Argos has reinvented itself to compete in the digital age against the rapid rise of the e-retailers and it’s done so by putting road transport at the heart of its operation.
Two years ago Argos signalled its ambition to take the fight to e-retailers and their increasingly sophisticated express delivery services.
Argos Fast Track, which was trialled in 2014 and rolled out in-store March 2015 and then as a delivery service in the autumn, meant the advent of same-day delivery for 20,000 of its products, with customers in-store or online able to choose from four delivery slots.
How does it work?
Once a customer’s delivery is despatched that becomes a condensed two-hour time slot, and a 30 minute advance warning is issued to them.
Argos had, in its own words, brought “shopping into the digital age for customers”.
With the second, bigger than ever, Christmas period now safely behind Fast Track and planning for the next one under way, the retailer hasn’t looked back. But Andy Brown, central operations director at Argos (pictured), paused long enough to tell MT about Fast Track at a meeting at the retailer’s headquarters in Milton Keynes.
Brown came from Tesco, where he was general merchandise development director in 2013, as Argos began a five-year digital transformation strategy across its business.
“I was one of a number of people brought into the business to realise the strategy. The strategy included home delivery from store. It included the concept of hub and spoke, but it’s one thing having an idea. It’s quite a different skill to realise that,” Brown said.
The move was in recognition of how we, the increasingly spoilt consumer, and our expectations when shopping had changed irrevocably.
“I want to know it [my order] is coming,” said Brown. “I want it quickly most of the time, but I want the certainty that it’s going to come when you say it’s going to come.” He adds that there can’t be many people waiting in for products these days.
“If I’m having a product delivered to home I want to know when it’s going to come so I can plan my life around when it’s coming. From an Argos point of view it’s the market dynamic of customer expectation and desire with a competitive landscape that’s been changing.”
Part of the change to the Argos business was working to get products to customers as conveniently as possible. Another was stocking more high-end brands such as Bose.
The other was evolving sales channels to be truly digital. “More than 50% of our sales originate online and half of those are mobile,” said Brown.
The hub and spoke of it
Fast Track is built on top of the hub-and-spoke concept popularised by the pallet networks.
Hub stores – around 160 of them, typically with the capacity to run a fleet out of the back – ship to spoke stores, which are sometimes housed in larger stores such as Sainsbury’s, twice a day.
“Home deliveries will come from the hub store. We use the same vehicles to deliver to spokes as we use to deliver to customers. So the same fundamental 20,000 products that sit in our hub stores, are available same day, next day, for collection in the spokes, or to deliver to your home,” said Brown.
While Argos has a two-man delivery service that runs in tandem with Fast Track, the new service was the first time it had delivered from store having relied on third-party couriers before.
One of the key concepts was to achieve great service levels and it hit on the idea of using staff in store to also deliver the products. It took the unusual step of building a 500-strong van fleet – in the main 3.5-tonne long wheelbase Mercedes-Benz Sprinters – from scratch and in-house (leased but in Argos livery).
“It’s all sitting as a single stock pool. The customer then has the choice of how they want that product fulfilled. Do they want to collect it in that store? Do they want to collect it in another store, or do they want it delivered to their home? We’ll pick it in identical fashion for all three of those customer journeys. If it’s going to a spoke then we will obviously put it with the other items going to that spoke, and store it until we get ready to deliver, and if it’s going by home delivery we’ll pick it, pack it and label it in that store,” said Brown.
Starting with a core of drivers, Argos has 3,000 contracted drivers for Fast Track. Many were in store and have taken the opportunity of “some extra hours driving on top of their store hours” and as a retailer used to recruiting 10,000 or so temps for the Christmas period, recruitment was already a big part of the Argos job description.
Working initially with a fleet partner, although now armed with its own group of driver assessors, all would-be pilots are assessed and trained in both the process and the doorstep experience the retailer is trying to achieve.
“The level of demand when we launched Fast Track delivery nationally was beyond our expectations,” said Brown.
“That first six months we saw 80% year-on-year growth of home delivery. Total Argos sales had low single-digit growth, so to have one channel growing at 80% – it was more than we expected.
“Again, it was a significant challenge through peak 2015 to maintain the service, and we had some challenges. We had to quickly get more drivers and more vans onto the road. We worked with a courier partner who supported us by giving us effective additional drivers and vans to support that volume.
“Coming in to peak 2016 we saw very strong growth, but obviously a second year, and an extra year of maturity, meant we could handle those volumes. We actually had fewer vans on the road year-on-year,” Brown said.
“We want our customers to have whatever whenever they want. That means having a combination of convenient stores that you can get products from, or collection points in Sainsbury’s where you can collect your product from, or we’ll deliver it to your home. We want to make sure the experience you get is a consistent Argos experience.
“What makes us different from a pure online retailer is our people and our stores. Fast Track delivery has enabled us to use those two things and to create something special, and importantly, everywhere. We have hubs in Aberdeen, on the Isle of Wight, in Cornwall where other fulfilment offers aren’t there.”
It’s the Isle of Wight that is the final challenge, with Brown recounting that when introducing the service there – which due to its reliance on ferries “no one delivers same day” – a customer contacted Argos.
“Your website has just told me my delivery is coming this evening,” they said. “There must be a mistake.”
“No, it’s coming this evening,” replied the Argos employee. As of 2017 there’s little doubt that Fast Track has arrived.
The two technical partners behind Fast Track are Accenture, described as the retailer’s strategic IT partner, and Paragon Software Systems.
Traditionally known for its routeing product, it is its Paragon HDX that facilitates the dynamic planning of delivery slots for Argos, with the software continually re-optimising the routes and schedules as every order comes in.
William Salter, MD Paragon Software Systems, which as a business has worked with Argos for decades initially supplying it with its routeing software, describes Paragon HDX as software that never sleeps, never reaches a stage where it’s done.
"There's no downtime with this system," he pointed out adding that in terms of system updates or upgrades judicious planning is required as a consequence. "If you go onto the Argos website and place an order HDX routes in realtime," he said.
Salter added: "We shouldn't under-estimate how forward looking this project was and how brave. It was well supported from the top of the company and that's what has pushed it through."
Making it pay
- Argos charges Fast Track customers a flat fee of £3.95 for delivery. But it’s not a loss leader. “If you buy a product from an Argos store we have moved that product to the store for you, effectively put it away on the shelf, and then when you buy it we'll pick it for you and give it to you. “When you order online we do all the same things (and even if you order in store, an Argos employer still picks the item for you).Therefore, at the point that the product leaves the back door, it's exactly the same model as if it was going out the front door in your hand. The delivery charge is covering the last mile cost,” said Brown.