Gerry Harvey has been considered something of a denier when it comes to all things internet.
He sees no value in it, it does nothing for sales, it’s a shiny thing with no long term value, etc etc – and of course, most of the logical, educated online business world disagrees with him.
His profit announcement results yesterday were hardly surprising, and even less surprising was his usual lashing of the internet as a channel. Profit is down 31%, and online sales only accounted for 1% of sales, proving that the idea that people use the internet to shop is rubbish, according to Gerry.
There were a number of comments made in the announcement that, to me, highlighted the fundamental problems with the way he approaches digital retailing.
“A lot of them [Harvey Norman franchisees] say people do research online and so the number of people that are researching our product online has jumped 25 per cent, but our sales haven’t jumped at all.”
So straight off the bat, I see two things here.
Firstly, franchisees are telling him that people do their research online. It goes to Gerry’s point of view, not really taking an interest in the way people utilise the net, and relying on others to tell him things that most online businesses already know.
The fact that people are researching online is nothing new, and in this statement, Gerry has managed to identify the thing that is affecting his business the most, while at the same time ignoring it.
Understand that not all online sales are created equally. People research online to save time, and make a better decision. There are things that you are still going to visit a store for – to use som of Harvey’s own products, I am hardly going to buy a lounge or a bed that I haven’t sat or stretched out on. These items are about comfort, and that’s not something I can identify online.
What I can identify are these things:
- Style – do I like what it looks like?
- Price – can I afford it?
- Reviews – what do other people who have purchased it think?
- Stock – is it in the nearest store to me, in the style and colour I want?
Because I can call these things out online, I can also then compare them to other retailers. In fact, in some cases, I don’t even need to go to the actual site to compare them. Because of the time poor nature of most people these days, if they can find one site that compares them all, then that is where they go.
What this means for retail is simple – if it’s too expensive, too far away, not in the colour I want or people don’t rate it, I’m not going to make the effort of going into the store.
Products like whitegoods, electrical and computing goods are different – they’re more functional and usability is the same, so there is a likelihood that ordering these online is a much more price driven focus.
But look at the statement – people researching on the site has JUMPED 25%, but the site only represents 1% of sales. It’s entirely possible that the number of people researching and the number of people purchasing are not that far apart.
”…but then when you check with Myer or David Jones, whoever, JB Hi-Fi, Good Guys, it’s nothing of their sales, somewhere between half and 1½ per cent. I get out there and tell it like it is, but I get bloody castigated and pilloried.”
The reality is that online sales only make up about 4.9% of total sales of total retail sales in Australia. 1% is not bad. For the retailers he mentions, perhaps they don’t consider that share of sales as much as an issue.
What it says to me is that the expectation was set too high by Gerry to start with, a fundamental misunderstanding of how people use online to buy products. He is prioritising pure sales over everything, without consideration that if he invested in the channel and gave it the attention and understood how people use it, then perhaps he could facilitate a better experience and in turn, sales.
”You have to have it, the problem is that as a public company you have got to give the spin, so every company is out there giving the spin and we do the same thing.”
Spin shouldn’t be a substitute for a strategy.
If Gerry doesnt believe in online, then get out of it.
Any team within an organisation tasked with creating a viable online environment will never succeed unless supported and empowered. Basically whoever manages digital for Harvey Norman has just been told that everything they’re doing is of little value to the company.
”You devote all this time to your omni-channel and integrated … and you go on with all this bullshit and the result is that it is 1 per cent of your sales. But if you don’t go on with the bullshit you are out of fashion, you are not with-it.”
“I am reluctant to do it but I do it, because if I don’t they label me a dinosaur. I’m out there labelled as a bloody dinosaur.”
Unfortunately, it just all seems a bit late for Gerry. His lens is about how many people buy his products, not how people shop online.
His attitude towards a channel that has impacted the way people shop in general, the fact that he was late to the game with an online solution, and an ongoing refusal to believe in it as something other than a percentage of sales means that he has missed the point by so much, not even one of his GPS units can help him find his way.
For anyone selling online as part of a multi channel strategy, I can summarise my thoughts in a few points:
- Understand the product your selling online, and the consideration cycle people must go through to buy it. Is it low consideration and uniform function, or is it something tactile that people will research about and then come in store?
- People are doing their research online, not only on your site, but your competitors – how are you facilitating that process for them?
- If you don’t believe in the channel, don’t start it – you need to commit to making it a success, because it doesn’t have trading hours
Keen to hear any feedback or thoughts.