Harvey Norman is tipped to switch millions of dollars’ worth of newspaper and TV advertising to online after launching a new online store. The company is also set to cut back on catalogue advertising; however, questions are being raised about the obligations the new Harvey Norman online franchisee has to adhere to as it is not owned by the same corporation that runs the current Harvey Norman operation.Chairman Gerry Harvey has said that a move to online by retailers like himself could see thousands of jobs cuts as they becomes popular. He cited as an example the recent closures of video stores and bookshops as a case in point.
Defending claims that the online web site which is not owned by the same Harvey Norman operation that runs the company’s franchised stores, Gerry Harvey said that his franchisees “loved” the online venture as they got a share of the proceeds from online sales based on a purchaser’s postcodes.
Currently his existing franchisees have to pay a fee for their online service. In comparison, JB Hi Fi’s stores and web operation are owned by JB Hi Fi, making management decisions easier to implement.
The new Harvey Norman online operation is owned by HNO, an independent franchisee. The terms and conditions associated with the new operation claim that “neither Harvey Norman nor any related body corporate of Harvey Norman sells any goods whatsoever.”
The move allows Gerry Harvey to slash his costs to below what his current franchisees sell the same goods for.
He said franchisees “loved” the online venture; they received proceeds from online sales based on a purchaser’s postcode, but franchisees had to pay a fee for the online service.
Harvey Norman franchisees that ChannelNews has contacted claim that it is “too early” to tell. “The jury is still out, and it is still very much a wait and see” said one Victorian franchisee.
“There is the real risk that we could lose a lot of business. Not everyone wants to pick up goods in store. That is just a PR spin by Gerry. The real risk is that online takes off and he gets the bulk of the profits”.
Gerry Harvey said initial trading had been promising with the new store taking $50,000 in orders in its first night.
Defending the situation Gerry Harvey said that one customer who ordered $50 worth of goods online visited a store and spent another $300. He did not nominate which store or whether the store was owned by a franchisee or Harvey Norman.
Gerry Harvey told the Australian newspaper recently “I’ve got to do what the market says. I have no choice. That (selling from offshore) would mean that product or line would no longer exist in Australia.”
“Because we’re spending on the internet, we could drop our advertising in the press, TV and catalogues,” he added.
Any move by Harvey Norman to quit advertising locally would end one of Australia’s largest advertising operations and would profoundly affect the fortunes of local media.
A key beneficiary of the new Harvey Norman online operation are companies like Microsoft, who are set to sell their new Windows OS online as opposed to packaged goods in-store.
He said any move to sell retail goods online to compete with the overseas economy would be “short-lived”.