Why online retailing is a dead-end: Gerry Harvey

Harvey Norman is being walloped by the downturn. But billionaire founder Gerry Harvey still refuses to consider online retailing, dismissing it as a dead-end for businesses. He predicts it will not make any money for entrepreneurs and says he will not be putting any more money into it.

Harvey told SmartCompany this morning that he will not be making any radical changes to strategy and that his retail chain Harvey Norman will continue to perform well despite the downturn.

Despite a growing number of Australians purchasing goods over the internet, he says online retailing is “a complete waste of time”.

“I’ve got an online part of my business, but I definitely would not put more into it. That’d be a recipe for a disaster.”

“Online people do not make any money,” Harvey also told SmartCompany. “The whole world was conned with online retailing. People say I’m a dinosaur, and I’ve had people coming to me with sites and saying, ‘Oh, look at this, they have 10,000 or 20,000 hits!’ – but it’s a con, a complete con.”

Over 57.9% of Christmas shoppers say they will use the internet to research and compare products, new Australian Retailers Association research says. But Harvey says online retailing is still “a waste of time”.

“Go and check and find out who is making money in the online selling business that you can say is worthwhile. You give me a list of 10 online retailers that are making money, and then we’ll talk. Not just $200,000 or $300,000, but real money.

“Sure, it has a future, but the problem is it costs a lot of money to do it properly. There’s an awful lot trying, though. If you said to me in 50 years will people be successful, then yeah, but mostly not now.”

Yesterday Harvey was quoted saying that in any recession he has been involved with, Harvey Norman has come out “a mile in front”.

This morning he says that nobody knows if Australia is entering a recession. “I’m hoping it won’t, but nobody knows anything. There’s a chance we won’t, but my opinion is only my opinion.”

But Harvey says the group will take advantage of the downturn.

“What normally happens when things get tight like this is a lot of your opposition disappears. You could probably name 10 retailers that are going to be there in six months and 10 that won’t be. I think we’ll still be around,” he says.

“There are some stores that will be closing down, we’ll be opening some new stores – we’ll close some of the areas we don’t make money in.

“If you’ve got a store you don’t think you’re making money in, but have good people, you’ve got to bite the bullet and just close it and move.

“It’s the same old story. You look at your people, you look at your advertising, buying prices, look at your stock. Good retailers are the ones who reassess everything.”

Harvey Norman has experienced a rough year, with the group revealing a 31.5% loss in pre-tax profit to $71 million for the quarter ending September at its AGM yesterday. And while sales rose 3% in the same quarter, they have since slumped 3.1% in the 28 days ending November.

The group’s shares fell 13% yesterday, their biggest one-day fall in over 20 years, closing at $2.24.

What are your views? Has Gerry Harvey got it right or wrong? What do you see is the future of online retail? Send in your thoughts to feedback@smartcompany.com.au