With sales falling, their stock down 28% and their stores coming under pressure from online sales, Harvey Norman has now been slugged a massive $1.25 Million dollar fine for misleading marketing.Desperate to be seen as the major retailer of 3D TVs in Australia, Harvey Norman management last year rallied TV vendors to spend millions on marketing what has now proven to be a dud technology, while convincing the NRL that 3D technology was set to be savour of the TV industry along the way.
In September 2010, the company who has been fined before for questionable promotions, promoted the sale of 3D televisions in a catalogue that was widely distributed in Australia.
This week the Federal Court said the catalogues created the ”misleading and deceptive” impression that consumers in all places where the catalogue was distributed could buy and use a 3D television to watch the 2010 AFL and NRL grand finals in 3D format.
The action to prosecute the mass retailer was taken by the Australian Competition and Consumer Commission, who have a history of keeping Harvey Norman in check.
The Court heard that the 3D broadcast was limited to Brisbane, Newcastle, Sydney, Melbourne, Adelaide and Perth.
Several TV vendors told ChannelNews that Harvey Norman was desperate to be seen as a major seller of 3D TVs.
“They wanted the technology to be bigger than Ben Hur despite the fact that there was limited content. They pushed the NRL into 3D but the whole exercise was a flop. The coverage was poor, sales failed to eventuate in the numbers that Harvey Norman expected” said a former senior executive of Samsung who at the time was involved in the marketing of 3D TV technology.
City Index chief market analyst Peter Esho told AAP that the aggressive marketing of the Harvey Norman brand invites more scrutiny from watchdog agencies.
“These guys market very aggressively and the regulators want to make sure that someone who is very aggressively marketing new technology is aware of their obligations,” he said.
Earlier this year consumers turned on Harvey Norman and their Chairman Gerry Harvey when he called for the Federal Government to step in and introduce a 10% GST tax on goods purchased from overseas web sites.
“Gerry Harvey equals Harvey Norman in the public domain and in the perception of consumers,” said Mr Esho. “That’s very unfortunate for Harvey Norman as a listed company because it’s run by franchisees and owned by investors.”
Mr Harvey has made headlines over the past year by lashing out against online retailing, starting with his support for an ill-fated campaign to pressure the government into lowering the threshold from $1000 for the goods and services tax applied to merchandise bought online from overseas.
The ability of Australians to purchase goods from overseas via the internet is reshaping the local retail industry with electronics sellers such as Harvey Norman and JB Hi-Fi under pressure to adapt to the shift in consumer spending habits.
Traditional retailers such as David Jones have recorded steep profit drops as well, in part because of their inability to compete effectively with online outlets.
Since Mr Harvey’s first salvo against the online retail he has relented and launched both a branded daily deals site and a full online offering of his retail and white goods.
Shares in Harvey Norman have struggled through 2011, losing 28 per cent of their value, more than double the overall market’s loss of about 10 per cent going into today’s trading.