Thursday, January 6, 2011

Gerry Harvey: 'I'm in a very, very, very difficult position'

Retailers must think that the Australian public are pushovers. How wrong they are.

The issue: The newly formed retailers consortium wants the Government to end GST exemptions on imported goods(goods purchased from overseas) worth less than $1000

The coalition of retailers(Myers/Harvey Norman/David Jones etc) are pushing for GST (Goods Services Tax) to be levied on online purchases from overseas valued less than $1000. With the Australian Dollar at record highs against the US dollars and international currencies, more and more Australians are going online to buy their goods directly from overseas.

The Australian public are angry that two billionaires, Gerry Harvey and Soloman Lew are trying to pressure and coerce the government into taxing online purchases. Their argument of 'level playing field' between their stores and online stores are falling on deaf ears considering that they've pulverised the smaller independent businesses and shops out of business in the past, hiked up their margins and have enjoyed their billion dollar wealth for decades. People are angry because of the contradictory stances of these two billionaires.

This means that the bricks and mortar retail stores have lost some of their sales to the online world. Instead of insisting that GST be imposed on online purchases, they probably should review their own cost and supply chain, cut their markups and provide better bargains for shoppers.

Right now, bargains from overseas along with our strong Australian dollar means that goods can be up to 40% cheaper than what you can buy them for in our bricks and mortar shopping stores. Introducing duties and GST won't stop shoppers going online for overseas good. Any government that values their neck will not introduce the new taxes or else they'll be on the chopping block too at the next election.

Gerry Harvey has been the most prominant commenter on this tax issue and now customers and the Australian public are revolting against him and the Harvey Norman chain of stores. Thousands of online commenters have been vastly negative with angry commenters using Twitter and their blogs to state that they will never buy from the Harvey Norman stores ever again. They are out for Gerry Harvey's blood and Harvey is now trying to backtrack and extract himself from the situation.

Unfortunately it's a bit late for that. It will be very interesting to see their financial statement and performance a year from today and see how all the negative publicity and backlash has hit their bottom line. Their publicity team is probably scrambling around to try and 'fix' the situation. Anyone who is looking to buy stocks in the retail coalition (who is trying to pressure the Government to impose GST onto online purchases of all value) should be wary and watch out for shopper backlash.

I've included some comments below to illustrate public opinion:

* A commenter wrote that the exact same Kate Spade shoes that retails for AUD$475 can be bought from the US directly USD$170+AUD$57 freight (total $227), even with the suggested 10% GST, it will cost around $250

* "Go blow your nose on a million dollar bill and stop trying to speak for the average Aussie- whom you couldn't possibly be more out of touch with"

* "I'm about to buy a new camera- price at Gerry's store...AUD$1800. Price online- USD$600. Saving about $1200...last time I took faulty goods back to Harvey Norman (under warranty, I was told to take it up with the manufacturer-'we are just the retailer, not our problem'"

* "Gerry nearly as bad as Mark McInnes. I will never shop at DJs or his shop" Ouch...Mark McInnes will always be known as the ex-CEO that had supposedly fondled his female staff. That's the worst association for Harvey's image.

* From Harvey himself, "Because of my profile, I then get all these threats and people hone in on me. It becomes me, Gerry Harvey and Solomon Lew- billionaires, greedy, ugly, old, out of date c***s, and the people writing this seem to think we have been ripping them off for years and that we deserve this."

What are the possible solutions?

* The retailers could have gone overseas, setup their own business and international branches and ship directly to Australians, rather than importing the goods, whacking on their margins and complaining about the loss of business to suppliers overseas

* Essentially, Australian dollars are spent overseas, which is an important leakage in our economy. However, since the goods that the shops stock are imported from overseas anyway, the money would have been spent overseas already...thus, the money that Australians save from buying cheaper goods off the internet will be spent on other industries/businesses in Australia (restaurants, other competive businesses, services etc) rather than going into Harvey Norman/Myers/David Jones' shareholders pocket.

Why do I write that? Because Australia has a very low rate of saving. The ration of saving to income was actually negative prior to the GFC. We as a nation, have been speding more than our income for several years now. Job losses in the retail sector will most likely translate to jobs in other retail or services industries. After all, if Australians aren't saving much, then the money they save from buying overseas will eventually be spent elsewhere but not at the retail store.

* Offer far superior services on the shopfloor and when there are warranty returns. Last week when we shopped at Myers, it was a good 15-20 minutes wait just for someone at the checkout. Shopping in Japan was luxury in comparison to the services we get in the major retail stores. Maybe they need to visit Japan to see what superior customer service is, or pay staff more so that they can be motivated. The biggest problem that I saw was a lack of staff.

Potential customers queuing up got sick of waiting for someone to attend to the registers. They placed their purchases down and just left.

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