Argos Unique Multi Channel Retailer Commerce Essay

Argos is one of the most well-known stores in the UK that offer a wide range of products of home and general merchandise. Argos belongs to one of the most important market leader in the home and general merchandise market, Home Retail Group. Argos logo

http://www.homeretailgroup.com/media/10531/04_financial_services_brand_page_logo.gifHomebase logo

Home retail Group has been focusing on some strategies such as Multi-channel expertise and leadership. The group has a strong capacity of organizational and infrastructural changes to reduce costs and improve the flexibility of the company. They have managed to make rapid advances in their technology; they have become leaders in online sales, move through mobile devices, or for pick up in a local store or home delivery. Another strategy focused is the expansion of product ranges and related services. The last step they have made is the recent acquisition of the Habitat brand in the UK. Finally, they have managed to continue to ensure customers excellent value and satisfaction. Its three-fold strategy have boosted the sales as high as £4.3 billion and serving more than 130 million customers a year.

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In the Retailing sector after being well-established in the local market, they must focus on a global-scale effort. Their strategy is concern; it is wise, maybe essential to think “international”. There are some push and pull factors that has driven this company to internationalize.

Market Screening

Argos unique multi-channel retailer recognized for choice, value and convenience. They sell general merchandise and products for the home from over 700 stores throughout the UK and Republic of Ireland, online and over the telephone. In the last financial year, their sales were £4.3 billion and they employ some 33,000 people across the business.

They serve over 130 million customers a year through their stores and take 26% of sales through the internet channel alone. Four million customer orders either online or over the phone. On average, 18 million UK households, or around two thirds of the population, have their Argos catalogue at home at any time. The company is primarily focus on UK, although now is opening through online sales also in Spain.

Currently, Argos is one of UK’s leading merchandise retailers competing against big giants such as IKEA, Zara Home, and BHM (British Home Stores).

They have some distinct advantages in comparison to other home retail company competitors. They are stores that offer a wide range of products at a very reasonable price. Stores are located in the city centre within very easy access, and as they sell home staff their delivery service is very well organized. They have created a three-step system of buying. Starting with a catalogue, customers select their desired products and check availability, if it was not in stock products you can order it. Next step will be payment process, finally within 5 minutes at maximum you will pick your buy already packaged. This system provides multiple advantages to customers such as time, money as the products sold are quite cheap and reduces cost to the company as they don’t have to have big stores with all the staff at disposal. This allows companies to be located in the city centre, and make easy the access to customers.

After some research I have come up with three potential markets for internationalizing Argos. France, Italy or Spain would be the best choice. We have used screening filters to identify the best area to internationalize.

This paper examines the various issues which Argos must take under consideration while planning to launch its very first retail outlet in France.

GENERAL CHARACTERISTICS

Geographic Location

The Location of the market is a very critical factor to consider. Spain, France and Italy are three countries of relatively geographic proximity making easy the exportation of products to the stores located in the cities.

Language

The language is a key point in internationalizing and the three potential markets have different languages although English as common denominator, facilitating communication. Brand name don’t have to be changed as in those countries there is already a huge presence of Anglo-Saxon or foreign in general brands with very recognizable names within the population such as Ralph Lauren, MC- Donald’s, Decathlon, Sturbucks, etc. all this brands are present and are very popular in Italy, France and Spain.

Political Factors

All the potential Markets are in the European Union and European community or Common Market. In general terms, the governments, laws and regulations with some exceptions follow similar patterns. There are not radical points affecting our retail store in any of the selected markets.

Demography

Population as a percentage of EU-27 population by country and period, 2010. Units percentage.

Dependency Ratio, 2010.

Trends analyzed show similarities within countries selected. The percentage of active population is relatively equivalent to UK so customer focus is favourable in France Italy and Spain.

Economy

Nowadays, as we are submerged in a world economic crisis we must highlight and take into account this point into consideration.

Unemplyment rate

http://upload.wikimedia.org/wikipedia/en/thumb/c/c3/Flag_of_France.svg/22px-Flag_of_France.svg.pngFrance

10.2

http://upload.wikimedia.org/wikipedia/en/thumb/0/03/Flag_of_Italy.svg/22px-Flag_of_Italy.svg.pngItaly

10.2

http://upload.wikimedia.org/wikipedia/en/thumb/9/9a/Flag_of_Spain.svg/22px-Flag_of_Spain.svg.pngSpain

25.1

http://upload.wikimedia.org/wikipedia/en/thumb/a/ae/Flag_of_the_United_Kingdom.svg/22px-Flag_of_the_United_Kingdom.svg.pngUnited Kingdom

7.9

TABLE OF ADJUSTED GROSS AND NET DISPOSIBLE INCOME OF HOUSEHOLDS PER CAPITA, 2010. [PURCHASING POWER STANDARDS]

Industrial Structure, Technology, social organization, Religion, Education.

SPECIFIC CHARACTERISTICS

Cultural, Lifestyles, Personality, Attitudes, tastes or predispositions.

The third step that must be realized in order to meet with the perfect target market would be the screening of the market.

There are many factors in the macro-environment that will affect the decisions of the managers of any organization.

Political factors

The political system in France is being carried out by the Parliament and the Prime Minister; the degree of intervention in the economy is irrelevance compared to the local one. French political system encourages capitalism and offers certain stabilibity compared to other European countries. Although political decisions can impact on many vital areas for business, nowadays there are not relevant regulations affecting the implementation of the Argos store in the main cities of France. Moreover market regulations and current legislation favor Argos’ business as France is a member of the European community and has good relation with the UK. However some changes must be applied within taxation policy, EU enlargement, the euro, international trade…

Economic factors

France is considered a first- advanced market open to international and European partners. During this recession, France and many other countries including the UK are suffering decreases in the consumption and investment while savings are increasing. Nevertheless the conditions of consumers are changeable and many of the products offered by Argos are low-priced products accessible to a wide range of customers.

Social factors

UK society and French society are known to be very different although being European countries but they are both very multicultural countries, with people from all over the world working and living there. French main population in between 15 and 64, it is a young population with a median age of 39 years old. Argos is a new way of shopping at a very good price and it is focus to people aiming new technologies, quick and easy shopping methods.

Population

Total: 64,768,389.52

Note: 62,814,233 in metropolitan

Age structure

0-14 years: 18.6% (male 6,129,729/female 5,838,925)

15-64 years: 65% (male 20,963,124/female 20,929,280)

65 years and over: 16.4% (male 4,403,248/female 6,155,767) (2010 est.)

Median age

Total: 39.44 years

Male: 38.2 years

Female: 41.2 years (2010 est.)

Sex ratio

At birth: 1.051 male(s)/female

Under 15 years: 1.05 male(s)/female

15-64 years: 1 male(s)/female

65 years and over: 0.72 male(s)/female

Total population: 0.96 male(s)/female (2010 est.)

Technological factors

Argos has follow new technologies creating new processes.. Online shopping, bar coding and computer aided design are all improvements to the way Argos do business as a result of better technology. Technology has reduced costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organizations providing the products. And Argos has managed to reach all this.

Environmental factors

Due to the proximity of this to markets, we have very similar aspects in both countries.

Legal factors

In recent years in the UK there have been many significant legal changes that have affected firms’ behavior. The introduction of age discrimination and disability discrimination legislation, an increase in the minimum wage and greater requirements for firms to recycle are some examples of what UK did. So if when entering France we need to adjust some legal changes it might not affect that much the firm’s costs consumer laws, competition laws, employment laws,

We should also consider

Local factors such as planning permission and local economic growth rates.

National factors such as UK laws on retailer opening hours and trade descriptions legislation and UK interest rates.

Global factors such as the opening up of new markets making trade easier. It might also change the labor force within the UK and recruitment opportunities.

3. Market Forces

With Accenture’s help, Argos implemented a supply chain management replenishment capability-based on advanced Oracle Retail technologies-without disrupting business operations or customer service.

Overview

When Argos decided it needed to develop an end-to-end supply chain solution that would deliver more responsive service to its smaller stores, it turned to Accenture.

Accenture’s ongoing High Performance Business research reveals that high performers understand the importance of operating their supply chains at peak efficiency-continually tuning supply to demand so that customers are neither over-serviced nor under-serviced, and that cost efficiency is not achieved at the expense of meeting customer expectations. Argos clearly understood the challenge involved in balancing supply and demand.

Argos, which is part of Home Retail Group, sells general merchandise and products for the home. Though its primary sales outlet is its catalog, the retailer has more than 700 stores throughout the United Kingdom and Republic of Ireland. It also boasts the second most visited Internet retail site in the United Kingdom. With approximately 34,000 employees, the company serves more than 130 million customers each year. For the financial year ended March 2008, Argos’ sales grew 8 percent to £4.2 billion (US$8.1 billion).

Business Challenge

Argos ran a lean operating model. Its stores tended to be relatively small, averaging about 14,000 square feet. Yet, within these stores, Argos typically offered 11,000 stocked items. In many cases, only one item was in stock at any given time. When it sold, customers would have to wait up to a week or more for the item to be replenished. Complicating matters was the fact that Argos’ shops used 45 different systems to manage the company’s complex supply chain. Some of these applications were more than 15 years old and nearing the end of their useful life.

Finally Argos decided on an innovative single system to assemble all the merchandise from suppliers and have them presented as only one delivery. This supply chain solution by UPS receives, validates and handles consignments from several hundred Argos suppliers. UPS checks that the order is correct, consolidates it with other orders and then sends it to Argos’ own distribution centre for the final delivery.

This system works through direct computer links. It electronically validates the merchandise against the Argos orders, confirms that the merchandise is ordered and ensures that delivery occurs at the correct time. The UPS scheme, consolidating goods for delivery in only one lot instead of sending five or six separate loads, offers strong financial and organizational advantages to both Argos and its suppliers. The most important of these benefits are the following:

Enhanced control of the Argos supply chain. All information about the goods is entered into the system from pickup until the delivery is made. Customers can track the goods virtually live.

The system reduces the number of Argos trucks on the road, increasing the fill rate by 9% in 2003 as compared to 2001.

Consolidation of the delivery logistics by ensuring full loads. In cooperation with UPS, Argos logistics manages to deliver its goods in approximately 15,000 (full) vehicle loads per year. The same goods could easily require up to 55,000 loads if a less sophisticated logistics system was used.

Significant reduction of traffic in the Argos logistics and warehouse areas. This system has been such a success that the Nominated Carrier Scheme now takes care of 35% of all inbound goods Argos in the UK. Moreover, the percentage of inbound goods carried increased from 20% to 25% between 2002 and 2003.

Competitor Analysis

I have consider that main and direct competitors Argos might have are IKEA, Zara Home and indirect competitors within some segmentation range of product might be Bazar de l’Hôtel de Ville, Galeries Lafayette, La Samaritaine, Le Bon Marché, Printemps, Tati.

Supermarkets have been growing share in certain parts of the non-food, non-clothing market, building on their regular footfall and the increased space given to these ranges. Online retailers, such as amazon.co.uk, currently represent a small but growing share of certain product categories. In most categories, the independent specialists will face even greater pressures on their ability to weather the challenging economic environment.

How We Helped

In delivering the program, Argos, Accenture and Oracle united behind a common vision: to help Argos develop advanced replenishment capabilities that would increase product availability, reduce inventory in stores and warehouses and increase sales by enabling Argos to stock a broader product range within its existing store footprints. The transformation program comprised two main elements.

”Heart and lungs” system transplantation

Argos selected Oracle Retail Advanced Inventory Planning as its core replenishment application for a variety of reasons. The Oracle solution would enable the company to create realistic, forward-looking replenishment and allocation plans across the supply chain. It would allow the company to convert these plans into orders and transfers. And it would combine time-phased replenishment and allocation algorithms to produce a receipt process based on demand forecasts, replenishment parameters and inventory availability.

In addition, the team opted to implement the Oracle Retail Merchandising System. This system would allow Argos to carry out its core merchandising activities-including inventory replenishment, purchasing, vendor management and core data and stock ledger management.

Accenture’s Supply Chain team and members of its Center of Excellence worked together with Oracle to custom design both systems and align them to the company’s business priorities. During the build phase, the team carried out 600 base modifications to the Oracle solutions, replaced 45 legacy systems and created (or modified) more than 100 application interfaces.

Following a comprehensive testing regimen, the team worked with business users to pilot the new technologies within six product categories, selected to reflect a range of sales volume, value, seasonality and supplier types. Based on the pilot’s success, the team launched a category-by-category rollout.

Change management and organizational design

Resources from Accenture’s Talent and Organization Performance service line set the framework for a comprehensive stock management training and communication program that covered all areas of the Argos supply chain, including suppliers, distribution centers and individual stores. As part of this effort, the team tailored job roles and tracked business readiness performance to help ensure that the 1,000 affected stakeholders would be able to function effectively within an environment marked by new processes and systems.

At the same time, Accenture worked closely with Argos to make significant in-store changes. For example, a new stockroom layout for all Argos stores freed additional space and increased speed of service. The team also recommended Argos stockroom adjustments, making faster-selling items more accessible to sales associates.

High Performance Delivered

First and foremost, with Accenture’s help, Argos implemented a leading-edge replenishment capability-based on advanced Oracle Retail technologies-without disrupting business operations or customer service.

The project’s success was based largely on the team’s well-orchestrated approach to program management. An important element was executive buy-in. The project received board-level sponsorship from the outset; early clarification of the business case and project priorities meant that all parties were aligned and engaged from day one. Also important was the fact that Accenture and Oracle adhered to a strict governance and quality assurance process. This process involved having key business users throughout Argos support the design, build, test and pilot phases; and then return to their roles during the rollout phase to act as change champions.

Argos’ new supply chain capabilities have already delivered a number of benefits:

The new merchandising system delivers a single source of master data across products, suppliers, inventory and replenishment definitions. This streamlines the forecasting and replenishment processes, and allows the company to make proactive forecasts and faster, better supply chain-related decisions.

An advanced replenishment algorithm helps ensure that replenishment plans are aligned more closely to actual demand.

Daily stock management calculations have replaced Argos’ previous weekly calculations, which allow orders to move through the supplier and distribution center network on a daily basis. With the new systems, Argos can run 685 billion computations within just four hours.

With deliveries occurring on a daily rather than weekly basis, Argos stores have been able to reduce their levels of safety stock held in inventory. Reduced inventory costs are on track to generate more than £100 million (approximately US$196 million) of stock reduction savings by 2010.

The systems enable Argos to share supply performance with suppliers, which improved collaboration and, more importantly, increased “right first time” product and pallet presentations from 68 to 99 percent.

Argos’ distribution centers now log 100 percent of received goods into the system on the day of delivery. This improvement contributed to a “goods-in efficiency” increase of more than 50 percent.

The success of this program is further demonstrated by the seven-year outsourcing agreement that Argos signed with Accenture’s Retail Center of Excellence in India to manage the Oracle application. Argos recognized that by outsourcing the ongoing management and maintenance of its application to Accenture, it would gain the flexibility of being able to refocus its employees on other critical business imperatives while realizing increased value and lower costs through improved performance.

The overall engagement also resulted in Argos receiving the 2008 Retail Technology Initiative of the Year award from leading United Kingdom publication Retail Week. And, most importantly, Argos now has a distinctive supply chain capability that lays a solid foundation for high performance.

”The supply chain transformation work is already beginning to present results. Once complete, we’re confident that Argos will be better prepared for the future and strategically positioned to maintain our lean operating model and competitive edge.”-Adrian Burleton, commercial director of supply, Argos.