“Online people do not make any money. The whole world was conned with online retailing,” Australian retail magnate Gerry Harvey told SmartCompany 10 years ago.
“It’s a con, a complete con.”
Today, exactly 10 years on from Harvey’s controversial comments, it’s safe to say the Harvey Norman founder missed the mark on this one.
The online retail space has grown steadily, both internationally and in Australia, over the last 10 years. E-commerce sales in the US have continued to grow between 14-17% year-on-year since 2010, and over 5% of March’s retail sales were online sales in Australia this year, up from 2.4% four years earlier.
In 2017, Australians spent $21.3 billion dollars shopping online, with growth in online spending outstripping traditional retail growth by over 16%. Australia Post predicts one in 10 items in Australia will be bought online by 2020.
Looking at these staggering growth figures, online retail is far from the “waste of time” Harvey first claimed it to be, and e-commerce’s time in the sun has arrived much sooner than the 50-year time frame the retailer first predicted.
And as for the list of “10 online retailers that are making money” Harvey requested back in 2008, such a list would be laughably easy to complete today. After all, the world’s richest man is Amazon founder Jeff Bezos.
“The fact that Gerry made this comment and then four years later launched his own online store goes to show just how much the retail sector is constantly evolving and changing,” says Gary Mortimer, retail expert and academic at Queensland University’s School of Technology.
“But some players in the market still choose to stick their head in the sand and not accept that change is coming.”
According to Mortimer, not only has online retail boomed considerably in Australia over the last decade, it’s existence has allowed certain retailers to exist which otherwise couldn’t have.
“Pureplay [online only] retailers have the benefit of being able to centralise their operations and not cop the costs of leasing and storefront overheads, and those operations are profitable models,” he says.
One such retailer who readily admits they wouldn’t exist without online retail is Quad Lock, a smartphone accessories business founded by Smart50 finalist Rob Ward in 2012.
“If it was not for online, it wouldn’t have worked,” Ward tells SmartCompany.
Ward says that’s not just due to e-commerce’s ‘online’ factor, but for all the added bonuses, such as being able to serve customers across the world, and being able to scale up the business and launch with very little money.
“In the past, you would have needed a huge investment to launch a product through retail channels around the world,” he says.
“For a long time, retail has held the power in terms of access to customers, but with online retail that power is back in the hands of brands. Gerry Harvey is just selling other brands’ stuff, and while he used to have the real estate to access customers, that’s not as relevant any more.”
Are online retailers making money?
One point raised by Harvey in 2008 which does still have merit today is whether online retailers were making “real money”.
With Amazon famously taking over 14 years to turn its first profit, questioning the amount of money being made, not just turned over, by online retailers is valid. But Amazon today makes over $2 billion in profit a year, and even Australia’s faltering clothing retailer Myer is still posting strong results in its online division.
For Ward, he says his business is “very successful”, generating over $10 million in sales revenue in the last financial year which he believes he never could have achieved via traditional retail.
“We’ve actually done a business model shift and pulled further away from some of our bigger international distributors and back into online, mainly because online retail lets us be as close to the customer as possible,” he says.
According to Mortimer, the future of online retail will be in part pureplay, and in part a meld of physical and online, with the academic believing shoppers will always want the option to touch, see, and try on their products before they purchase them.
“People say I’m a dinosaur,” said Harvey in 2008, and it would seem the online retail meteorite has caught him by surprise.