Online Retail: A Quarter of Argos Customers Can't be Wrong
There's been some discussion over the place of online shopping in retail over the last few days, which is particularly timely with Home Retail Group, the owner of Homebase and Argos, mentioning over 25 per cent of its sales now comes from online channels.
This is against a fall in overall sales for the 52 weeks to 28 February 2009 of one per cent and a fall in benchmark pre-tax profits of 25 per cent for the same period, so hardly a year for the company to look back on with fondness.
Chief executive Terry Duddy was enthusiastic about the development of the company's online and multichannel business, citing its unified clicks-to-bricks purchasing, delivery and financing systems. Where Argos has lead the way in terms of check and reserve options and widening out lines available to buy and browse online, Homebase is about to follow.
It's still early days, but the sounds from Home Retail Group support the ongoing and increasing interest in online retail as a serious business channel. Some commentators are voicing a note of caution however, saying some retailers are struggling to get a profit out of the channel.
Another drew the comparison with the newspaper industry which is faced with a much more serious migration from physical to digital distribution, saying that sector won't see any gain in doing so in the long term. Retailers on the other hand can always fall back on the aspect of retail theatre, that doesn't exist online, to keep stores open.
While these sentiments might echo many retailers' concerns, they only add to their fear of the unknown and could even be dangerous advice.
Retail is lead by the nose by consumers. In an environment of high competition with an embarrassment of choices for customers, retailers must go where they go. If shoppers expect an online aspect to their buying decision, it must be provided for them, irrespective of whether that part of the operation turns in a profit. Not to do so would be to risk appearing irrelevant to shoppers.
Do the Oxford Street (in London) Carphone Warehouse stores turn in a profit? It's doubtful, considering the selling space they occupy and the costs of running those locations. Even so, Charles Dunstone thought it so necessary to have a profile there that he saw fit to have five stores in the same road.
The amount of UK retail not going through stores is around 20 per cent and it is growing. Ranges, such as clothes and shoes, which pundits thought would be unsuitable to sell online are doing well. It would be a mistake at this stage to decide there was no potential market for any other consumer offering. No retailer can say online sales are not for them.