Gerry Harvey was a guest on Radio National’s Saturday Extra program this morning. You can listen to the interview and read feedback comments here. Harvey was preaching his usual message: that the $1,000 GST free threshold on imports is hurting retail in this country and that overseas retailers facilitate fraud by allowing Australians to purchase expensive items and get a receipt which is under the $1,000 threshold.
Host Geraldine Doogue did not challenge Harvey as she should have.
In London earlier this week, I heard some major retailers openly talk about Australia as being a hot and lucrative market for them. One fashion retailer talked about the $1,000 tax free threshold and the high Australian dollar as providing them with “extraordinary” sales.
While I think the federal government should address the $1,000 threshold on imported consumer purchases, I don’t see this as the cause of Gerry Harvey’s problems. Retail has changed, especially in the area of higher ticket price goods such as those sold in the Harvey Norman stores. Consumers are better informed today, they have more options. From a shop floor they can price compare and purchase from a competitor for next day delivery.
We are moving from retail model built on labour intensive distributed warehouses with high overheads to a model of fewer warehouses and lower overheads. However, this is not a point A to point B shift. It is evolutionary. This is why retailers are talking about omni-channel retail today. This is a transition model because, frankly, they do not know where we will end up. This is not an end game – from the day the first retail business opened the model has been in play.
Gerry Harvey’s challenge is that he has built a business almost completely around a price perception. His route to market was relentless advertising. Advertising is working less today. People have smart mobile devices and other means through which they can discover price options. Had Gerry built his business around a value proposition which it could genuinely own then they could have taken their loyal shoppers with them. Gerry is now learning that price does not drive loyalty. His millions of dollars in advertising has not been an investment in the future.
So, what does all this mean for newsagents? We will be as challenged as any other retailer. We have the opportunities of other retailers too … opportunities to adjust our business model. Many of us have customers who are loyal because of unique and appreciated customer service or because of a unique range of products. We need to develop business plans to evolve with our customers as their approach to shopping evolves. The biggest mistake we could make right now would be to stand still.
We are confronted with more opportunities than ever before. Now is the time for us to embrace these, leveraging our existing good and quite unique traffic from our core products and building our own businesses for the next generation.
I will explore these and related ideas in the Newsagency of the Future workshop which starts in Perth on March 26.
In the meantime, listen to Gerry Harvey because his message today will be a topic of analysis by retail experts in the future.
Footnote: Gerry Harvey sooked about how people react to what he says. He needs to understand that he has done nothing in his business to develop loyalty. Price is not a unique selling proposition.
If you buy something at one HN shop and try to return it at another, you’re told it can’t be done because they are different franchisees. Very annoying, and good reason to stop using them. As I did, and in line with the theme of your article.
Gary Black from the National Retailers Association was on The Project on Friday trying to sell the same message about the GST.
I agree that Gerry built a model on price perception. However I do disagree that price is not a unique selling position. There are a number of stand out retailers, both bricks-and-morter and online, that have developed a price-based USP.
Gerry’s problem is that his stores can no longer convincently promote their previously established USP. Their high-cost model can’t compete with more cost effective setups when it comes to price.
Gerry is known for being a dinosaur when it comes to the internet. It took Harvey Norman forever to get online and even now the website it just an extension of the physical store.
Jarryd, the best USP is one which is not easily copied, one you can own over the long term. In most situations, price can be copied – for example, if you find it cheaper anywhere else we will beat that by 5%.