Online Push Leaves Harvey Norman Cold
Sydney Morning Herald
Thursday February 14, 2008
GERRY HARVEY, chairman of Harvey Norman, has warned that his retail group would not invest heavily in an e-commerce sales channel for many years, citing concerns about online profitability and "cultural" differences in shopping between Australian consumers and the e-retailing boom under way in North America and Europe.
Mr Harvey's comments came after the British grocery chain Asda announced a big expansion of its online sales channel to generate #1 billion ($2.15 billion) in sales by 2011 from 750,000 non-food lines including TVs, furniture and freezers. Asda's rival, Tesco, is already generating more than #1.1 billion in online sales from food and general merchandise with online earnings in 2007 of about #83 million. International online experts regularly express surprise at the extent to which Australia's large retailers are behind their US and European counterparts in e-commerce, a point Mr Harvey and others such as the Woolworths-owned Dick Smith Electronics acknowledge. "I have been trying to get e-commerce running for 10 years and it's never worked," Mr Harvey told the Herald. "There is no growth in our sales on the internet. They're the same as they were 10 years ago. We might do $30,000 a week and it's not worth having. It's a waste of time. The sort of products we sell in Australia people don't want to buy on the internet."However, the chief executive of the global internet search advertising firm iProspect, David Holmes, said Mr Harvey was out of touch. "Gerry is such an old dinosaur and he needs to understand that is the past. If he thinks traditional retail is the way he's going to sell iPods to teens he's mistaken." The latest available figures from Nielsen Online estimated online purchases in Australia reached $2.6 billion for the three months to September, up nearly 10 per cent on the same period in 2005, although consumer online purchasing intentions for the Christmas period had turned flat. In Nielsen's survey before Christmas, Australian online users said they would spend an average $264 on the internet in the lead-up to Christmas, just $2 more than in 2006. Moreover, the time users spent on e-commerce sites declined."I know of no instance anywhere in the world of people selling our sort of products that are making any sort of money," Mr Harvey said. "I know of a few doing volume like Dixons [Britain] but they don't make any money. It's just folly. If you try major [e-commerce] initiatives here you just fall flat on your face."Dan Lunoe, finance manager for Dick Smith, agreed. He said his company was generating "a bit less than 2 per cent" of its total sales from its online site. "We're well off the pace and we've probably got a lot of work to do online," he said. "But I agree with Gerry's sentiment. It's much harder to make the economics stack up." The buying manager of Dymocks, Meredith Drake, said the bookseller was one of the few larger retail chains investing heavily in e-commerce, and it was bullish about the prospects, although internet sales were still only about 2 per cent of total revenue. "There is a definite focus for us making the website as exciting as coming to a store," she said. "The online channel is growing so fast in five years we think it will really kick. Australia is around five years behind the patterns we are seeing in the US and UK." In Britain Tesco recently indicated it was looking to move away from a "browser based" shopping site to a more interactive 3D shopping destination similar to Second Life.
© 2008 Sydney Morning Herald