Harvey Norman chief Gerry Harvey has come to his own defence, writing a short piece over at Business Spectator explaining why he actually understands online retail, in response to criticism following his move to downgrade online sales targets.
The piece is a response to an earlier article by Stephen Bartholomeusz, who suggested Harvey doesn’t understand how online retailing works.
Here at SmartCompany we’re well-known for clashing with Harvey when it comes to online retail. But Harvey’s actually made a few key points here that deserve to be acknowledged.
While it may be true Harvey is being a bit too hasty when it comes to his online sales targets, and the website itself may need a bit more of a push before the company should throw in the towel, Harvey definitely understands how this industry runs.
So here are five key points you should take away from Harvey’s editorial:
1. Harvey Norman is one of the few companies revealing figures for online sales
Harvey Norman has revealed its online sales are pretty small, perhaps 1% in a few categories and 2% for televisions. But Gerry Harvey’s comment here is much more important:
“First, I ‘get it’ and moreover, I am one of the few who is actually releasing the figures on what is going in.”
He’s right. Most of the other businesses suggesting an increase in their online targets aren’t actually revealing sales figures.
Note: This article originally stated JB Hi-Fi does not disclose online sales figures. In the company’s latest report, it shows online sales accounted for 1.4% or $25.7 million of total turnover.
While they all show a growth rate, they don’t show the amount of sales as a dollar figure of a percentage of total sales.
That may very well be because they’re still quite small. But at least Harvey Norman is admitting it.
2. The gloss is off the group buying sector
While Harvey may have seen his deals site perform worse than expected, he’s dead right on this point – the gloss is off the group buying sector.
“Group buying sites are struggling now with falling open rates and fading interest among the wider public.”
Now, it’s not necessarily true that they’re all struggling and that they’re going to fail – research from Telsyte suggests this is going to become a $1 billion industry by 2016. But it’s certainly becoming harder. Niche sites are struggling and industry sources suggest to us even the bigger sites are having some problems.
This is an industry in which it is becoming much, much harder to succeed. Only the strongest will survive, and the smaller players will fade away.
3. Multi-channel is the way to go
The best way for existing bricks and mortar retailers to approach the internet is with a multi-channel attitude. And that’s exactly what Harvey has.
“Instead of trying to make online sales bigger than they actually are we have been working on what we call the ‘omni-channel’ strategy. This has already been highly praised by those who have analysed it.”
We’re not sure about the “high praise” but it is true that bricks and mortar stores can’t ignore the digital opportunity. A multi-channel method is the best way to get people into stores, and ensures you can compete in both arenas.
Harvey Norman is never going to be an online-only brand. But adding the internet as another layer on top of its existing business is the best way to go.
4. A strong brand requires a careful approach
Harvey says: “We already have a strong brand – it was named the third most valuable brand in the Asia Pacific by Interbrand in 2012. Now we integrate all channels – physical stores, social media, marketing, smart TVs, kiosks, distribution centres, home services and mobile devices.”
Say what you will about Harvey Norman, but it’s a very strong retail brand, one of the strongest in the country, and that reputation needs to be maintained.
And although sales have been poor lately – they’ve been poor across the entire industry – Harvey Norman is still well recognised. And as a result, that requires a slow approach with a long-standing customer base. Too much movement all at once could have a detrimental impact, although it is worth pointing out that it could also help.
5. The trend skews towards research, then shopping
Harvey says: “The way I see it people come and have a look on the internet and then they go to the shop. This is now a well-established fact in our business… it is not supposition.”
This was true five years ago and it’s still true today. Yes, the proportion of online sales is growing and yes, more people are shopping only online. But the majority are still researching to buy in-store.
That’s where Gerry Harvey is going to find success. Sometime in the future, most of the company’s business may be online. But for the short to medium term, Harvey is probably right that he needs to focus on the established bricks and mortar shoppers who want to walk in, touch and feel the products before the buy – even if they’ve researched online beforehand.
But at the same time, he needs to make sure his online presence is top notch – and that, Gerry, means you need to keep your investment, commitment and enthusiasm for online very high.