Analysts warns Harvey Norman omni channel strategy will be an “uphill battle” as it spruiked the plan to investors today.
Gerry Harvey & Co are bombastic about their ‘omni channel strategy, which it spruiked to investors in a presentation today, after announcing a massive 8.6% fall in Aussie sales.
Globally, sales fell 11.5%, and rose in just two out of 5 countries it operates in, in the six months to December 31 last.
Harvey’s Audio Visual and IT categories continue to be “challenged with deflationary headwinds affecting average selling prices and margins” it admitted, but said categories like home appliances, furniture and bedding remained “stable.”
Harvey Norman now says its digital, store and distribution channels are “fully integrated” into an ‘omni-channel’ and says consumers are “clearly supporting the click, pay and collect in store capability.”
However, its also worth noting there was no mention of online sales figures in Harvey’s latest results.
Still, the retailer insists the omni-channel strategy gives it a “significant competitive advantage”, despite the fact rival JB Hi-Fi recently reported a 3% jump in sales and profits to $1.82 billion and $82.1m, for the same six month period.
JB online sales soar 40% last year, but still accounts for 2% of total sales. But unlike stuck in the past Harvey’s, JB has been selling online for yonks.
Read: Down Down Down For Harvey Norman
JB opened 11 new stores in the 6 month period, while nine Harvey Norman stores were closed, but says six of these were rebranded Clive Peeters and Rick Hart stores and opened another 6 smaller stores (mostly ex Retravisions).
Harvey’s presentation to investors also spruiked the store’s customer focus saying its mantras are now “quality”, “value” and “service”
“The strategic initiatives of the Harvey Norman omni channel strategy requires Harvey Norman franchisees to invest in their people, and deliver the best customer experience by focussing on the core mantras of “Quality”, “Value” and “Service”, in every communication, transaction and service with the customer”, Harvey’s investor presentation states.
It also alluded to the “Shop with Confidence” marketing campaign launched in February, which promoted the “best customer experience”.
Harvey Norman is known for its shoddy service, inflated prices and, up until a few months ago, its Chairman refused to acknowledge the Internet as a sales channel, let alone mobile-commerce.
Bricks and mortar stores are becoming more and more influenced by an ‘omni channel’ strategy, says Sam Yip, Telsyte analyst, which means a seamless integration between online and offline channels.
Myer and Woolies are just some of the retailers bleating about similar strategies to investors, of late.
“Retailers do need to look at the business holistically” to get it right, he says. However, Harvey’s success will be an “uphill battle”, as consumers think of the retailer as an offline channel with transactions taking place instore.
Consumers have ‘boxed them in’ and they need to break away from that, he warns.
But Yip believes Harvey’s can do it and “can break out” [of that box] although says it will be a long process of rebranding and re-educating consumers.
However, there are several obstacles in the way – its franchisee model for one.
The franchisees “hold it back” as they all own their own stores so don’t necessarily benefit from online sales which go back to head office, although do benefit if consumers avail the pick up instore option, and if they buy additional items (instore).
The challenge for Harvey’s is to “keep harmony between head office and franchisee stores” says Yip.
Harvey’s and JB HiFi are very different beasts – Harvey is a traditional retailer that has been “around for yonks” but has more categories, while JB has smaller stores but sell on high volume and low prices.
Harvey’s is “pushing omni-channel up a hill and turning it into a mountain.”
It will be a “long, hard and painful” hill, he says.