Vendors are set to play a wait and see game, as Harvey Norman starts to cut back on 4 and 3 year interest free deals which were being offered in a partnership with GE Money.
Gerry Harvey the Chairman of Harvey Norman has said that more customers than ever before are paying with cash and that the move is being made to eliminate excessive debt.
He claimed that his stores, which have a 25-year relationship with GE, had already started to pull back on promotional activity surrounding the incentives, which can sometimes stretch out to as long as four years before customers have to pay for their purchases.
“We have actually reduced our interest-free offers over the last 12 months, because we are just trying to survive without everything being on interest-free. I’d love to do business with no interest-free [deals] but that’s not possible.” Mr Harvey told BusinessDay.
30 years ago while selling vacuum cleaners door to door, Gerry Harvey and a bunch of mates hit on the idea of selling products by offering loans. The move was highly successful.
Shortly afterwards he started his own store. He then cut a deal with US finance Company General Electric. Since then more than 1.5 million Australians have been loaned $3.8 billion dollars of interest free packages.
Last week the retailer reported a 3.8% jump in sales on revenues of $6.03 billion for the 2008/2009 financial year.
Sales for the final quarter of 2009 increased 4.5 per cent to $1.49 billion, with like-for-like sales growth of 2 per cent.
A major TV vendors that ChannelNews spoke to said “This will be interesting. Harvey Norman has built it’s business on interest free loans. If this is removed and other retailers contine giving away credit they could sdee a downturn in sales”.