Gerry Harvey declares war on Amazon

HARVEY Norman is gearing up for the retail battle of a lifetime, with its founder vowing to fend off the Amazon threat. But can he do it?

Gerry Harvey might not be laughing when Amazon arrives in Australia this year. Picture: Glenn Hunt

IT’S THE feared global e-commerce company that analysts predict will “destroy” Australian retail.

But there’s one man who refuses to “lie down for Amazon”, and his name is Gerry Harvey.

The founder of one of Australia’s biggest and most recognisable retail chains, Harvey Norman, has issued a battle cry against the online giant — vowing to fend off the Amazon threat with superior service and low prices.

“If you want to buy something, you can come into the showroom, we will deliver it to you ... and we will be competitive, come hell or high water,” Mr Harvey told 9news.

“If they’ve got a cheaper price we will match that price, and we will give them the service, delivery and after sales service and they will be a lot happier than if they dealt with Amazon.”

But can he live up to this promise, or is the outspoken entrepreneur just on a public relations blitz?

Asked if the impending arrival of Amazon in Australia kept him awake at night, Mr Harvey answered: “No it does not”, before referencing the company’s low profit margin, which has become a hallmark of its march towards world domination.

Amazon finally made a decent profit in 2016 after years of pouring revenue straight back into investments like more warehouses and cloud computing, in service of founder Jeff Bezos’ bold vision for the company.

It posted a profit of $US857 million on revenue of $US30.1 billion in the last three months of fiscal 2016 — its most profitable quarter in its history — and is about to launch Australian operations.

This will include a fresh food component and a network of distribution centres to ensure quick, cheap delivery on goods priced at roughly 30 per cent cheaper than you’d find at high street shops, making traditional retailers very, very scared.

But Mr Harvey said Amazon’s online systems and warehouses were no substitute for the experience of shopping at Harvey Norman, which has 194 stores around Australia.

If something goes wrong with your toaster, he said, “you just go back into your local store, we fix it”.

He said the e-commerce giant had earned its $US388 billion market capitalisation “for one good reason: they think they’re going to take over all of retail”, warning that the consumer would lose out if Amazon wiped out all or most of its competitors.

BEATING AMAZON ON PRICE ‘UNLIKELY’

Melbourne Business School Adjunct Professor Mark Ritson said Australians could expect to hear Mr Harvey firing up about Amazon at regular intervals in the lead-up to Amazon’s arrival.

But he said the reality was that local retailers would not be able to consistently match the global giant on price.

“Gerry Harvey is a brilliant businessman but what he says in front of the cameras may be very different from what he’s doing back in headquarters,” Mr Ritson said.

“He wants to communicate that Harvey Norman will match Amazon penny for penny for the consumers, but the reality is you can’t do that, and he knows it.”

Ultimately, though, he said Mr Harvey didn’t need to avoid being beaten by Amazon; he just had to avoid getting beaten “as much as everyone else”.

“Amazon will take their $4 billion and onwards, but there’s still value left in the Australian market,” Mr Ritson said, adding that JB HiFi was more vulnerable because of its focus on price.

“All of the big retailers have strategy teams that have been working for many months on how they will respond to Amazon.”

Instead of trying to beat the company at its own game, he said, Australian retailers needed to differentiate themselves through their product ranges, merchandising, service and loyalty programs.

“In the case of Harvey Norman, the most obvious thing to play up is the fact that they do have very good service,” he said.

CALL FOR TECH FUNDING BOOST

Dan Rabie, chief operating officer at cloud-based accountancy software firm Reckon, said that for Australia’s retail industry to survive Amazon’s arrival, small businesses must to become more tech savvy.

“What we should be doing as a nation is enhancing our capabilities from a technology perspective so that we can actually compete with the likes of Amazon — and any other global brand coming into our space — so that they don’t come here with such advanced capabilities,” Mr Rabie told news.com.au. “And that’s possible if we start investing in our tech sector.”

He said Amazon coming to Australia was “a great thing” and that technological disruption should be embraced rather than feared.

“Amazon is essentially a technology company,” Mr Rabie said.

“Everyone says they’re retailers, but what enables them to move so quickly and be better than current retailers is their ability to adapt and move based on technology innovations.

“The government has to start investing in the sector and allowing small businesses to have access to great technology so that if these global brands come that they truly can compete.”

[e-mail]