My piece on the Conversation has generated a bit of interest from business reporters. Here’s a piece from the Brisbane Times that resulted from a phone interview. I got to bandy around terms like “disruptive technology” and delve deeper into the scope for bricks and clicks to coexist (for some).
Posts Tagged ‘Harvey Norman’
As more rumours spread about what exactly Woolworths’ new hardware business will look like, we can see that perhaps it isn’t just Bunnings (and therefore Coles’ parent Wesfarmers) who should be worried about a shift in their competitive environment.
According to this story, the new entrant (which might be called Masters) - a joint venture between Woolies and US giant Lowes – may not just be selling the usual hardware merchandise. Also on the cards are whitegoods (i.e. fridges, washing machines, dishwashers etc). That would certainly be a challenge to some of the big players in that retail segment, such as Harvey Norman and The Good Guys.
This isn’t just a random diversification choice either, as Lowes has extensive experience with this market, and presumably can suitably integrate the offerings into the retail mix. It will be intriguing to see whether this upsets the likely co-located store mix for the firm, as some homemaker-type centres may find this new challenger upsets their tenant mix.
Another interesting titbit in the story is the possibility that WooliesWareHouse (I’ve decided to grant them that brandname) will go down an explicit ‘Do It For You’ path, which would be a neat differentiation position in the hardware space.
This case in progress serves to demonstrate the blurry lines between markets and the scope for competitors to slip across from adjacent markets (among many other strategic lessons).
It was somewhat disheartening to see the always candid Gerry Harvey (Australia’s richest retail tycoon) lamenting the poor performance of his firm, Harvey Norman, in Ireland. A big box retailer of home electronics, furniture and white goods, Harvey Norman is one of the few Australian retailers to venture off shore in recent years (see my discussion of the few in a chapter I wrote last year for a book called The Internationalisation Strategies of Small-Country Firms: The Australian Experience of Globalisation).
The firm has chosen an odd mix of locations – Singapore, Malaysia, Ireland and Slovenia (along with the obligatory NZ). The international adventure now makes up 24 percent of the business on a simple store count basis. As these stores are all company owned, whereas 98 percent of the Australian stores are franchised, they represent (potentially) a more significant source of revenue. The simple reason for the dramas is that the Irish economy is faring a lot worse than Australia. However, there are still question marks over Harvey Norman’s ability to build sufficient competitive advantage in its international operations.
In Australia the firm benefits from enormous economies of scale in both purchasing and marketing (the firm is one of the biggest media spenders in the country). Also, it utilises a distinct within store franchising system. A given store might include a furniture franchisee, a white goods franchisee, an electrical goods franchisee and a computer products franchisee. This allows appropriate specialisation from sales (and purchasing) staff and offers the usual motivation benefits of entrepreneurial franchisees. The Australia operations also has a nice side-business in property management and leasing.
It looks like very few of these competencies have been transferred offshore, with all stores company owned, and limited scale in a given country (beyond NZ). With troubles in the retail market at home, and Harvey Norman much more exposed to consumer timidity than their upstart competitor JB Hi-Fi (who sell a lot more software such as DVDs, video games and CDs rather than big-ticket hardware like TVs), it is hard to see Gerry and co diving into more international expansion any time soon. Looks like the paucity of Aussie internationalisers may continue, at least in the retail domain.