Gerry Harvey is blaming poor results on the consumers

The outspoken Australian retail king-pin “Gerry Harvey” is blaming poor performance on declining  consumer sentiment , created by media.

Australians should be "as happy as pigs in shit" with low unemployment and a resources boom, but instead they're scared to spend money, he says in an interview with AAP yesterday.
"You've got too many things out there affecting the minds of humans and it's just an avalanche of media activity and government activity that's making people unhappy and not wanting to spend their money."

After posting a nine percent increase in profit last year (nett profit after tax $252.26 million) one may wonder the background behind such negative statement.

Let’s look at the facts:

-       Harvey Norman are currently experiencing more than a 5% drop in sales since the start of this year, urging a cautious outlook due to global volatility, increased utility costs, possible increase in unemployment numbers, dampened housing markets and weak equity markets.

-       The positive result last year was not created by themselves, but simply by the strong Australian dollar reducing the cost on imported goods.

-       Whilst they continued having visitation to their stores, customers bought less from them resulting in a lower value per transaction

Maybe it is time to start pointing the finger at himself rather than external factors, such as media, overseas on-line retailers and politicians, for Harvey Normans negative development.

Harvey Norman stocks generic branded consumer goods, also available at other retailers, their service is scattered amongst a very broad network of franchisees. Their unique selling proposition is their property portfolio which is very strong spread across Australia and close to the market.

In an environment where, number of stores and store locations are playing a declining role, in particular for home electronics, what is the future for Harvey Norman? The fact that visitation has kept up, with a decrease in transaction value, may suggest that consumers make their product selection in their stores but make the final purchase on-line. After all, you get a better service on-line and a better price, than in their stores.

After several attempts by Gerry Harvey to block on-line retailers in Australia, he has finally conceded and will launch his own e-commerce site in early October this year. This will again have a fall-on effect on his existing franchisee network, who today set their own pricing. In order to remain competitive on-line, Harvey Norman will need to price the goods lower than in their own franchisee network likely to lead to internal competition resulting in a lower margin. Which leads to the questions -what additional value do they bring with their property portfolio?

To add fuel to the fire, Masters, a joint venture between Australian Woolworths and American Lowe’s, are opening their doors this week with an aggressive roll out plan across the continent. Masters will go head to head with Harvey Norman for white goods selling the same brands.

Is there a future for Harvey Norman at all? Gerry Harvey is cautious with his own outlook, but is he looking at the wrong enemy when blaming the consumers, media, politicians, basically all but himsef?

Posted in: commentary