Gerry Harvey backs down on GST war, announces impending site launch

The news this morning is that Gerry Harvey has declared he is stepping back from the Retail Coalition crusade of the past month, for which he personally has borne the brunt of scathing criticism by consumers.

That is the wisest and the only option. Harvey described it as ‘suicidal’ in hindsight, and any move to continue would have only increased the damage. What this unfortunate and ill-conceived campaign exposed to Australia and in particular, the shareholders of these companies, was the seething animosity toward the major retailers. Thousands of negative comments have poured into media sites this week, citing inflated prices, woeful customer service and the greed of retail bosses in Australia as the reasons why angry shoppers have turned offshore. Many vowed never to shop again at any of the Retail Coalition stores.

It’s fair to say this is probably not the outcome they were seeking. Now shareholders are well aware of the public derision of Myer, David Jones, Harvey Norman and the Solomon Lew companies, and that can’t be good for business. As Ian McIlwraith of The Age put it:

“When billionaires start bleating in ”open letters” about the need for the playing field to be levelled, no matter how strong their case, you really have to ask what they were thinking or drinking.”

Power Retail was approached by David Mendels, Managing Director of the International Fashion Group some months ago, after he read an article I was featured in. Mendels has been waging war against the tax-free threshold for a number of years, and has played a key role behind the scenes in bringing retailers together to lobby government. He’s recently been featured in the background or on camera as a key voice in the battle, while enlisting known heavyweights like Bernie Brookes and Gerry Harvey to plead the case.

We can expect Mendels to continue to carry the torch, and fair enough, but the campaign clearly does not have public or media support, and Bill Shorten remains unmoved. Mendels passed on an email he wrote to a Fairfax journalist suggesting the media would lose out on advertising if retail flounders because of the rise in online imports, warning of job losses in press, radio and TV. That’s a red rag to a bull if I know Fairfax journalists – I have yet to come across a report in any media praising the Retail Coalition campaign as a sensible initiative.

Mendels is clearly capable of making some compelling arguments, drawing some of Australia’s most successful businessmen into a catastrophic public campaign that has done incalculable brand damage. Harvey admits he was unprepared for the vitriole directed at him via Twitter, reminiscing that in the ‘old days’, someone might have written a nasty letter or made an abusive phone call.

Welcome to the new world of social media – any representative of the Retail Coalition who didn’t see this coming is now at least thoroughly aware of the brutally viral nature of publicity in today’s hyper-connected world. Brands can be shredded in hours, and even the thick-skinned Harvey found this storm impossible to weather.

All for what? Had the campaign succeeded in lowering the GST threshold, would that have been of any consequence? The campaign should have been abandoned before Christmas when the first cracks began to show, but instead the retailers dug in very publicly, blowing hundreds of thousands on ads and millions in brand value.

Harvey Norman’s online plans

For the online retail industry, the public failure of this campaign is an important milestone. Online retail has been thrust into the spotlight like never before, and shoppers are more aware than ever of the deals to be found on the internet. Now the challenge for the major retailers is to claw back market share, but until they invest in matching the online experience there’s no chance.

Gerry Harvey told Fairfax journalist Mathew Murphy that he trialled an online store in the 1990s, which turned over $30,000 a week, so he shut it down. Now he’s trialling it again, and we do know that a team has been building steadily toward launch, gathering knowledge locally and internationally. Acquiring Clive Peeters from administration last year has given him a good launching platform, with clivepeeters.com.au nominated as a finalist in several Online Retail Industry Award categories.

Gerry Harvey may not know a computer from a breadmaker, but he’s got people who do, and I know the e-commerce team is actively seeking out the right experts to produce a best-in-class product. To Harvey’s credit, he appears to be going about it the right way, but the recent public backlash could seriously damage the launch, as cynics love company and the past week has proven there are plenty out there waiting to take a shot at Gerry.

From an industry perspective, let’s hope that’s not the case. We want a robust, profitable online retail industry competitive enough locally to keep Australians shopping here. They’re already doing it, spending billions each year domestically, with only a fraction spent on foreign sites.

Unfortunately for the Retail Coalition, not only do its members have the challenge of building viable e-commerce businesses, they have now brought upon themselves the more daunting challenge of stemming the wave of negative consumer sentiment exposed in the past week.

3 thoughts on “Gerry Harvey backs down on GST war, announces impending site launch

  1. Once again Grant – great article.
    Thanks to these captains of traditional retail, online business is booming due to this silly campaign that was doomed to fail. All Australian businesses need to take action and invest in the online sector now or they can continue to wait for the inevitable.

    Reply
  2. Great Article Grant and necessary. I could not believe they embarked on that campaign without doing their homework at first. Online retail in Australia has every chance of being competitive and providing a great shopping experience but it has to be embraced and not trialled.

    Reply
  3. […] a face of a Retail Coalition, it seems Harvey is now strategically holding advantage of a GST-threshold on abroad purchases, […]

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