Business
Laminate this: Inside Argos' ongoing online (r)evolution
Think Argos and you think catalogue: The Laminated Book of Dreams, as comedian Bill Bailey puts it, placing thousands of products from crayons to cookers within the easy reach of eager shoppers.
Go ahead, laugh it up, but that book introduced a brand new way of shopping in beige 1970s Britain. Shopping from a catalogue was the first and latest word in convenience for a people facing power cuts and lining up in the streets for their fresh water.
It struck such a nerve that the turnover of Argos hit £100m within six years.
Today, it's not the book but the internet, and especially mobile, that’s driving the 40-year-old retailer’s business. Online accounted for 44 per cent of everything Argos sold in the first quarter of the year, reported in June. While overall business was down to £846m, online grew by two points.
Smartphones and tablets are a growing part of the business Argos transacts that's not from the laminated book, accounting for a quarter of sales in Q1, up from 21 per cent in 2014 and 15 per cent in 2013. Argos reckons 50 per cent of all its sales now start online – via browser, tablet or phone.
Argos this year moved up the UK’s web retail rankings from third to second – overtaking Apple and tucked in behind Amazon UK according to IMRG's list of the top 50 UK retailers. IMRG's data is based on stats from the retailers, with Argos reported to have claimed 738 million website and app visits during the year.
The roots of Argo’s online expansion can traced to a five-year transformation plan designed to convert Argos into a digital retailer. Unveiled in 2012, the transformation plan included a £300m investment in the first three years. Where are we at the end of that phase?
Argos built a mobile-friendly website, apps for shopping via iOS and Android, and an in-shop catalogue served not by laminate books, but by but iPads.
iPads inhabit a new generation of “digital concept stores” being rolled out. Sixty of the chain's 750 shops have so-far been flipped to become digital concept stores in a makeover that often takes a matter of weeks. That makeover introduced free Wi-Fi, big screens running ads, mood lighting, minimal counters and staff gliding about in polo shirts.
Outlets have opened in branches of Homebase – the DIY chain which is also part of Argos's parent company, Home Retail Group – and also in some supermarkets belonging to partner retailer Sainsbury’s. Argos opened its smallest ever store in November 2014 in London's Cannon Street Station, measuring 650 sq ft and stocking 2,000 of Argos' best-selling products, with access to 20,000 items if they're ordered online.
Argos’ IT director Mike Sackman reckons the driver to much of this change on the IT side has been an API strategy. It's put the company online and mobile, helping it slough off legacy IT infrastructure and quickly develop a new website and native apps for mobile and store.
“We see APIs as a strategic piece of infrastructure, rather than having an integration strategy,” Sackman told The Register. “Our API strategy has enabled us in terms of the mobile apps on the iPhone and Android and in the stores, to devise digital access to the central stock systems."
It's Sackman who is turning Argos digital. But he must do so without losing customers along the way – those who are familiar with and who love the Argos brand.
"People will be used to walking into a store and seeing a laminate catalogue – you have to invest time to help people navigate that. One of the things we will invest in is consistency of experience between your time on the iPad and your time at home and in store. Part of my job as IT director is to keep those channels consistent and make it usable," he explains.
Argos APIs are managed using software from Mashery, the startup founded in 2006 and bought by Intel in 2013 after landing $35m in venture backing.
Mashery lets firms expose their internal systems to external users and those on devices – as Argos is doing. Other customers of Mashery include US retail giant Wal-Mart and drinks-maker Coca-Cola.
What legacy is Argos straddling? Oracle Advanced Inventory Planning (AIP) system for forecast and replenishment, a homegrown product information management system in stores and a Sterling Commerce selling and fulfilment system – Sterling was bought by IBM in 2010. An IBM Homebase mainframe is in the mix, too.
These are old systems running a variety of languages and built for a more sedate trading age. But they hold data critical to the business, so go online they must. Also, Argos must be able to quickly add new functionality.
This was not a job for enterprise application integration, Sackman reckons.
“We in the IT world were taught in the pre-digital age to build enterprise message busses,” Sackman says. “Conceptually, this [API strategy] is the same thing, but it lets us externalise our capabilities and let third parties access data and functionality and extend propositions to the customer.”
Those third parties include payment engines – especially with Argos now partnering with eBay as a collection point – and tech and marketing agencies.
Wanted: London's digital hipsters
Building to APIs instead of specific systems or black-box EAI busses let Argos deliver a Wishlist app, for children aged between three and seven, in just one month in the run-up to Christmas 2014. It was an app that drew on product and price data in those legacy systems. The Wishlist took the idea of circling products in the paper catalogue and extended that by adding a list that could be emailed to parents with, er, "handy" links to products.
The guide was the product of a hackathon at Argos’ then newly opened digital hub office in Victoria, London, where bosses assembled 50 people from across the firm and from outside. The hackathon generated 20 ideas, which were whittled down to eight prototypes, before eventually producing the winner for Christmas.
“We delivered it in weeks, because we let third parties access all our core data on pricing and it was launched in a month. We can build new mobile channels very, very quickly,” Sackman says.
Behind this is re-structured IT at Argos that’s merged traditional IT with digital and marketing teams. “Rather than getting hung up with functional territory... We built a group that feels like one team, which spans digital, customer experience and marketing people and we have a single program looking at what the customer proposition is for Argos,” Sackman says.
Argos is hiring tech types who understand technology in “customer facing ways” and can sit next to UX and marketing, according to Sackman.
The change is being extended to work with IT suppliers, too. Argos’s incumbents are Accenture and Fujitsu – Accenture helped design the digital strategy and is delivering “significant chunks”.
But the company is increasingly looking to partner with fresh blood. “You need people with traditional IT skills, but you also need people who can push the boundaries. We are looking outside the traditional boundaries, at startups and people in UK retail who wouldn’t traditionally have engaged with us – hence opening that digital hub in Victoria, to attract talent we might not normally get,” Sackman says.
That Victoria centre opened with 10 staff in February 2012, above an existing Argos store. It has been positioned deliberately to attract more of London's startup and design crowd.
The digital hub was the initiative of Argos’ then-digital director Bertrand Bodson, who’d joined from EMI Music where he was global digital chief. Bodson has since ascended to the position of group digital chief, with additional responsibility for IT added to his portfolio.
The need to become more dynamic and open has been forced on Argos.
Argos was on the cutting edge of retail. It was founded in 1973 by Richard Tompkins, the man who also launched Green Shield stamps in the UK – an idea established in the US. Green Shield stamps were like a loyalty scheme – you saved stamps that you exchanged for something you wanted to buy.
But in 1973 Tompkins saw the future and the future was shopping from a catalogue: a revolutionary idea when most shops were selling what they stocked and shoppers had to physically see or touch things before buying them.
Decades later, however, Argos was becoming dated, something of a shabby joke. Worse, HRG struggled to recover from the 2008 downturn. HRG profits had slumped to £130m, down from £426m as the world went pop in 2008.
The competition has toughened up, too. Today there’s one name on every retailer’s lips: Amazon. Arguably, nobody goes up against Amazon more as a retailer than Argos.
The two compete on web traffic. There are similarities in terms of their pricing and seemingly infinite ranges, too. Amazon takes this further by bringing in suppliers from outside, with merchants tied in through its commerce and order-fulfilment process. There's pressure with regard to order fulfilment – the delivery and collection of consumers' goods. Amazon is offering one-hour delivery windows and now also offers collection points, while Argos is laying claim to the UK's largest home-delivery business.
Argos has restructured to ensure rapid order fulfilment at its 700+ shops, which have been grouped into a hub-and-spoke system. Smaller stores are clustered around large centres to fulfill same or next-day delivery. Hubs carry all the stock, with smaller spoke stores carrying only more popular, fast-moving items. Behind this arrangement sit the warehouses. The idea is that rather than tell a customer their Argos store is out of stock, Argos can tell them instead when they can expect the product will be ready for collection.
Personalisation means packaged ERP
Much of the first three years' work has been on the front end – online, mobile and in stores – but more fundamental change is on the horizon.
The next step is greater personalisation in the form of individual offers. This is a world way from the catalogue business that marked the birth of Argos in 1973. Back then, the catalogue was the innovation as Tompkins conceived a new way of shopping and remade his existing Green Shield stamp business. Today, the laminated book is printed only once every few months, which in today's fast-churning retail climate leaves you dead in the water.
“One of the areas we will develop carefully will be how we build personal relationships with our customers,” Sackman tells us. “Think of the Argos of old and you think of a paper catalogue and directory of products that are fixed. We want to get to a point where we are adding to that range of products and making it more specific to customers.”
Argos wants to serve more detailed shopping and delivery information online – specified reservation pick-up windows and price data. To achieve this means dynamically tracking products, a move Sackman reckons will mean a new ERP-based back end to replace that legacy of stock management and order systems built for a catalogue business.
“We will be looking to replace that soon,” Sackman says. “The back end changes will be driven by our strategy to expand the range and trade more dynamically.”
Sackman reckons on a “package option”, which typically means SAP, Oracle or some other competitor, either on-prem or in-cloud. But when we last spoke to Sackman there’d been no movement on a decision.
The reason is that Sackman's boss – group chief executive John Walden, who served as Argos MD before promotion in March 2014 – has been evaluating options for synergies across the group. Also, there's been the primary focs on front end – UX, devices and stores.
There is also a question of whether Argos moves its infrastrucutre to the cloud. Currently, for example, the website is hosted internally. That means that rather than scaling elastically, Argos has to do all the usual capacity planning in advance of anticipated peak traffic that you'd expect.
Sometimes that doesn't work. Argos got caught out last year as demand on Black Friday felled its website. It wasn't alone, however, as sites belonging to Tesco, PC World, Boots and even Amazon were also downed. Sackman insists “pretty much everything went well" and the problem was "access".
“We had to throttle the website... we wanted to maintain the experience of customers on the site so we held some people out,” he says.
Another factor is Big Data, given Argos’ desire to provide customers more tailored offers, options and shopping – it wants to harvest mobile data.
“The gathering of data and its analysis to drive supply chain and stocking and for customers will be huge, as we get more and more into peronsalisation offers... It will become more prevalent and real-time,” Sackman says. “We will need to develop the background analysis of data to help us decide ranges.”
It’s a careful revolution at Argos. Yes, 44 per cent of business comes from online but 56 per cent still comes from the catalogue. Argos can't afford to throw these catalogue-friendly customers off-kilter with too much new-fangled stuff, too soon. Hence, gently introducing digital concept stores, rather than lighting the fuse on a big-bang introduction, building native and in-store iPad apps that evoke the familiarity of that paper-and-laminate catalogue. If there is a revolution here, it's in the plumbing that's enabling change – the API drive.
"We are encouraging people to move online. Lots of people move online of their own acord and are shopping online, but there are still people who want to shop their traditional way... we thought long and hard about how to not make people intimidated by the technology," Sackman tells us.
“The paper catalogue still has a role to play. We will need to evolve it." ®
