When it comes to online shopping, Australia’s consumers are 15 years ahead of our retailers

Simon,

Nice work. Totally agree.

If I could share the analogy that sprung to mind as I read your article. It’s a bit like deciding to go to Bendigo in Victoria tomorrow, because you heard there was a ‘Gold Rush’ ….only to get there and discover that many others have been there for a long long time and that most of the good ‘spots’ are taken. Then to realise, ‘spots’ is only a small part of the the method for success.

Ironically, I’m certain that it was Gerry Harvey who said, if you haven’t made it before your 35yrs old, you ain’t gonna make it. His point being that if you missed your chance, you will never catch up. He knows what you are saying is true….he’s just going through his Murdoch Crisis at the moment.

Unfortunately he’s using old school scale and power tactics. Which, like governments are discovering thank to wikileaks, is not the approach to take. (making the whole article even more valid ).

They just haven’t learnt how the new markets operate….they are the new cowboys in town, looking for gold, swinging their pistols, only to discover no-one likes to be threatened, bullied, intimidated or taken advantage of because you think you are big in some other town.

Finally – if I could offer them some advice. When they talk about ‘customer relationships’ they need to realise that the word ‘relationship’ implies that there is a two way mutually beneficial experience. Most corporates don’t really get this…and as such relationships have been 1 way for decades.

Seasons greetings to you!

Simon

We run an online gift basket business which we took over in august this year. After rebranding and adding a range of new products we have just finished a xmas season with sales up a huge 75% on last year.. This is against a bricks-and- mortar retail environment with a 2% fall in sales.

Clearly our experience shows customers who are time poor and want a full end to end service are absolutely prepared to buy online. It is quick, easy and takes minutes to send a beautiful gift to anyone anywhere in Australia. Importantly Corporate orders were up significantly showing businesses are more than comfortable online..

Stuart

Harvey Norman , David Jones et al are all suffering from refusing to invest in ecommerce in the early Noughties because it didn’t provide an immediate return on investment. In addition to this online diminishes margins that Harveys have been fleecing Aussies for years, its only now these margins mean nothing as consumers are switching to online for more of their purchases.

For example this month I bought an Ipod speaker for 40% less than in any store in Australia, and a suit that was 45% cheaper than DJs. This represents quite a alot of $$$ and is only the tip of the iceberg.

Wake up Harvey the horse has already bolted you know need to invest to catch up not cry that its not fair to the government like a spoilt little kid.

Australian online purchases of non-IT consumer goods is much smaller than people would like to believe. All those big numbers in the press are out by a factor of 10 for purchases of consumer goods.

All the usual reasons mean it will continue to be about people opening shops – online/offline whatever and just as tough online as offline retail has always been.

Be 5-10 years before any of the majors seriously look at going multichannel.

Hi Simon,
In essence, the diatribe from Gerry et al is about how to best preserve shareholder value in light of the apparent lack of foresight and planning on behalf of the board of Harvey Norman and other similar companies to appropriately identify the competitive threat posed by this new platform and prepare or respond appropriately. They’ve been caught napping and now have their knickers in a twist, hoping to dupe a clueless government in to a swift yet protectionist policy reaction.

You’re completely correct when you say that they have had up to 15 years to play with this and get all of the learning out of the way early. It’s now like a restaurant deciding to rearrange their seating arrangements 20 minutes after the dinner service starts serving because they think it will bring more people in the door….it’s just six shades of wrong!

Bricks and mortar retailers will likely be around to deliver inadequate levels of service to millions of consumers for many years to come but the face of retail as we know it is changing, and with that comes the destruction of value – specifically asset value in existing retail businesses. This is the nature of disruptive innovation (or revolutionary innovation), and whilst some may suggest that the internet has been around for such a long time that it’s disruptive capacity is somewhat diminished, just hang around and watch this space…the until now low adoption rate has meant that it’s just getting warmed up!

With respect Simon, I have read that the likes of Amazon spend a fortune in mainstream advertising; and it takes a considerable investment in mainstream ads for a new website to succeed.

The irony is, most smart people comparatively shop online these days, whether to find a better price or a better product. And as it happens, you stumble on a better user review which points you to, say for example, a better donkey and that company selling that better donkey happens to have an online presence, and that donkey is cheaper than you can buy it in-store, and it’s a simple click and hand over the credit card details…

Retailers shouldn’t be complaining, they should be apologising and adjusting their prices accordingly. I’ve bought online within Australia many times, and it’s because I’ve shopped around I found a better deal – not GST or Y2K or 424 or anything like that.

Barby you’ve actually missed the point. Whether Amazon spend money on traditional advertising is irrelevant to the real issue here. Amazon and others have spent 15 years optimising every part of their model from the software stack to the promotional mix. They’ve optimised every part of the business. You can’t catch up 15 years.

Agree Aaron the board at Harvey Norman have to answer to this not to mention Meyer, DJ’s and others.

I think there’s a bit missing and it starts with “60 months interest free”.

Retailers have morphed into personal credit brokers of late. Their business model is get em in the door via crazy deals (where the retailers makes 2%) then sign them to a personal loan with fees hidden in fine print and nose bleed interest rates. All of a sudden, 2% becomes … allot more.

Oh, and give em a credit card so they can come back and get a bigger LED, fridge, washer, curling wand whenever they want.

Gold!

Folks shopping online and not signing up to insane credit is what’s really hurting these guys.

Gerry Harvey whinged and groaned and the government gave every Australian $900 back in the GFC… (The squeaky wheel gets the oil.) Now Gerry whinges and moans about online retail continuing to cripple the Aussie retail sector.

Gerry! Get with the times!!!

You can compete and survive – get your online act sorted out and stop throwing all of your ad dollars in traditional! Fish where there are fish Gerry – people are buying products online and I cant see your products online(.)

Can we classify Harvey Norman / Domain etc as a retailer? People ‘buying’ goods online generally ‘buy’ the goods. Gerry offers people the good ole ‘buy now pay later’ thus is part of the problem for the debt…

You reap what you sew I guess..?

Simon,

The nail has been hit firmly on the head…

Now if only we could do that with the dinosoars running the big bricks and mortar retailers.
I had that experience this year, I found a very nice item of kitchen equipment at a good $639 on line price while retail it was $780.
I went to retail stores, asked if that was their best price, gave them the option to be on par or within a few bucks on price. They all said no so my money went to Western Australia instead.
The retailers can whine but if a shop owner is happy to see a $650 sale walk out the door then all well and good but don’t cry hard done by when we shop on line instead.
I have no emotional or any other attachment to where I purchase equipment for either work or home.
My last work purchase had a $800 GST bill attached, so not affraid to pay it, but the difference from purchasing locally to int’l was or would have been an additional $1000 in GST if locally purchased.
Local retailers have been ripping off the consumer for years. The internet is showing this up plain as day or what is on that screen in front of you.

As for the advertising industry? well maybe the cinema is starting to look good?
Newspapers on-line? too invasive at the moment or should I say as subtle as a house brick in the face.
Advertising will have to get busy but also understand that the market is not just a bunch of pre-pubescent kids but their parents and grand parents all quite used to doing business on-line.
If I can get an 86 year old excited and now using an i-pad as an essentual tool for modern life then marketers had better understand that on line advertising will or should take that in to account as those of us 35+ when out spending do spend big even more if the price is right.
I purchased the house I am in now after viewing it on line first, so the web is a powerful tool for todays consumer.

I buy online because at the moment as a poor student I need to save as much money as possible. However I cannot justify how a shop can sell for example a pair of levis for $180 yet I can buy the same pair online in America for $40. ecommerce is now and now is the future. But I guess Gerry Harvey probally thinks that the internet is just a fad and it wont be viable!

Harvey Norman has always had overpriced goods. Period.

Gerry Harvey complains about consumers spending $$$ overseas. However maybe we in Marketing and Advertising should complain that he does not use Australian Advertising and marketing agencies for his own reason is that he is saving money – well the money that he is saving he is definatly not passing it onto the consumers thats for sure! Plus he is not creating jobs in our sector – talk about the pot and the kettle!!!!

Aren’t the multi national online retailers wising up to these price differences though and repricing accordingly? I’m sure it won’t be long until it all balances out.

As a quote from a Gerry Harvey advert “If your not buying Australian – Why? Why not?” Well Gerry the last time I went to your store I wanted to buy a desk yet all the reasonably priced desks you had on the floor was made overseas! The ones that were made here (with not much choice) was way overpriced. That is why not! Gerry you need professional help – from a real marketing professional!

Beau – nope, that’s unlikely to happen. Margins of less than 30% are the norm in the UK and US for online retailers and they’re quite happily making money from Australians buying their products. Gerry Harvey and his like have been fighting tooth and nail to keep their 60%-70% margins – this is their model and how they survive. It’s also how they can hoodwink the general consumer with 50% off sales and still be more expensive than their online competitors.

Time’s up Gerry…

I am surprised that the influence of ebay on online buying/selling has not rated a mention in this discussion. I know that by 2000 I was selling collectable cameras on ebay in US$ because of the favourable exchange rate AU$0.50. From then through to 2008 ebay changed from a site to buy/sell used/collectable items into a market for online stores with the HK/China based sellers being particularly prominent. By 2010 they had been joined by traders worldwide and the favourable exchange rates for us are Sterling, the Euro and the US$. Who wouldn’t a least have a look on line.

The worst PR campaign of 2011 – I wonder if Gerry Harvey, Myer and the rest of the dinosaurs will win the 2011 worst PR gong?

An article from Fairfax on the subject:
http://www.smh.com.au/business.....19g9b.html

I whole heartedly agree with everything said above – which in honesty is a rare thing on Mumbrella.

To throw my tuppence into the ring….I am gobsmacked at the prices charged in Australia for musical instruments – its completely ludicrous.

To give a real life example, a Gibson Hummingbird in the USA retails for US$2099 – and at today’s exchange rates that’s about AU$2103. The EXACT same guitar through Allans / Billy Hyde is currently on sale for AU$5499….now that’s a hell of a mark up. You could actually buy a flight to LA, go into the store and buy it in person then fly back to Melbourne for less.

Granted I am sure there are issues originating from the manufacturers & international distributors themselves here, but surely that kind of price discrepancy should be illegal?!

Gerry and co should take some of these pointers on board:
http://blog.nielsen.com/nielse.....-in-2011/#

I read an interview with the founder of Appliancesonline who said that business is booming – they are an Aussie retailer…

Great article Simon, thanks!

Worthy of discussion are the premiums paid in Australia for global products.

Macbook Pro US$1650, AUS $2000. Same product, available online in many countries… Why the premium in Oz?

What about Adobe Creative Suite? I don’t remember exactly but I’m sure there’s ‘000’s of dollars difference in price for the same product?

I absolutely agree it’s a cultural shift, there are at least 2 generations of kids now accustomed to using price comparisons and the ease of buying online, no matter what country the goods are in.

Good Posting Simon, and I totally agree, it’s the 15 years of learning that they have all missed out, right back to DJs closing down their online store 10+ years ago, when they could have kept it up and running as a great test-bed for a fraction of the cost it is now costing them to re-enter the online market.
Unfortunately I think that the big Aussie retailers will, with some exceptions, not learn from the Amazons of this world, and will make all the same mistakes they made previously, and claim that’s it fault of the medium, rather than any fault of theirs…

m

Hey Matt – yes they are all looking at Magento and Blue Martini as we speak like getting a package is going to let them catch up the 15 years they missed. Just the fact that they all start with the software says they don’t get it yet.

Simon, while I don’t disagree its ironic our retailers cry foul now after decades of sending manufacturing overseas your writing in an online forum preaching to the converted. Gerry is facing a much bigger task. So therefore I feel a need to totally disagree.

Firstly, on your premise that Australian consumers are 15 years ahead of our retailers the figures I’ve seen suggest online shopping accounts for less than 7% of total consumer spend. So Simon where is this fundamental change in consumer behaviour? Despite you (an Internet developer) and the people reading Mumbrella online think there is one, its hardly surprising since your immersed in the online world on a daily basis. Less than 10% after 15 years is not a revolution but more like a slow burn.

Your logic is simplistic as your survey was, for starters you asked dog owners on the North Shore whether they shop online. You could have asked them whether they owned BMW’s and got a similar response rate!

Many retailers cannot compete with overseas prices of low-cost goods due to the cost of shipping, taxes, shop-front overheads, wages etc in Australia. I’m no expert but I can see Gerry Harvey has fumbled over this in communicating it to the Australian public, he’s just lucky he doesn’t have Julia Gillard looking over his shoulder.

Harvey Norman still commands profits and with a short hiring drive could attract experienced staff to help deliver an online experience to the Australian public…heck he may be able to do it without employing the services of Hothouse. So if he and other big retailers have lost anything, its probably less any great design and more the equivalent cost of 15 renovations.

Great post Simon, but we Aussies have been paying over the odds for a whole range of products and services. There’s the banks, the airlines, the telco’s, automobiles… the list goes on.
Jerry, Solly, Bernie et all, are only trying to maintain the status quo. Honestly its un Australian of us to be complaining about the profits the retailers require. The government must mandate that overseas purchases will attract premium penalties which will be donated to the retirement homes for your retailers.
Personally I cannot wait to go back to the past.
Save our retailers

cybermonday generated over $1billion sales for US shops. Aussies retailers are 20 years behind….

consumers are savvy too, look at consumer behaviour they are going to comparison sites to compare prices, look on ebay, read reviews, download apps, get peoples opinions etc. before they buy.

I have my own ecommerce store, and have been very surprised at the amount of orders I receive from overseas… perhaps Australin retailers arent doing it as tough as those in the UK ad Europe, where a lot of my orders go…. they need to adjust to the fact they simply cant just squeeze out competitive bricks and mortar like they used too…

The effect that online retailing has had on our shopping environment is immense. Gerry and co certainly need to adapt and not whinge. (However haven’t DJ’s or Myer bought an enormous warehouse in Hong Kong anyway, so they can compete with the overseas retailers? if so then aren’t they just contradicting themselves with this campaign about being ‘un-Australian?)

Admittedly there is one negative effect from the whole online domination of late. I was in a small farming community, chatting with a local farmer who is selling up and moving nearer the city to a larger town. I asked why? Two reasons:

Farming is obviously very hard these days unless you own a ‘super farm’ the margins are not like they used to be, 10 years of drought etc

The other reason; he doesn’t get out much. He used to go to the Post Office 2 or 3 times a week, where he would chat with locals and socialise / be part of the rural community. Likewise if he was sourcing spare machine parts in the off season etc he might drive to a big machine depot. (Not any more he uses ebay!!) He stated that the internet is also a reason for the local community not seeing as much of each other…

Food for thought…, his words, not mine, without any prompting other than ‘why are you leaving…’

Its all too easy to say that Australia’s are 15 years behind the curve ball when it comes to online retail but what can we do to help them change and be more relevant to our wants and needs.
The distinction is a lot of the retailers that are feeling the brunt of online sales have the challenge of integrating offline and online which isn’t easy but there a numerous examples of how this is being done in the US.One case study Harvey Norman could look at is Best Buy and how they using mobile to bridge the gap between online and offline. I notice that you make no mention of social shopping in your article Simon as a possible way to bridge the gap for retailers and their online e-commerce presence. When will people move on from stating the obvious and offer constructive advice to any retailers that find themselves in the same boat currently. It’s all about solutions and many retailers could do a lot worse and look at some of the initiatives of how social media is help driving sales at the moment -Anybody interested in find out more can find a whole host of examples on the following post http://bit.ly/9sMmHj

I knew a friend of a friend who imported some wonderful ladies clothes from Italy. These clothes were total quality and all of her girl friends and extended friends girl friends were buying them like hot cakes.

So, she decided to open a shop (an actual shop.) She did so and also placed an advert in…………..WAIT for IT…….. The Yellow Pages…

After 4 months she shut the shop.

20 years ago the above strategy might have worked. However, unless you have serious start up dollars to lease a shop in a prime position, my advise would be to start online(.)

Gerry and co have not adjusted their business models and are living in the past.

We live in a day and age (The Information Age) where consumers can often know more about a product that the seller.

Online reviews, comparisons and recommendations rule out the need for an expert in a bricks and mortar store. In a big store like Harvey Norman, you rarely get an expert anyway.

Gerry is all about making money. He is a billionaire for crying out loud. He doesn’t sell products he encourages people to take out loans and to get in debt; the bank pays him and consumers owe the bank… He is hardly your local responsible retailer serving the local community is he. (Another word for that is ‘UN-Australian.)

“Buy now pay later” – very good of you Billionaire Gerry.

I cant imagine why I would ever have the need to visit a Harvey Norman Store in this digital age; so take not of this Gerry and start adjusting your business model:

There are Australian retailers, selling the same products as you Gerry and their businesses are booming!