“Harvey Norman takes a big dive”, screamed the headline in the Sydney Morning Herald. But this wasn’t news; it was an entirely predictable announcement. Like-for-like sales down 6.5%. Profit for the year likely to be down 40%.
Harvey’s hurting, and it’s happening because the model doesn’t work anymore. There was a time when “Go Harvey Go” was a rallying cry for customers, and Harvey made sure the message got out there by “winning through weight” of media spend. Back in the day, Harvey Norman’s relatively drab stores, car-salesman service and never-never interest-free deals somehow resonated. But not any more. Gerry’s still selling it, but customers aren’t buying it.
Gerry Harvey will point to a retail spending malaise, lack of GST on overseas online purchases, which has seen some sales leakage (but the high $A and the quality of the online retailers are much more convincing reasons), and most critically the rampant deflation on electronic goods. There is no doubt all these factors play a role but something else is going on here. Y&R Group’s Brand Asset Valuator (BAV) research* clearly shows that retailers like Harvey Norman are being depositioned in the eyes of customers by the new breed of online retailers…and also bricks-and-mortar merchants who choose to constantly refresh and reinvent their offer.
Harvey Norman is standing still, while the landscape shifts from what we at IdeaWorks call “Old Retail” to “New Retail”. I’ve listed some of the changes below in short-hand, but you’ll easily get the drift:
• “Yell & sell” to seduce and engage (guess which side of the ledger Harvey is on?)
• Price obsessed to Value obsessed (our BAV research shows customers understand the true nature of value)
• Retailer in control to Customer in control
• Company focused to Customer focused
• Highly transactional to Highly experiential
• Directional to Interactive
• Distanced to Connected
• Research in store to Research online & mobile
• Single channel to Omni channel
David Jones has equally proved that if you stick doggedly to your original knitting, things can become unraveled (hopefully with DJ’s that’s all about to change). Meanwhile, the best retailers around the world are constantly innovating and experimenting. Best Buy, the US electronics retailer is reconfiguring its stores with prominent “Click & Collect” stations, slimming down its store network with hundreds of smaller shops focused on mobiles, and testing what it calls its “connected store” format. The new store concept is much heavier on tech support, and allows customers armed with smartphones access to a slew of information on products. Best Buy is still struggling in the States, but at least it’s trying to figure out a way forward.
So wouldn’t it be refreshing to see Harvey Norman rethink and reinvent itself in the same way? Go on Harvey, go on.