Gerry Harvey - Is the Economy all to blame?

In recent days Gerry Harvey has voiced his concerns over the bleak and severe battering ahead for Christmas retail trade in the media, sighting interest rate rises, drops in consumer sentiment, heavy discounting, a stronger Australian Dollar and an increase in online store trading as some of the major factors in this gloomy retail picture.  Mr Harvey is not a happy man with the current state of things.

While I dont necassarily diasagree with Mr Harveys claims, it does raise some very valid thoughts to ponder.
Lets start with 'Online Trading': As the technological generations mature to become a larger percentage of the consuming economy, coupled with increased internet trust and security by existing consumers, the move to online purchasing and retail trading is inevitable. You can buy your groceries online safely and efficiently now. You can even buy homes, boats, cars and yes TV's all from the comfort and security of your home. I have even heard rumours of full shopping centres currently being developed...a virtual centre you can go online and buy all your favourite brands.

Can I raise the point though, that if there is no perceived difference between buying in person and buying on the internet, the internet will inevitably win. By this I'm not talking about price, I'm talking about personalised friendly service that is designed to assist and build a relationship with the customer. The internet is impersonal, you are offerred no assistance as a customer, it is very much point, click, hand over your credit card and the goods arrive. If the experience I receive when I walk into a retail store to purchase a TV is very much the same impersonal and transactional experience, then why would I not save the time, fuel and energy and buy online?

Retailers need to look at the internet as an opportunity to improve their traditional sales, marketing and operational models. You can not rely on people just walking through the door and handing over their limited hard-earned cash. You need to build a relationship and trust. Every person that walks in the door is a prescious resource to be nurtured now. It's the new economy! (although it should have been there in the first place).

If we look at Heavy Discounting: Discounting has been alive in retail for many, many years and always will be. Everybody likes a bargain! As a consumer, if you leave a store feeling you have had a win, you are happy. But discounting is a very tough way to make money. Let me explain... If you currently operate with a 30% Gross Profit Margin and you offer a discount of 10% to your customers, you need to increase the actual amount of goods you are selling by 50% to make the same profit. In tough economic times discounting is always the first point of call for many retailers.

Why not go the other way and offer value and package deals or bundles. There is nothing more frustrating when you have finished negotiating a "cash price" for an appliance then you get to the counter and the salesman starts to rattle off all the other cables you are going to need and keeps adding to the agreed price. Why not have a less discounted experience with an all-up price, so that the customer feels they have received value and all my needs are met?

Interest Rates are rising and will continue to in my view in the next twelve months. Consumer sentiment is dropping but I am a firm believer people will still be purchasing. They still have needs, they still have a thirst for consumption and technology. Go for a walk in an Apple store on any given weekend... they are packed to capacity! Even with interest rate rises, even with increased online sales, people are walking out the door with Apple bags. They are meeting the needs of the new economy. They have developed a marketing machine that brings people in. You can touch and experience their products. Their shops are bright and simplistic yet have a feeling of efficency and currentness about them and can I just say they are not just young tech-head customers they are attracting. Many, many of the customers are over their mid 30's. Yet Apple are nowhere near the cheapest technology and computing solution, they dont heavily discount their products, you never see big "On Sale Now" signs in their stores. They are meeting their customer needs. When you buy an Apple product you get a box and its all included and most importantly when you go to pay they don't slug you with extras or a 2% surcharge or EFTPOS fee penalising me for how I choose to pay for my experience in their store.  THAT is my biggst pet hate!

So, I agree with Mr Harvey, the factors he speaks of are out there and having a huge toll on traditional retail strategies. But I think there is a need for many retailers to take a good hard look at how they are treating their valuable customers and meeting the needs of the new economy.