Harvey Norman founder Gerry Harvey is about to go on a trip to his company-owned store in Slovenia and tagging along with him will be a crew, reporter and producer from the Nine Network’s Business Sunday.
It will be a nice trip in the northern summer, but visiting Harvey Norman’s company-owned stores in New Zealand or even Ireland would have been more illuminating, and cheaper, while the loss-making Singapore stores would have also been an interesting example of failure for this successful Australian entrepreneur.
According to the electronic industry magazine and website Smarthousenews, the real story is the struggle by Gerry and his managers to boost margins and stop a slide in profit. The key strategy sees Harvey Norman trying to lift floor selling prices in the home entertainment and information technology areas by 15%, and also trying to force suppliers to boost rebates to as high as 17% of the invoiced wholesale price. Harvey Norman will get the rebates and they will not be passed on to the franchisees who do the selling – although it’s their selling margins that will suffer from the higher floor price.
Competitors like Woolworths, Tandy and independents Betta Stores, Retravision and The Good Guys must be laughing. Harvey Norman’s 180 stores Australia are company owned, but run by franchises. According to the article the merging of the home entertainment and IT business is yet to happen as Harvey Norman slows down the construction of new stores to try to boost margins in Australia.
Meanwhile investment analysts have gone all bearish on Harvey Norman, judging by this report in The Age.