How important are toys to Argos? What are your ambitions in this sector?
Argos is the UK’s number one toy retailer (by value) and toys is an incredibly important category to our business. Many people will remember flicking through the Argos catalogue as children and choosing what they wanted for Christmas, and we find that many of these consumers continue to shop with us as adults for their own children.
In the future we plan to continue to support strong brands, including our very strong character line-up with great licences old and new, from Fireman Sam to Peppa Pig and Moshi Monsters. We also want to further develop our own great brands such as Chad Valley. We will also be exploring ways in which we can create points of difference in the market.
How have toys been performing for Argos?
In our January trading update covering the period September to December 2012, we reported growth in the toys category with a number of products in high demand from consumers, such as the Furby and kids’ tablets. Devices such as the VTech InnoTab and LeapFrog LeapPad made up seven of our top ten best-selling toys in the period.
How has the toy trade reacted to Argos’ decision to move from a catalogue-led business to a digitally-focused one?
We only recently announced our ambitions, but the feedback so far from suppliers has been very positive and they are excited to see what our plans will look like. We will be updating the city on our transformation strategy when we report our full year results in May.
Internet sales represent 42 per cent of Argos’ total sales, and mobile commerce sales grew by 125 per cent for the year-to-date. Do you expect these figures to rise further in the future?
Yes, we absolutely expect online sales to continue to grow. By 2016 we expect 75 per cent of our sales to be digitally-led.
What percentage of toy sales are made online compared to in-store?
The split between online and store sales for toys is roughly in line with our overall business, where internet sales represent almost half of total sales.
You have great experience at retail. How has the market changed from your perspective? What are the biggest challenges retailers face today?
Broader economic pressures continue to be an issue not just for retailers but many businesses – customer confidence is low, disposal income is squeezed, fuel and food prices are rising and unemployment remains an issue.
A deeper and longer-term issue for retailers is the impact of the internet, which has fundamentally changed the way we interact and transact with brands. An ongoing challenge for retailers is going to be keeping pace with changes in technology and consumer demand, and ensuring they remain relevant in an increasingly commoditised marketplace.
Argos has already taken steps to address these challenges through our transformation plan announced last October, which aims to reinvent Argos as a digitally-led retail leader.
How aggressive are you going to be in the toy space between now and Christmas 2013?
We’ll continue to focus on protecting our leadership position by investing in our core toy categories, bringing new and exciting products to our customers and offering the most competitive deals possible throughout the year.
How was your Christmas performance for toys?
As reported in our last trading update, our toys category saw growth in the period September to December with strong sales on tablets, LEGO and new products such as Furby. We believe that our strategy for the category helped to drive this growth. New initiatives included the Toy Exchange, Argos’ first ever commercial charity partnership, which raised more than £700,000 for children’s charity Barnardo’s. We also worked with suppliers to deliver a strong promotional programme including in-store takeover events, toy walls in-store, press leaflets, online activity and TV ads.
How do you expect the UK toy market to change over the next year or so?
The whole retail landscape has changed significantly over the last 12 months so it’s impossible to say what’s next on the horizon for the market. However, we are very much looking forward to seeing more innovation and creativity from suppliers.
Argos previously said it’s looking into making toys based on its aliens advert. Do you have an update for us on this?
The alien family from our advertising campaign has proved enormously popular with our customers and we’ve received hundred of requests for alien toys.
What would you like to have achieved by the end of the year?
We know that this year is likely to remain tough for many consumers so we want to continue to offer value and connect with them in meaningful ways.
We will continue to remain completely committed to toys and the toy industry and we want to build strong, long-term relationships with our partners.
After seeing the line-up at January’s Toy Fair we are really excited about what’s coming and look forward to a great year.
TECH OR TRADITIONAL?
Argos may be focusing on its digital offering, but what do you think about tech-focused products which have online or downloadable app functionalities like Furby and Moshi Monsters? Will it focus more on tech or traditional toys in the future?
Technological developments in the toy market have been incredibly exciting.
Demand from parents for kids’ tablets has been very strong, with devices such as the LeapPad and InnoTab offering educational and developmental benefits for children. These products featured in our best-selling products list for the last three months of 2012.
An interesting trend is the convergence between digital and traditional toys. The Furby is a great example of a physical toy which has been digitally ‘revamped’ with new features, enabling it to interact with smartphone devices. Conversely, there are also cases where concepts originated in the digital world have been brought to life through tangible toys. Angry Birds started life as a digital gaming app and the brand has now translated into a collection of physical games and plush toys and more.
Remaining fresh and relevant in this digital age is very important for established brands and there are several examples of well-loved brands which have stood the test of time by adapting and reinventing themselves, such as Monopoly, Twister and Barbie.
It’s quite exciting to think what’s next for toys with technology – the options for creativity and innovation appear endless. Despite this,we believe that traditional ‘physical’ toys which offer strong imaginative play value will remain just as important to parents and children in the future. There’s certainly room for digital and traditional play patterns to exist side by side.
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