Interview: Gerry Harvey knocks the net

As ARN discovered in a recent interview, Harvey Norman head honcho Gerry Harvey's attitude to web-based retailing is hardly normal compared to most people's in the IT industry. Besides the fact that he has a huge bricks-and-mortar heritage to protect and a franchise model that is hard to transfer to online sales, Harvey's opinions are also based on many, many years of retailing experience, which definitely counts for something.

ARN: What do you think of the future of etailing in Australia?

Harvey: I am the world's greatest knocker. I do believe there will be some of them that are going to make it in that space, but 98 per cent of them won't.

Is Harvey Norman planning to be one of those companies?

Yes, but we are not going out and wasting everybody else's money to do so. We actually sell a little bit of stuff, but we don't spend a whole heap of money on advertising and a whole heap of money on infrastructure. We lose money, but we don't lose much, which is not like some of these other people are doing.

Is that sort of negative opinion based on retail experience or because you have so much to protect in the bricks-and-mortar retailing realm?

It is both. I have a lot of experience in retailing where most of these etailers have somewhere between none and less than none. They are working on models that are pure theory -- in theory some of their models work but in practice they don't. I have had some of them (etailing proponents) sitting in here talking to me as if they are some great gurus (on retailing) and inferring that I know nothing. They think they know what they are talking about but they haven't got a clue. When you point out some of the fundamental things they don't want to hear that.

What about companies like Harris Technology that do appear to be making strides in this new arena?

He has been a retailer for a long time too. He knows what he is talking about.

So is Ron Harris, and therefore Coles Myer, going to be one of the ones to survive?

With his sugar daddy (Coles Myer), he has to survive and at the end of the day, you would expect Harris Technology to survive, but I think his brand will be merged into CM one day and the name may disappear. There is no doubt in my mind that every major retailer will have websites.

If etailing grows over the years and I expect it will, then so will the retailers, but we all know that we are not doing very much business on it (the net) at the moment. If we are, we're all losing money. The strange thing is that there are then other people -- not traditional retailers -- spending about $100,000 a month on advertising but they are selling about the same amount or maybe double what we are. The ratio of sales to advertising does not make sense and that will catch them and stuff them in the long run.

So would you question Harris's claims that web sales are growing dramatically?

I don't know what he's doing. No one tells you what their sales are. It is all a very grey area. We reckon we know what Harris is doing and we know what we are doing and what some others are doing but none of them are saying much about their sales. If you are going well, you will tell everyone what your sales are. Even if the figures and growth sound impressive, in comparison to what is being done in our stores, it is peanuts.

Do you accept that internet sales are the way of the future?

I think it is a way of selling in the future. As it is with catalogues, it will not be as popular as it is in the States. We don't sell much off our catalogues, people see them and then come to the stores to have a look. Probably about half of them will change their minds when they get there and buy something completely different to what attracted them in the first place.

The internet will be the same. Some people will do business that way in the future -- but it won't be many. I had a bloke in here the other day trying to tell me the internet was already accounting for 30 per cent of retail sales in America. This bloke is supposed to be a smart fella but when I asked him "How do you know that?" he just said that it is a fact. That figure is so far wide of the mark that I immediately knew he had no idea what he was talking about when it comes to retailing. Despite what people are saying, it is not even within a bull's roar of that.

So what is the potential of the internet for retail sales?

I know there is a market there, but it is not a big market. If someone told me sales on the internet in five or 10 years time might be 5 or 10 per cent of total sales, I might accept that as a reasonable assessment. But I don't think I could accept any more. To me, that means at least 90 per cent of retail sales will still be done in the traditional method that has been done for centuries. Why would people want to sit in front of a computer day and night and do their shopping? A lot of them these days do it all day at work too. And getting trucks delivering the wrong stuff when we are not there and all that sort of drama. In theory it works but in practice it just doesn't. People like shopping.

So is all your negativity because retailing is a price-motivated arena and Harvey Norman is not the best on prices?

I would say that if you took a Harvey Norman customer at random, there would be an 80 per cent chance that they have been here before and they are happy -- that is why they are back. Retailing is all about relationships. We have relationships with our customers. What relationship is there with a computer screen?

This interview appears in the April 12 print edition of ARN

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