argos grew 13 per cent to represent 25 per cent of total sales, while sister store Homebase saw digital sales in the period leap 43 per cent year-on-year to represent around 10 per cent of total sales.

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