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Go Harvey, go Harvey Norman offshore? Don’t bet on it

So Harvey Norman wants to commit commercial suicide by moving offshore? It’s unlikely CEO Katie Page really meant what she said.

So Harvey Norman wants to commit commercial suicide by moving offshore? Let it. Katie Page, the Harvey Norman CEO and wife of chairman Gerry Harvey, was quoted in reports this morning as saying:

They [other retailers] can actually be setting up in Hong Kong — anywhere in Asia now actually, Hong Kong is the favoured place. There’s lots of advisers of going around, speaking to thousands of retailers at the moment, saying, ‘Just set up the company in Hong Kong and ship into this country’. ‘How un-Australian is that?”

Asked whether Harvey Norman would do that, Page said: ”Let’s just take it step by step. I think that is just the worst thing an Australian company could do. It could solve a lot of problems but, you know, if Harvey Norman did that, everybody else would follow. And that’s wrong.”

She’s wrong there. “Everybody” would not follow. Coles, Bunnings, Woolies, David Jones, Just Group, for example, would stay here, as would other legacy retailers. The local business operations are geared to Australia. They have long-term rents, leases or ownership in a few cases (especially Harvey Norman). That means they have to remain here and keep restructuring to keep selling. They might source more and more from offshore (that’s been happening for for 40 years) or they might dabble with offshore online businesses that becomes part of what Harvey Norman and others call an “Omni Channel”.

Every retailer has something similar. But they anchored in Australia, with the wrong sorts of bricks and mortar threatening to crush them.

And no Australian retailer has so much bricks and mortar as Harvey Norman. More than half the company’s $4 billion in Australian assets is made up of bricks-and-mortar retailing (with some other property) Harvey Norman would be group most damaged by a move offshore and into the online world of selling. It would be a kind of commercial suicide.

Even the mighty Walmart and Tesco, plus Carrefour of France, the world’s top three retailers have had mixed success. Some wins, but some big failures offshore. Harvey Norman has an appalling record offshore as well with poorly performing operations in New Zealand, Ireland and Slovenia and an indifferent operation in Singapore. So threatening to move offshore would seem to be the last thing the company would threaten to do. In fact Harvey Norman’s threat would see the most damage occurring to its franchisees and property businesses, with shareholders, who include Harvey and Page, last in the firing line.

A look at the Harvey Norman results for 2011-12 shows the company’s problem. It is not a retailer, it is a property owner with retail franchises and some company owned stores piggybacking on those properties.

If the company moves offshore, the impact will hurt its own sales in Australia through its franchisees and company-owned operations. Every sale done offshore will take sales from Australian stores, thereby lowering its own profits and revenues, especially those vital profit earnings and fees from the 700 or more franchisees.

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  • 1
    seriously?
    Posted Wednesday, 19 September 2012 at 2:00 pm | Permalink

    Pretty hollow “threat” by Mrs Harvey - if she really believes it then she’s pretty dumb. If she doesn’t, then she takes us all for mugs.

    Crikey should send a reminder to the likes of Mrs Harvey and Bernie Brooks et al (and chuck in a few of the rent seekers) every few months to follow up a how their various plans to relocate offshore, shut down operations or sack workers etc is going.

  • 2
    Simon Mansfield
    Posted Wednesday, 19 September 2012 at 7:39 pm | Permalink

    This is exactly what they should do. And so should all the major and smaller retailers. Change there shops to showrooms and set up offshore distribution and fulfillment services and bypass the GST. Well at least until the government figures out that this little freebie to the masses has a use by date on it.

    The real cost of charging GST on imported goods is pennies on the dollar. IT systems could automate the whole process and you will simply be sent a bill in the mail - just like a phone or any other utility bill.

    The original seller or shipper does not need to get involved in the process at all. Their only responsibility is to accurately complete the customs declaration details that can be easily included in the barcode data and uploaded by Fedex, UPS etc and the parcel will clear customers quickly and efficiently - and on the way through critical data will be automatically captured about the value of the parcel’s content, who it’s been shipped to and where. And a GST bill automatically generated and sent to you to pay after receiving the parcel.

    Get use to the idea of paying a little more - 10% more - for most things bought online and shipped to you here in Australia. Stop complaining about it and either accept it or be prepared for income tax to rise or local GST to rise or services to be cut or user pays to become the norm for more things.

    Five years from now no one will think twice about paying GST on imports over $20.

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