Australian retailer Harvey Norman last week confirmed what we already new, and that was that they have just had a lousy year of trading. They posted a 31.6% drop in net profit and continue to bemoan the lack of consumer appetite for shopping, and the continuing deflationary pressure on prices in the electrical goods sector. Nothing new you might say, but what was telling was what Chairman Gerry Harvey said about online sales. At one level you can not help but love his candor, however at another you cannot help feel he has well and truly put the ‘pygmalion effect’ in to play, and that Harvey Norman’s experience in online retailing is likely to be a self-fulfilling prophecy, a second rate experience.
On September 1 in The Age newspaper reported Gerry Harvey to considered the need to appear internet savvy and embrace an ‘omni-channel‘ retail strategy as spin and bullshit. He said he felt the pressure to invest in Harvey Norman’s omni-channel platform and spruik the company’s achievements in developing online capabilities , lest he be labeled a dinosaur. At only one percent of Harvey Norman’s sales, Gerry Harvey is finding it very difficult to get excited about online.In Australia however online sales continue to grow, reaching $11.7 billion in the past 12 months, according to NAB. In percentage terms it is now 5 times what Harvey Norman are achieving at 5.3% of total sales. Domestic online sales continue to dominate with 72% of online sales being sourced from local firms. It is coming of a low base but it is growing.
From a strategic perspective what is interesting is that Harvey Norman is seemingly only investing in its online capability because as a publicly listed company it is concerned it would be marked down by analysts. If it was a privately owned business one would suspect that Harvey Norman would be walking the mono-channel path rather than spruiking the merits of an omni-channel strategy. Regardless, if Gerry Harvey thinks it is all bullshit it inevitably will be. However, if he were to consider online as an exciting new frontier he may open his mind to innovative ways to make it work, rather than to simply conform to analysts.