Editorial

Editorial: Is Gerry Harvey Past It?

Gerry Harvey (SMH)

Outspoken Retail King, Gerry Harvey, is well known for his negative stance towards the online retail industry. Yet in light of comments made at his superstore Harvey Norman’s recent annual meeting, is it time for King Gerry to give up the crown?

It’s hardly surprising that Harvey Norman Chief Executive Gerry Harvey is negatively bleating about the online retail industry once again. As Christmas looms, Harvey warned at the retail giant’s annual meeting yesterday, that the upcoming festive season’s sales period for Harvey Norman would only be “okay”.  While the blame for this was laid indirectly on the online retail industry, Harvey made a number of interesting comments around the issue that simply begs the question: Is Gerry Harvey past it?

There is no denial that Harvey has done something great with his superstore chain – if he hadn’t, there is no way he’d now have 230 stores across seven countries, 50 years after first opening the doors of (what was then known as) Norman Ross.  However, Harvey’s obvious reluctance to embrace the online retail industry makes one wonder if it is as a result of a genuine, yet somewhat misguided concern for an industry he is passionate about, or rather a severe lack of understanding of how retail is evolving in Australia and the rest of the world.

Over the years, Harvey has made no secret of his disdain for the online retail sector.  Think back to the infamous “online shopping is a dead-end” comment, when he said “he wouldn’t spend another cent on his own retail business’ e-commerce interests”, as well as his vocal backing at the end of last year, of the National Retail Association’s (NRA) call to put a GST on products purchased from overseas online retailers. Harvey offered himself up to front the NRA’s campaign, which resulted in scathing backlash against Harvey directly, as well as his brand, mostly played out over social media by disgruntled consumers.  While Harvey was forced to admit pushing this was nearly “suicidal”, by choosing to blame the dawn of social media for making him a scapegoat, he effectively failed to grasp the lesson in, or simply ignored, what had happened – consumers now have a powerful and public voice that can and will leave retailers reeling…and sometimes looking silly.

Although Harvey Norman finally launched its e-commerce site last week, and with its board predicting the online business will grow to one percent of total sales this year, and by one percent per year for the next three years, it still sounds as though Harvey is fighting the evolution of 21st century retail.  As he so eloquently put it, he believes there are a lot of “bull s****ers” out there promoting the benefits of online retailing.  He feels that accurate sales and profit figures are difficult to come by, and therefore businesses should be realistic about the effectiveness of selling on the web.

Other comments made by Harvey during the meeting suggested everyone will wind up regretting the advent of the internet in the near future, and even attacked the very people Harvey Norman sells to, with Harvey taking aim at technology-obsessed consumers who spend large amounts of time looking at computer, tablet and mobile phone screens, saying, “They live on the bloody things. It’s so invasive into your lifestyle.”

At the end of it all, while Harvey Norman, the brand, has taken the next step at bringing the superstore up to speed with progressive retailing, Mr Harvey, on a personal level, is still dragging his feet – and why he is, is still a mystery.  His comments only serve to make him sound out of touch with, and confused about, the state of both traditional and online retailing in Australia, and the evolving profile of modern-day consumers.

It’s just so ironic that Harvey himself recently said, “The problem with our little world Australia (is) we wait too long to act.” Although he was referring, yet again, to placing a GST on goods purchased on overseas sites, why can’t he see that, when it comes to the future of successful and relevant retail, this is the point exactly?

 

Elisabeth Lambert

Article by

Elisabeth is an editor and content creator for The Media Pad, publishers of Power Retail. As a writer and blogger, she is rapt that she is able to channel her passion for online retailing into Power Retail. She also loves writing about rugby, pop culture, travel and anything baby related. Having spent most of the last decade in Japan, Elisabeth still immerses herself in as much Japanese crazy as possible, and when she has time, Elisabeth likes to cook, ski and train for triathlons.

11 Comments

  • You are both right of course. What is happening is meant to happen and nothing (including GH’s whingeing) will change that.

    But consumers will eventually come to ‘regret’ the change to lifestyles, communities, jobs etc. when 50% of the current bricks& mortar retailers have evaporated.

    Reply
      • Leon
      • 30th November

      That is why these bricks & mortar retailers have to branch out into online sales as well as keeping a physical presence. Even online sales require workers.
      Whether they can continue to be competitive with overseas retailers is the question.

      Reply
  • Yeh?

    do you know who one of the biggest purchasers of bricks and mortar real estate is in the US?

    Amazon.

    Now why would they be doing that? Very interesting.

    Reply
    • Tony D
    • 30th November

    The most successful retailers will be multi-channel. Pure play online will struggle to compete with the multi’s and and stuck-in-mud B&M will evaporate. Interesting to hear that Amazon is buying real estate – is that retail real estate or warehouse real estate?

    Harvey Norman is in the box seat. I don’t know why Gerry is so resistant to it. Maybe the company is still so completely driven by him and he is so detached from the online medium that anyone inside HN who advocated going online was sent packing.

    Reply
      • Mark
      • 14th December

      Tony,

      from what I understand it’s the warehouse or Bunning’s type superstore variety.

      Reply
  • Great article and interesting comments. I too found Gerry Harvey’s comments regarding the use of technology interesting for a retailer who sells technology. I think these comments and others do indicate someone who may be out of touch with consumer behaviour. The evidence is stacking up and the retailers who are capitalising are those who understand this and meet the demand. This is not only pureplay but B&M retailers who get the fact that online should be part of an integrated approach and can play a part in getting consumers in store. Dick Smith’s recent launch of their mobile site is a good example of a company that analysed how consumers behave when they visit the site on a mobile device and created a site to make the consumers life easier.

    I can unfortunately see comments similar to last christmas starting to appear in the press from a small number of retailers and retail bodies so wouldnt be surprised if we have a similar backlash.

    Reply
  • I meant to reply to the comments earlier, but time has gotten away from me.

    I am by no means saying online is the only way, however it is definitely part of the future of retailing, in what is now a multichannel industry. I just don’t know what Gerry Harvey is always trying to fight it/ignore it/bag it when online retail, social media and the like is not going to stop – and then I thought perhaps it is because he just doesn’t understand it, and is afraid of not being able to understand it. Why else would he keep on making the comments he does? But that’s why you hire people who do, and evolve your business and stay relevant.

    And with this kind of retail/technology already considered the norm, who knows what’s waiting around the corner that’s going to shake up the industry as much as the internet has. Exciting times ahead!

    Reply
  • Harvey Norman as a company made 285+ million dollars last financial year.

    And their asset’s are ridiculous (in terms of what they own).

    So Gerry’s doing something right.

    Having said that, he does need to employ a few ‘smarter cookies’ to assist him with the move to online sales.

    The bunch of muppets he has working for him at the moment; have no idea.

    – Paul.

    Reply
    • paulg
    • 10th December

    Harvey Norman is good for one thing.. seeing the product for real. This ripoff merchant has been slapping 30-50% on his goods now for a long time at the same time whinging about free trade on the web. When are Australians going to wake up? Yep, deal with this thief by handling the goods to see what you want.. then go online with ANYONE else who do have stock and save money.

    Reply
    • JP
    • 7th June

    GH’s problem is his unique (inflexible) business model, over the last 30 years his BM has been very profitable but it’s not easily adaptable to the era of online retail.

    Here’s why; GH makes money even when the people at the front line (his employees; franchisees & sales people) make no money/commission selling products in ‘their’ stores.

    Of course GH wants his stores to make profit on products they sell because he takes a healthy part of that gross profit, the split is generally 70/30 (70% to GH). However the most brilliant part is when products sell with near zero floor margins, mostly due to price matching online retailers, Gerry still makes money.

    You ask how?
    Franchisee fees. It is worth noting that you don’t have to pay GH to buy a franchisee license, it is technically given to you for free. You DO need to sign a contract legally binding you to pay the ‘franchisees fees’.
    1) GH charges franchisees interest on the stock they hold & it is not uncommon for many of the 230 stores to be holding several million dollars of stock. Franchisees pay GH interest on stock which GH acquires using generous supplier credit with zero interest. GH often has 90 days to pay for stock without bearing any interest, Franchisees pay interest monthly… free money for GH.
    2) Furthermore, the stock received by each store has a little bit of ‘extra padding’ added inflating the ‘cost price’ of the goods. This makes it difficult for HN stores to compete with online retailers. Before a single product is sold GH has made a healthy margin. GH will never be competitive online because of this.
    3) GH the landlord, GH receives rent from most franchisees because he owns the buildings. (GH has a Property Portfolio of around $2 billion). If store sales stagnate GH is hedged against this because rental income increases every year, it is up 15 million from last FY10/11. A successful online store will only put more pressure on the franchisees because they will sell less in their already struggling stores. No landlord in their right mind wants the tenant to struggle to pay rent!
    4) As mentioned previously GH also takes most of the profit out of the franchisees pockets, in most cases 70% of gross profit. Oh and if you don’t make any profits as a franchisee due to discounting, staff wages, advertising & rent etc you will still need to find money to pay your franchisee fees. If you can’t find the money GH will force you to borrow from him at a healthy interest rate.
    I could go on but I think my point needs to be made. The success of GH’s integrated retail, franchise and property system is dependent on bricks and mortar stores & lots of them. GH can’t afford to have a successful online store as his BM relies on franchisees (tenants) that pay him HUGE fees to occupy his properties.

    Reply
      • De
      • 24th October

      Hi JP, No wonder GH is one of the richest men in Australia.

      As a former supplier I can also say that if you sold a franchise $1000 worth of goods then 60 days later you would be faithfully paid – $900.

      If you questioned where the extra $100 was you would be told that that was GH’s share. So amongst the suppliers GH was known as Mr 10%. If you did’nt like it then don’t supply.

      A natural outcome of this was that many suppliers have two sets of catalogue, a normal one and a HN one, the latter with prices approx 10% higher.

      I don’t know how wide spread this practice was, but as I say – no wonder he is so wealthy.

      Reply

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