Amazon A Threat To Retail Stores “Pure Myth” Claims Harvey Norman Boss
A senior Harvey Norman executive has claimed that it’s a myth that retail stores are in trouble because of Amazon.
Blaine Callard is the head of Harvey Norman’s Ireland operation where Gerry Harvey has just opened another flagship store.
In Australia ChannelNews has been told that brands and distributors have baulked at forking out millions on additional Harvey Norman flagship stores until they get the results of their investment in the Auburn NSW store.
During an interview with the Irish Independent Callard claimed that internet shopping and in particular Amazon is not killing physical retail in Ireland or even in the USA, “quite the opposite” he said.
This is despite chains such as Toys R Us closing down and retailers such as Sears being taken to the Chapter 11 brink.
He dismissed the Amazon impact claiming it’s all “baloney” he describes it as a yarn being pushed “by men in technology companies who don’t like shopping in the first place”.
Singling out the writer he described him as a “technologist”. Someone who was not a typical shopper. He said that “There’s a difference between buying things and shopping.”
He claims that in the US, there are more shops opening now than ever and that Amazon has only actually reached 5pc of retail.
I was in the USA last week and in locations like Costa Mesa and Laguna Beach retailers that have been there for decades have disappeared.
He describes claims that Amazon is impacting retail as “A misreading of the data”.
He claims retailers are suffering because of “Parking charges, bad zoning and inappropriate shop sizes. Shopping centres, if they’re struggling, can blame their “pretty low” standard. And none of us are talking about the great recession of a decade ago, he says, which is still affecting these traditional retailing zones far more than is properly credited.
Days after UK retail giant Marks & Spencer announced the closure of 100 stores British retailer Mike Ashley claimed the British high street is “already dead”.
Callard rolls his eyes. Lots of that is misinformed, he says. “The reason that some stores are failing isn’t because of Amazon, it’s because they’re bad stores.” he told the Independent.
It’s not Amazon and it’s not the internet. It’s mismanagement, bad retailing and a host of other factors.
Harvey Norman operate 15 stores In Ireland, and has convinced suppliers to invest A$18M in a massive new superstore in Tallaght in the country’s capital, it’s been described as “A big bet”.
Callard said “Shopping is a recreational, social activity. Going to a store is exploratory, tactile and physical. I can take the kids. It’s a totally different thing to just buying something.”
When questioned about online shopping “Most people don’t know enough about a product to necessarily zoom in and just get it online, sitting in their lounge chair,” he says. “They want to go in, they want to pick it up, they want to feel it.”
When asked why were clothes the biggest growth category in online shopping? with virtually all surveys revealing that clothes are now the most-purchased item online among ordinary people.
When it was pointed out that Callard’s logic did not stack up like a lot of what his boss Gerry Harvey goes on about when talking about online shopping he said, “The economics there don’t stack up,” he says. “Returns are extraordinarily expensive and rocketing. Research in the US shows that 30pc of all products bought online last year were returned, compared to 9pc in bricks and mortar stores. It’s the same in the UK. Most of those clothing returns end up in the solid waste stream because the returns can’t be resolved.”
This, Callard says, undermines another claim that internet shopping is a low-cost model.
“The narrative is always this very simple one, that ecommerce is a low-cost model and that physical retail is a high-cost model. That whereas we pay rent and staff which is all really expensive, ecommerce is light touch with low rent, no shop and no staff and therefore it’s going to disrupt retail because it’s going to always be cheaper prices than stores. But we’re now 10 years down the line and it has been completely debunked that ecommerce is a low-cost model. It’s not just the cost of returns, which is horrendous. There’s the cost of customer acquisition, which is huge for most of these ecommerce players. Amazon sank A$18bn last year into delivery costs.”
Callard says that one reason online retailers get into the business, thinking it will be a low-cost one, is the belief that an efficient online operation would look like Amazon. But he argues that industry rivals are only now fully realising that Amazon’s low prices are really just cross-subsidisation from other, profitable Amazon services such its cloud and hosted storage businesses.
“Amazon has not made money selling stuff,” he says. “It doesn’t make money in any market other than the US. And in the US, it’s primarily making money out of its non-retail activities. Its high share price is an expectation of what’s going to happen tomorrow, that some apocalypse will happen and that other retailers will die and that it can suddenly put up its prices and be profitable. But that’s not going to happen.”
In Ireland Harvey Norman has fought its way back from a heavily loss-making state to profitability in the last three years.
When asked about the Australian retail market he said, ” Australia have been extremely challenged for some time, with headwinds there that aren’t necessarily digital”.
He concluded “Look, digital is disrupting retail and retail has a new high bar to jump over,” he says. “So, stores will have to have remarkable store experiences. They will have to have the inventory and the service. That has to be a reason for people to go to a shop. If there’s not, then people will sit at home and buy online, or they’ll go somewhere else. And that retailer will die. But the two activities are not mutually exclusive. If you shop on Amazon, it doesn’t mean you don’t shop anywhere else.”
The Irish Independent journalist who conducted this interview was Adrian Weckler.