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Online rivals slam Harvey over eCommerce

Friday, 1 April 2011 | By Michelle Hammond

Online retail rivals have hit out at Gerry Harvey’s claim there is little money to be made online, arguing large retailers moving online face a different set of challenges to smaller ones.

 

Earlier this week, Harvey Norman announced it will launch an online retail store, with executive chairman Harvey stating he has no choice but to “cannibalise” the company’s stores.

 

“By this time next year, you’ll see Harvey Norman with a pretty sizeable internet presence. My heart’s beating very strong on whether we make any money," Harvey said.

 

“They’re kicking us on the internet at the moment but there’s no history of anyone making money on it. I’m not against it – I’m trying to get on at the right time.”

 

Lorenzo Coppa, chief executive of online IT retailer estore.com.au, says that profits can be made online but that large retailers with bricks-and-mortar stores face multiple eCommerce challenges.

 

“I would argue that if you run stores and a website, then you need to sell at shop prices online. [Harvey will also] have the problem of keeping his franchisees happy,” Coppa says.

 

Coppa also believes large retailers will need to differentiate their online and offline offerings, posing the question: “What is their value proposition? What are they offering their store customers versus their online customers?”

 

Coppa opened several storefronts in 2005, but says it became clear that customers were choosing to buy online and opt for a delivery service rather than pick up goods in-store.

 

“It was also proving difficult to provide products at ‘online prices’ in a bricks and mortar store, having to pay overheads such as rents and staff salaries, so I decided to close those stores in 2008 and move solely online,” he says.

 

According to online tech entrepreneur Ruslan Kogan, choosing to operate solely online after having an offline presence is a bold move, but one he would advise for most retail businesses.

 

“You need to ask yourself, what is your competitive advantage? For example, you’re never going to see Prada and Louis Vuitton move [solely] online because their offering is as much about the retail experience as it is about their products,” Kogan says.

 

“But for businesses selling digital cameras or TVs, they’re essentially competing on price, which means retailers need to find a competitive advantage to bring people into their [offline] stores.”

 

Kogan says while offline retailers can compete on service, they are also vulnerable to customers who use their stores and their staff to research and trial products before heading online to purchase items for less.

 

In order to maintain competitive pricing, Kogan predicts retailers with a dual presence will continue to encourage customers to purchase their products online but will charge them to trial products in-store.