Gerry Harvey has head in the sand, say online retailers

Retail experts raise doubts on Gerry Harvey’s retail strategy, after the billionaire retailer told SmartCompany yesterday that online retailing was “a waste of time”.

Retail experts raise doubts on Gerry Harvey’s retail strategy, after the billionaire retailer told SmartCompany yesterday that online retailing was “a waste of time”.

Harvey predicted online retailing will not make any money for entrepreneurs and says he will not be putting any more money into it.

But successful online retailers responded, telling Harvey that they are making money and he has his head in the sand.

Experts add that Harvey needs to change his perspective. Retail analyst Rob Lake says moving online is necessary for retailers.

“Gerry seems to see retail as either you order it online and get it delivered, or you go in a store and buy it and take it away. It’s not like that,” he says.

“Online has to now be part of the retail mix. People use online to do research and look at where stores are, and to look at where you even park and pick things up.

“Every survey I see says that retail online is growing. And he’s ignoring that stuff… and I say, ignore it at your peril,” Lake says.

Brian Walker, managing director of retail consultancy group Retail Doctor, says retailers must “without a doubt” strengthen their online presence.

“The research element, particularly in the bigger items, is critical. My view is that online retailing is an incredible, increasingly important, element in the mix. You need a website to inform, educate, give store locations, and also be able to sell from it.”

Richard Evans, chief executive of the Australian Retailers Association, also says savvy retailers must have an online presence.

“A lot of folks are comparing prices using online research. Savvy retailers must be providing that. They must be using online within the marketing mix.”

But Evans says moving into the online sector is all about knowing your product and specific market, and that research is becoming a critical component.

“Think about who you’re pitching your offering to… but as the market matures, you see a lot of folks with virtual stores that are online. Savvy retailers will use the internet effectively, allowing their customers to find them and purchase, and will advertise online.”

The claims come as a Google retail study this year finds 25% of shoppers view the internet as “the most crucial source” of information, while 50% use websites to research products.

The study also finds that 44% of online shoppers use the internet to find information about a product, while 36% use it to compare prices. Convenience was the differentiating factor between bricks-and-mortar stores and online for 31% of shoppers.

Ross McDonald, Google industry marketing manager, says the survey, titled “The internet’s role in offline purchase behaviour”, shows retailers need to seriously consider moving online.

“Our point of view is that there needs to be an understanding of who is already shopping online. The people who shop in stores are already there… they would definitely encourage retailers being online.”

Entrepreneur Naomi Simson, who runs successful online retailing business RedBalloon, says that just because Harvey hasn’t got it right, doesn’t mean it cannot be done, and profitably.

Read below what Simson and other SmartCompany readers have to say about Gerry Harvey’s comments yesterday. What do you think? Send in your feedback.

And if you have a top online retail business, drop us a line. SmartCompany has accepted Harvey’s challenge to find 10 top Australian online retailers, and we are compiling the list during the next few week.

Greg writes: Gerry is certainly no fool, but I think he underestimates just how much business is being done online. We have not bought anything at one of Harvey’s stores, or any other majorbricks and mortar retailer, for years. They are just too expensive. We certainly go in there and look, but generally, go back home and place our order online. I bet we’re not the only ones doing this either, and this extends to footwear, clothing, wine, DVDs, sports goods and even car parts. With nearly everything available online these days, as a family we almost never pay retail, and with all the major purchases we have made in the last few years from computers to home cinema equipment, coffee machines and mobile phones, nearly everything I can think of has been done via my computer. And that is not about to change.

 

Naomi Simson from RedBalloon Days writes: Thanks Gerry… Leave it to us young fools who see the future of online retailing well beyond our own shores. As you are stuck with bricks and mortar trying to be nimble in a downturn – we will be open for business 24 hours a day 7 days a week serving clients anywhere on the planet. Just because you have not managed to get it right – doesn’t mean it can’t be done – nor that others aren’t doing it very profitably. I know which business I would rather be running in a downturn. Thanks for leaving online to us…

 

Scott Maxworthy from Max Media & Entertainment writes: First, I have the utmost respect for Gerry Harvey, he’s done a great job in building his retail operations over the last 50 years – BUT the times they are a changing and the future ain’t rocket science! Simply, people follow paths of least resistance. The facts are that advertising dollars follow where customers search – online advertising is growing – newspaper, television and radio effectiveness is decreasing. Today the media landscape has changed; online is where Rupert is focused and some say why James dumped his dad’s beloved PBL and Nine.

The future is online. Today most people begin any purchase search on the web. Do we have to look any further than real estate, holidays and books? From buying a computer to a car, we are beginning to see rich internet media reduce the need for retail showrooms. Today we can get a look at and explore a product without having to waste time in traffic, car parks, weekend warriors and apathetic or untrained sales staff, 24/7 from the comfort of home.

Once customers know what they want they compare, is it then only a question of whether it is cheaper/easier/faster to buy online or go down to the local shop. Online social word of mouth recommendation and influence is also increasing. See Seth Godin’s Tribes and Forrester Research’s Groundswell. GH’s current strategic advantage – current brand awareness, purchasing aggregation and distribution is key – all the rest are just commodities. For sellers, producing an internet video is far cheaper than most 30 second television commercials (excusing the HN ads) and without having to pay all the advertising rebates. Nearly every manufacturer or supplier would secretly like to get closer to their customers (if they could) and disintermediate costly or inefficient (not adding significant value) supply chains.

Jannine Barron from Natures Child writes: Gerry Harvey has his head in the sand. Online retailing may not suit his whole business, but it’s perfect for part of his business and he is missing out on some good income. I may not want a lounge online but I would buy some of his gadets on line! Next time he is in Byron Bay at his resort, tell him to drop by and see me for lunch; I’m doing close to $1 million turnover (is that real money?) and flat out – online! We struggle to keep on top of it some days! It’s the biggest part of our business, despite a successful retail store to match.

Garry Clarke from Inosoft Solutions writes: While you’ve got to give Harvey credit for what he’s achieved, the reality is that when it comes to online retailing he and many of his old boys club ilk just don’t get it. A big part of the problem for them is that having made so much money from selling bricks and mortar retail franchises, Gerry and many others like him see internet retailing as a threat to that business model and they react to that perceived threat.

Unfortunately, unlike Gerry who just bags online retailing, some retail franchisors go to great lengths to protect their patch, and in one case I’m aware of that involved colluding with a major supplier to destroy an online competitor’s business by denying that retailer access to the suppliers products. Regrettably, other than being a significant breach of the TPA, this sort of behaviour is very short sighted and while it protects the franchise business in the short term the only long term outcome it can deliver is the demise of many franchisee’s businesses in Australia.