Jan 31, 2012

Posted by in Business ethics, Humour, Social comment, Values | 0 Comments

Harvey’s hubris

Australian retailing supremo, Gerry Harvey, has long enjoyed almost cult status thanks to his very carefully nurtured personal brand. Coming across as quintessentially Aussie as our sunburned land, he lives the collective dream of battler made good: the door-to-door vacuum cleaner salesman who became a billionaire.

As the board chairman and multimedia face of his ubiquitous chain of Harvey Norman stores, Gerry seemingly spruiked his wares in every home in the nation just about every day. His public profile grew in tandem with his fortune, and Gerry became a favoured media pundit whose news and current affairs clips began to rival his paid advertising appearances. Always forthright, Gerry nurtured public approval by remaining down-to-earth.

It is a salutary lesson, then, to see what happens when you start to believe your own hype because lately he has been burning his brownie points faster than a Victorian bushfire. Several times recently Gerry has shot off his mouth only to find a bullet hole in his foot. His determination to wage war against online shopping may go down in retail history as a classic example of kicking an own-goal.

This was a low-key issue and nothing like an insurmountable challenge for a man well-accustomed to achieving success. Remarkably it is his seeming expectation of always winning that may yet cause his greatest loss. Gerry’s personal mismanagement of this issue elevated it into a cause célèbre that has dramatically eroded his status as a national character. And with a growing chorus questioning the validity and relevance of Gerry’s Harvey Norman business model the very future of his retail empire is under threat, certainly as an Australian entity. How could it have come to this?

A decisive element was Gerry alienating many in his own customer base by accusing them of a lack of patriotism for evading the 10% Goods and Services Tax through purchasing items worth less than $1000 over the internet. The response was a flood of denigration in online comment heated enough to blister paint off the walls. In no uncertain terms Harvey Norman stores were lambasted for an allegedly appalling level of customer service and product knowledge. It was enough to make any head of a business stop and take note. But not our Gerry. Like a prizefighter blinded by blood dripping into his damaged eyes, he kept lurching around the ring trying to land a haymaker on anything in reach.

As Harvey Norman revenues declined in a very tough retail market, Gerry’s mounting frustration prompted him to escalate his attacks. When consumers clearly refused to abandon the internet and return to his stores, he gave them a few more serves. Those who used internet-based technology such as iPads, smart phones and similar gadgets were harangued for wasting their lives by spending too much time trawling the net. That Gerry’s chain had sold many of these people some of their most highly-prized possessions seemed to have escaped his attention. Accustomed to being feted as an oracle, Gerry could not contain his counsel. He berated those who purchased  digital devices, saying they would regret their lifestyle choices. This was when many people started to discern a disconnect.

Why would Harvey Norman stores sell us products that are bad for us? The likely conclusion is that you cannot be the consumer’s best mate if you are actively aiding and abetting the consumer’s downfall. The notion is not good for corporate credibility. But like a weaving drunk confident he’s walking a straight line, Gerry felt no need to pause and take stock.

Like the sharks they are, the media began to smell blood. You cannot have a controversy without two sides to an argument so they kept asking Gerry for his opinion of online shopping. He kept obliging. The result has been even further decline in Harvey Norman revenues and a proliferating popularity for electronic purchasing. The art of demagoguery is not just reaching an audience but making damned sure they take away the right message. Some lessons are very costly. Shares in Harvey Norman Holdings were above $7 just four years ago and today they are languishing below $2.

Mind you, Gerry still evinces that entrepreneurial drive that helped amass his great fortune. In a remarkable about-face Harvey Norman announced on the eve of Christmas 2011 that it would  sell electronic games online. Most people might have just shrugged their shoulders and wished Gerry & Co. all the best. But he could not let it go at that and in an aside which, yet again, appears certain to come back and bite him in the hip-pocket, Gerry told consumers they could still buy games in his bricks and mortar stores but that they would pay much higher prices. You do not have to be Einstein to add 2 and 2 and work out that you have been paying 6 in-store. This additional disconnect might require an awful lot of repair work

Yet Gerry is nothing if not an avid pursuer of another dollar. He abandoned his flagship campaign against online retailing and has now embraced it with open arms, reinforcing the adage that there is nothing quite so zealous as a convert. He has now established  The eCommerce Agency Pty Limited, trading as Harvey Norman Online. This is touted as an independent franchisee though consumers are unlikely to take much notice of that.

And while all these machinations were going on, Gerry reverted to his now-favourite stance of attacking those who used to shop with him. He lashed consumers’ unwillingness to part with their hard-earned cash or credit in the traditional pre-Christmas sales spree. Sales did not go up. But with cracks appearing all over Gerry’s once apparently invincible image no less than federal Treasurer, Wayne Swan, felt able to stick the knife in. His stiletto to the ribs was that he couldn’t remember a Christmas where Gerry Harvey was not whingeing.

The massive advertising spend of the Harvey Norman chain has assured soft focus media exposure for many years but times they are a-changin’ and Swan’s jibe gained sympathetic coverage. Gerry has played political games for decades so a savvy response could reasonably have been expected. But when you think you don’t need anyone else, your blind spots shroud you in darkness.

So, despite having demanded that the federal government bow to his wishes and drag recalcitrant consumers into line and force them to pay GST on their online purchases, Gerry then turned on those he wanted to help him. He responded that Swan and his political colleagues were all poll-driven. It was a lame response verging on limp-wristed, really, for a man who does know  how to kick someone when they’re down. But when you want the government to ride to your rescue, attacking them publicly is, as Sir Humphrey Appleby would comment, courageous.

The inescapable fact is that Gerry is in exactly the same position as the politicians, since rises or declines in sales are a daily poll of the Harvey Norman chain and himself as the face of the business. As voters trenchantly declare that the federal government is on the nose, so do consumers mark down their once-favoured retailer. Each is languishing in the doldrums of public opinion. Yet while the government, however feebly, strives to turn around its fortunes, Gerry uses his shovel like a steam-powered turbine to dig himself ever deeper

Mind you, there are still those who have a sympathetic bent towards Gerry. How else to explain the material drafted by journalists Eli Greenblat and Ian McIlwraith for a Christmas-eve story in The Sydney Morning Herald? With all the wide-eyed naivete of a puppy they opined: “Gerry Harvey has put his money where his heart is, spending $1 million to buy more shares in his retail baby Harvey Norman Holdings when the shares hit an historic low on Monday.
The rather harsher reality is somewhat different. Gerry actually put his money where his hip-pocket is, not where his heart is. As these egregious journalists point out later in their own story, Gerry did just the same in March 2008 when Harvey Norman shares plunged around 20 per cent. So, rather than an act of corporate philanthropy, it was a calculated attempt to bolster his own fortunes by arresting a precipitate slide in the value of his major asset.

And anyone who thinks that Gerry is a soft-hearted sentimentalist rather than a ruthless capitalist with an asset backing of somewhere either side of one thousand million dollars should ponder his views on those who don’t have a thousand cents to rub together. In the 2008 book Master CEOs by Matthew Kidman, Gerry let his guard down with the following quotes attributed to him.

“You could go out and give a million dollars to a charity tomorrow to help the homeless. You could argue that it is just wasted. They are not putting anything back into the community. It might be a callous way of putting it but what are they doing? You are helping a whole heap of no-hopers to survive for no good reason. They are just a drag on the whole community.

“So did that million you gave them help? It helped to keep them alive but did it help our society? No. Society might have been better off without them but we are supposed to look after the disadvantaged and so we do it. But it doesn’t help the society.”

Ouch! Not much different from attacking your own customers is it? At best, one could say that Gerry was exhibiting a refreshing honesty. Conversely, it just as readily demonstrates that he does not in any way feel the need to court public approbation. Which does now seem to be striking a sympathetic chord with said public.

As Gerry skirts issues of controversy like a car sliding on an icy roadway, it brings into perspective his other half, Katie Page. His second and much younger wife to be sure, but their union spans some three decades and they give every indication of being soul-mates. She is a woman every bit as tough and determined as he. The fascinating aspect of the relationship – especially at this critical juncture – is that Katie is Managing Director of the Harvey Norman chain. She frankly admits they have stand-up fights and maintains their marriage is the stronger for it. Very admirable. But how is she to reconcile her duty to maximize shareholder value in Harvey Norman with her spouse’s increasingly effective dismantling of that value? The pillow talk must be priceless.

It is worthwhile noting that Page is not only the chief executive of Harvey Norman and allied entities, Domayne, Space and the Magic Millions thoroughbred horse racing sales organisation but also Chairman of the Australian National Retailers Association. This gives her a degree of backing by the likes of Coles, Woolworths, Bunnings and other consumer behemoths. The association claims to represent the employers of something approaching 500,000 workers and sales turnover in excess of $100 billion annually. A true position of power. Which warrants scrutiny of her attitudes towards honesty in retailing. Funnily enough, there is yet another disconnect.

In December 2011, the Federal Court fined Harvey Norman Holdings Ltd $1.25 million for conduct it described as ‘seriously misleading and deceptive, on a significant and far-reaching scale’. This followed a case brought by the Australian Competition and Consumer Commission for misleading advertising. Not the sort of reputational enhancement to reassure increasingly sceptical consumers.

But it was the nature of the actual conduct that most betrayed those who have financially supported Harvey Norman or morally supported Gerry Harvey. It concerned Harvey Norman catalogues, distributed to households across the nation, and the chain’s website. The impression was created that all the goods advertised – with their cheap prices and applicable discounts – were available at Harvey Norman stores generally. In reality though – buried in the fine print – was a condition in all the catalogues that the offers were only being made by a single store in each state and territory while the website offers were only being provided at one store in the nation (which itself was lost in the dust haze on the far side of the black stump).

The Federal Court described these actions bluntly as ‘an expensive, misleading and calculated campaign of sizeable proportions, characterised by blatant and deliberate disregard of the truth’. The intent was to implement ‘cynical strategies’ aimed at ‘the contemptuous manipulation of the expectations of ordinary consumers’.

Hardly a ringing endorsement of Gerry’s suitability to be a national media pundit on retail consumer issues. And what of chief executive Katie’s Page’s leadership of the Australian National Retailers Association? In light of these concerted activities to betray the consumer interest happening under her direct authority, it would be impossible to mount a valid argument for her to be the public face of Australian retailing. Still, politics being what they are and power cliques being what they are, she may not be required by her peer group to stand down in a hurry. That, after all, would signify they found the Harvey Norman approach to honesty in retailing and truth in advertising to be inadequate. Fascinating that the retailers who sell every single man, woman and baby in the nation goods worth around $5000 a year refuse to say that consumers should not be treated like mugs and lied to. We should all bear that in mind as we make future purchases.

Interestingly, just as Australians start to turn away from Gerry and Katie, the power couple are turning their own attentions away from Australia. These events are not necessarily linked but there is vast experience to highlight similar responses by powerful individuals who feel they are being spurned. So it is the increasingly wealthy middle classes of nations such as Malaysia who are about to get a ramped-up exposure to the Harvey style of retailing. There are 14 stores in Singapore, accented by a brand new $38 million Space store accompanied by eight outlets in Malaysia with another four to open by 2013. Europe also attracts their interest – with not-your-usual locations such as Croatia and Slovenia – but to a far lesser extent with just six stores.

The bleat by Katie that the Australian government is losing out on a lot of tax by refusing, so far at least, to close the GST loophole on online purchases of less than $1000 does strike a discordant note . With a goodly share of a billion dollar fortune, paying tax can hardly be a problem for her or Gerry. So it seems a little crass to insist the poor battlers making meager purchases over the internet are somehow depriving the nation of its fair share of their income.

Which leaves us to ponder the probable demise of yet another cult hero who won our hearts by being our mate. Slowly we find that the power and privilege that accompany adulation drives a seemingly inescapable wedge between us. And, sadly, that trademark call to arms: “Go, Harvey Norman, go” takes on an altogether different meaning,

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