The two sides of 1% – where Bernie Brookes and Harvey Norman disagree about online retailing

Both are heads of department stores, one of the weakest sub-sectors of the economy, and both carry staunch opinions about the future of online retail – but they couldn’t be more different.

Harvey Norman chairman Gerry Harvey made some more comments on the weekend about the state of retail and, in particular, how the GST threshold is affecting sales, how he should remain in charge at the company and, of course, a lament about online sales making only 1% of business.

Myer chief Bernie Brookes had similar things to say late last week – but in a different tone.

While both men agree the GST threshold needs to be eliminated, Brookes is much more optimistic about the future of online retailing and continues to drive his multimillion dollar restructuring strategy.

Both admit their companies are only making 1% of sales online – but have vastly different opinions and motivations when it comes to the digital space.

So while there is plenty on which Brookes and Harvey agree, here are a few areas where their opinions differ on online retailing:

The ratio of online sales

One of the biggest debates in Australian online retail is the idea that sales will eventually reach as much as 10% of purchases overall. But Harvey and Brookes differ when it comes to the outlook for the online space.

Harvey suggests current figures are over-inflated due to taking into account some purchases that aren’t strictly “online”, such as plane tickets.

”Every time the media talks about it – they quote 5% or 6% of total retail sales are now being made through the internet,” he told Fairfax, although then reportedly said this isn’t the case. He also dismissed estimates of higher sales in other countries.

Brookes, on the other hand, has a much clearer vision of where sales are heading and is basing his omni-channel strategy on that path.

“If you look at the game play that took place in both the US and the UK, it’s exactly how it started there and now some of those retailers and department stores are doing 10% to 15% of their volume online,” he told Inside Business.

“It takes about three to five years to get there. We’re on that journey.”

The need for an online strategy

Reading Harvey’s comments, you get the feeling he’s only going along with an internet strategy because he’s forced to.

”You devote all this time to your omni-channel and you go on with all this bullshit and the result is that it is 1% of your sales. But if you don’t go on with the bullshit, you’re a dinosaur.”

Brookes, it seems, has a much different opinion, talking up his company’s multimillion dollar effort to get more sales online – and commenting on the importance of having a digital sales channel in the first place.

“I think most retailers in Australia were caught a little bit by the speed at which the internet took off. The Australian dollar had a fair bit to do with that. But I think we’ve tacked very quickly.”

“We’ll be into this space in a big way and we’ll still maintain a competitive advantage over those pure players because you can buy it in store, pick it up in store, try it on in store.”

Consumer confidence

Much of the talk around the rise in online sales is centred on the volatile economic situation – but that’s another area where Brookes and Harvey differ. Harvey says there’s a lot to be optimistic about, while Brookes is taking a more cautious view.

”If I am sitting here today looking at 5% unemployment and interest rates of 6%, I am saying this is not a recession. It’s a bloody boom,” Harvey said.

Brookes, on the other hand, says that while sales have been increasing, the situation is far from the norm.

“So, for us, we’re starting to see a little bit of light, but we’re not riding as a trend because we’re not certain what’s going to happen over the next 12 [months] from an economic, political and social perspective.”

 

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