This article is by Scott Ewing, senior research fellow at the Swinburne Institute for Social Research at the Swinburne University of Technology. It was first published on The Conversation and is re-published here with permission.
analysis Gerry Harvey is great media talent. When I first became interested in online retail, I almost immediately became interested in Gerry. As far back as 2000, Gerry told ninemsn on a live chat forum “that most of the online business will be conducted by traditional retailers and that over 90% of the e-retailers will in fact all go out of business one after the other”.
In 2008, he famously told Smart Company that online retailing “is a complete waste of time”. During his short-lived campaign to have GST applied to all goods bought by Australians from overseas websites he said that online retail was “escalating to proportions that are quite unbelievable” and was threatening to put scores of retailers out of business.
By June 2011, he was sanguine: “We find people will order smaller things online, but for bigger items they’ll mostly come to the store, go home and order online”.
You might think this was Gerry changing his mind over time about the implications of online retail. But then I saw this interview on Lateline. If current affairs television consistently reached this level of rollicking entertainment, I would watch it a lot more often. Gerry came across as a more avuncular and amusing version of Queensland’s late Joh Bjelke-Petersen. It became obvious watching this interview that there was no evolution to Gerry’s opinions on online retail – he held them all simultaneously.
There’s a popular line of thought that Gerry is a dinosaur, a man out of time who doesn’t get the internet. On the contrary, I think that there a lot of people who don’t get Gerry, or perhaps his business, and its complicated relationship with online retail.
When Gerry talks about the internet he is addressing at least two very different audiences. The first is the investment community who want to know that Harvey Norman has a digital strategy, understands “omnichannelling” and is forward focused.
The second are Gerry’s army of franchisees who want to hear that someday this war will be over. All of Harvey Norman’s Australian stores operate as franchises, aside from the recently acquired Clive Peeters and Rick Hart outlets. In the last financial year, franchisee sales revenue fell by 2% and the fees Harvey Norman Holdings received from their franchisees fell 5%. Gerry has to walk a tightrope – being seen to embrace or at least understand online retailing while convincing his franchisees that the internet is not going to destroy their livelihood.
The franchisee structure makes it incredibly difficult for Harvey Norman to wholeheartedly embrace online retail. This underscores a very important point about the internet. It’s a disruptive technology. For a lot of businesses, it is not simply a matter of adding another channel. The landscape will change so much that a new business or business model is required. This is something that Fairfax Media and News Limited know only too well.
When Gerry talks about online retailing, most people think they are listening to a retailer. But Harvey Norman is also a major retail property owner and developer. It owns 74 sites across Australia and has a $2 billion property portfolio that includes properties in New Zealand, Malaysia, Singapore and Slovenia. For retail property owners, online retail is not such a good thing. The investors who want to hear that Harvey Norman has a digital strategy also need to hear that the internet is not going to devalue its retail property portfolio. This is a tricky message to sell.
The strategy of banks and other businesses in the 90s and 2000s to divest themselves of property now looks very sensible. Australian banks have wholeheartedly embraced the internet and their customers have in turn embraced online banking. Banks may be affected by other people’s commercial property devaluing, but mostly they don’t have to worry about their own.
Online retail promises or threatens to greatly change how Australians buy and sell over the next few years. However it works out, I hope that Gerry Harvey is around a fair bit longer, saying things to provoke and amuse us. Anybody who tells us omni-channelling, a glib and ugly expression if ever there was one, is “bullshit”, deserves an audience.
Scott Ewing receives funding from the ARC funded Centre of Excellence in Creative Industries and Innovation. This article was originally published at The Conversation. Read the original article.
Don’t have an “Online” central warehouse, just sell the products that are on the floors of your shop, via the internet.
A single website, that is the same as the front door of every one of your stores is a golden opportunity. You already have the stock. You already have the capacity to ship items (at least large items can have home delivery – perhaps investment in delivery to bring costs down? – secondary bonus is delivery costs go down for in-store purchases)
This isn’t an Internet vs Shop front debate. The internet becomes a side-entrance to every one of your shops if done right.
Every store as a ‘pickup point’ or ‘distribution center’ … like how IKEA do online shopping.
It probably works better when the products arent overpriced to cover realestate margins however. So Harvey is still in for a world of hurt if someone like Amazon crosses the pacific.
That sounds great except that the online retailer can stock more products in less space for a cheaper price.
Having a nice shop requires the retailer to spend more on design, cleaning, staff and the actual site itself.
Having an online shop means that you can stock items in cheap warehousing, stack them to the roof and hire cheaper staff who cannot even speak english.
Theres a store online (iiBuy, I expect sure a few here have used it) that is the opposite. They have a physical warehouse in Sydney (couple of suburbs from where I work) which is their base for sending out all orders. They also have a pokey little store at the front, no more than a room with a display case and a register. Given how close they were, I’ve bought over the counter plenty of times.
Works well in practice, but you could hardly compare it to a Harvey Norman store. Combining the two COULD work, but given the old fashioned mentality of Jerry Harvey on this issue I expect the final outcome would be the worst of both worlds, and self-justification to JH.
I still don’t understand why you don’t at-least try to sell your franchisees products (which you take a commission off) online at the same time.
You see, when buying big ticket items, people like the fall-back position of: “I bought it from a brick and mortar store”. This is becoming less and less, because the pricing and convenience of online is quickly becoming apparent.
If they can’t fix the pricing with my idea above (as you point out), they sure as hell can fix the convenience deficit that forcing people to drive to a store has.
As someone who’s worked with GST since before its inception, giving Gerry Harvey a voice on this issue causes me to cringe every time. There are very good reasons the $1000 limit was set, not the least of which was the extra cost to police a smaller limit.
The Commonwealth collects the tax on behalf of the States, so needs to show the cost of collecting doesnt eat away the benefits. Imagine the extra staff that would be needed at Customs to check EVERY package sent into Australia. Then pay them $65000 a year.
All Harvey cares about is his own profits. He wont acknowledge that there were reasosn, and that these reasons have only been proven right year after year, or that the reasons are even more valid today than they ever were. All he cares about is not changing his business model to adapt to the changing world.
If he, and others around the world in a similar situation, banded together to form a global online warehouse, they could be a mutually beneficial process in place to counter what he sees as issues. Instead, he wants the Govt (both state and fed) to pay $50 to collect $5 so he doesnt have to change.
Scott is correct – Harvey is first and foremost a retail property investor. He buys a whole site/land/estate and plonks a Harvey Norman store in the middle of it all and then sits back and collects rent on the other retail shops around it given that where there is a Harvey Norman, foot traffic will follow That’s how he makes his money. His other means of making money is thru his franchisees and if his franchisees are profitable… that’s a trifecta right there.
“Hardly Normal” – the pundits exclaim with derision.
My last foray into his bullshit tripping – was seeing the competitors charge (I think / recall) from $370 to $450 for Microsoft Orrifice, while he charged $990.
Yay Gerry.
Gerry Harvey is a greedy old man.
Not all online purchases are things you can buy retail. A lot of online purchases are for secondhand items for peoples collections, used parts for old vehicles etc etc. Why should everyone pay a price for his greed.
Did he care about all of the small specialty shops that went out of business when he opened his one stop shops next to them?
He certainly doesn’t care about his customers as I have recently discovered first hand.
I have also noticed he has now started advertising on a certain torrent site.
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