The move is part of a trend towards "multi-channel" retailing under which shopping companies will target consumers using a variety of methods including high street shops, catalogues and new media such as interactive television. Nigel Cope, City Correspondent, reports.
The takeover offer has come from Great Universal Stores, which is best known as a traditional operator of "big book" catalogues such as Kay's and Choice as well as the Burberry brand of upmarket clothing.
One of the key reasons behind its Argos bid, is that GUS wants to target customers using as many different methods as possible. It is already Britain's market leader in catalogue shopping. If it succeeds in buying Argos it will control 400 shops up and down the country and be able to assemble an even better database of customers' shopping habits.
It is also in talks with television companies about selling its goods via television channels as the digital television era gets under way later this year.
"Most retailers will be multi-channel," says Lord Wolfson, chairman of GUS. "They are all simply ways of communicating with customers and giving them the widest possible choice."
Many retailers are adopting similar strategies. Asda is keen to launch its own television channel - it wants to use a QVC-style format to sell its non-food ranges - and Littlewoods is trying to assemble a consortium of retailers to run a TV channel, possibly to coincide with the launch of digital television later this year.
Marks & Spencer is moving into mail-order shopping with its clothing ranges. The Burton Group, which is now known as Arcadia and owns chain stores like Top Shop, Dorothy Perkins and Principles, has launched a range of catalogues for each of its main trading formats. Meanwhile a host of retailers are already successfully selling their products over the Internet.
Industry experts suggest that "cash rich, time poor" consumers will increasingly be willing to pay a little extra for the convenience of home shopping.
Argos represents a good target for a catalogue group seeking high street exposure. Its 400 shops tend to be slightly off the high street but still attract millions of shoppers with its offer of top brand names at low prices. It has a strong brand name and is also a "destination shop" for anyone seeking a new kettle or toys for Christmas. But the group has been under pressure recently as rivals have eaten away at its key markets of toys, jewellery and small electrical appliances.
Analysts have suggested that while Argos was a popular place to shop during the recession because of its low prices, some customers have been deterred by its functional shops and relatively low levels of service. Some have also criticised the system of purchasing under which customers have to fill in order forms, queue to pay and then queue again at another counter to collect the item.
Argos, meanwhile, has rejected the GUS bid as "opportunistic." It is in an awkward position as its chief executive is seriously ill and is undergoing a course of treatment.