Stop the Harvey Norman GST tax extortion

Harvey Norman and a number of other retailers are attempting to lobby the Australian government to place a GST upon online transactions. We encourage you to boycott Harvey Norman stores in Australia and New Zealand. Taxation is not the answer and we will explain why in this blog.

Thursday, April 7, 2011

Harvey Norman - a belated online seller

Today we got from Gerry Harvey, the CEO of Harvey Norman, confirmation that he is a practical least belatedly. He was clearly not honest enough to concede that he was wrong in his actions to campaign for a new tax, however when it comes to money, he is inherently a far more practical or pragmatic man. Clearly he has seen some impact on sales from his 'tax policy', and has climbed into the trees. There was no fanfare greeting the launch of this enterprise- a new online business. He is conspicuously silent since drawing negative press. He has done this before, its just that he could not make it work.
I guess you cannot blame him before his entire business model was about charging high margins upon the unsuspecting. I actually don't expect him to develop his market online. I think he will sell his shares and retire. The online presence is probably just a smoke screen because really it does not fit with his existing business model. Its not a question of being too late, its a question of people questioning the integrity of a business which charges so much more for online or store-bought produce (knowing the online price).
Anyway, his arrogance will only cost him millions....not enough carnage for him to face his demons.

Friday, February 25, 2011

Harvey Norman profits hit by tax campaign

Clearly the tax campaign has hurt Harvey Norman, as its half-year sales plummeted 17%. The company has however blamed a cool summer and reduced profit margins. That is a nice way of putting it. Cool summer equates to low sales. An interesting rationalisation. I wonder how they explain the fact that Dick Smith sales improved 6.5% in the same period.
I am a big advocate of online sales, but its interesting just how competitive traditional retailers can be. I found a reasonably priced phone at Dick Smith and purchased it, paying $15 more than I would online for the product 'now'. This is a company which is more atune to the market. I must however say that their sales policy disclosure is poor, and their customer service not up to the standard of their rhetoric. For that reason, one is inclined to not merely by from local online resellers, but to indeed go offshore. These companies have to realise that they need to offer value that we can't get offshore.

Saturday, February 5, 2011

Dick Smith - problems buying a smart phone

Last week I bought a Sony-Ericsson Xperia Mini-Pro Smartphone from the Queenstown store of Dick Smith NZ. I tend to buy such products online, however there were two compelling reasons for buying in-store on this occasion:
1. The $399 price was merely a $20-30 mark-up from a lot of the NZ online stores
2. I was given the assurance from two staff that I would be able to replace the unit with a higher value product if I was unsatisfied. They did say that I could not simply return the product for a refund; however this would later be a wide digression from the rules as the store manager would ultimately explain.
Anyway, having talked to two sales people at the same store, I came away with the knowledge that I could get satisfaction from this phone, or that I could get a Nokia phone. As it turned out, I failed to check whether they had the type of Nokia phone I desired. Anyway, no problem, they have other types of Nokia phone.
Having bought the phone on the 2nd Feb 2011, I returned the product for an exchange on the 5th Feb. On this occasion I spoke to the manager/perhaps franchise owner. I was inquiring about whether they can order the Nokia E63 phone. The reason for returning the phone was:
1. To avail of the opportunity to exchange for the Nokia E63 phone within the two weeks required by the sales staff. The Nokia E63 is cheaper, so I would have to buy other products.
2. More importantly, the Sony-Ericsson phone is a teaser with great specs, but poor performance. Store staff had indicated that this was a popular phone.

The problem with the Sony-Ericsson Xperia Mini-Pro are the following:
1. Under-powered battery - the size of the Xperia battery is half the physical size of the battery in the Nokia E61i I currently own. The problem being that I am only getting 2 days of use rather than the 4 days with the Nokia E61i when I first bought it. I would expect that improved energy efficiency offsets the higher power load in the newer models.
2. Poor product balance - I work in different settings, i.e. at cafes, standing up, lying down. I found the Sony-Ericsson Xperia fine for typing when you stand up, though not as good as I thought, but it was bad lying down. The balance was poor for typing. The weight balance is far better for QWERTY based keyboards which are integrated into the phone. I also do not like the unsturdiness and looseness of the slide-out models. I have shied away from them before.
3. Android software - The software on the Android was also bad. Although I would be able to load free or cheap software after acquisition, this is not tempting when you consider the prospect that I might want to return this product to the manufacturer/retailer.

The reason why these were issues was because by asking for the terms I understood I had, I thought I was protecting my downside. My concern was that the battery was not good. Their were such proclamations on the internet; however the issue was not ambiguous because:
1. I could see no evidence of how many hours of battery life
2. There were customers (who clearly had not had a Nokia E61 or E63) who were satisfied with the battery life, and who

There were two problems with the service I received from Dick Smith - for me.
1. Product Disclosure - They have slimmed the specs to describe the phone. In the case of the Xperia mini-Pro, there was utterly no 'objective' or 'written' specs at all, so I was relying upon online information. I find this completely inadequate.
2. Sales terms Disclosure - The manager pointed out to me their sales terms 'in writing', displayed in bold about 1 metre above the head of the short staff who was serving me. I did not see it, it was not in my field of view. They displayed it on the receipt as well; which I did not look at, after all, I was buying a phone, not a receipt. Even the sign the manager highlighted. After I read it, it did not even state what he implied. So there is a lack of clarity with respect to the terms of sale. The staff should present the customer with a written outline of the store sales policy, and get them to sign it. That is proper disclosure.

The attitude of the store owner/manager was far more 'tighter' than the sales staff. Why? There is a disparity in policy direction as I asked two staff. It is probable that a lot of customers are asking the same question. The staff should just refer customers to company policy as a matter of routine. The response I received from the store manager was less than satisfactory. It went something like this: "Dick Smith is an international company and we don't make exceptions for customers". This sounded like a thinly veiled threat....'if you mess with the big guys. I highlighted that they were beholden to the law. No response. Might I gauge from this remark that customers in Australia are also treated the same way?

There is however a greater problem for stores like Dick Smith and Harvey Norman - where is their value proposition? They now offer less value than ever when they start adopting the measures they are adopting. The only reasons that I can see for buying in-store is:
1. Store credit - this is not a benefit for me - I'm not poor and I would not use store credit anyway, even if it was 2-years interest free....not just because a premium is attached to the purchase price.
2. Customer service - this is no longer there. I guess one has to empathise with sales staff. It is hard to provide customers with accurate info with so many products. This is reason for stores to add-value, not to spurn customers I would argue.
3. Immediate delivery - This is often a buying point but its not always compelling, particularly in this case since the product was not in stock when I inquired. I had to wait several days.

One of the problems for these stores is inadequate training. This is a global phenomenon. I buy products around the world and it is a rare case indeed where sales staff know what they are talking about. In this case, I did not trust sales staff to tell me the product specs. I looked online, and I protected myself 'on what I was told the store sales policy was', which ultimately proved to be false. I was not going to trust the manufacturer or the retailer with such questions. The problem I have is that the manufacturers have failed to come up with an objective test for product battery life. i.e. If you were to perform a certain number of hours performing a certain task, i.e. text typing, calling, playing music, then you would have an objective measure of your product's battery life. i.e. If you thought you use the phone 15% for music, 50% for texting, etc, then you could could measure the life of the battery. It would be good to have an idea of life over time as well, and better information on how to use batteries.

If you are looking for a smart phone, you can read my blog post on the issue here. In the meantime, I will escalate my complaint with dick Smith to a formal complaint.

When I listen to the person in-store and I look at the complaints website, I really get a different response. Is it just rhetoric, or does the company have a policy of culling bad news at head office, if you escalate the issue to them. Visiting the complaints site was indeed a 'different experience'.
"At Dick Smith you'll get the right advice by Talking to Our TechXperts".
I have a great deal of difficulty believing that of any electronics chain, though in fairness I did not rely on their 'technical skills' on this occasion. I go to paper source or manufacturer specs when I want technical info, as well as store feedback.
"We offer the best quality brands delivering the best solution to your needs every time".
Actually this was not my experience. They were understocked in the better Nokia brands like the E63, N71, N72. You have to go online for those.
"Satisfaction guaranteed"
Hard to believe that rhetorical claim is possible, given that customers can be unreasonable in their demands. Then there is the following:
If you find a lower price within 14 days of your purchase date, we will refund the difference*. And... if you change your mind within the same 14 days we will exchange or refund your purchase**.
All those asterisks is a bit disconcerting. You do have to read the fine print. Their price clarification is reasonable:
"Competitor must have a retail store. Price comparisons must include all delivery charges, and bonus offers. Product must be identical (e.g. same brand?model?colour). Confirmation of competitor's price is required. Excludes exclusive models. Competitor must be in stock (not available for back orders). No bulk purchases, retail quantities only. Excludes competitor's clearance lines, limited stock offers or Member ? Club ? Internet prices".
These terms are reasonable. The 'change of mind' policy however is not satisfactory:
** Change of Mind Policy: To be entitled, you must provide proof of purchase and the item must be in unmarked, original condition including all packaging and supplied components. Change of mind returns do not apply to Gift Cards, Recharge Cards and Vouchers, Music Downloads, Photo Processing and Imaging Products, Pre-Paid Mobile Phones, Vendor Direct goods such as Fitness Equipment, Made?Built to Order Products, Unsealed:- Computer Games, Music CDs, DVDs, Computer Software, Printer Cartridges".
This is not the same as what I was told in-store. I was told the product had to be sealed. This does not stipulate as such. The policy is also vague because the policy does not apply to certain products. This leaves open - what in fact does apply to phones? How does this relate to the customer 'satisfaction guaranteed'. Maybe it was never about the customer. Maybe its a play on words 'Dick Smith satisfaction guaranteed'.

I really think Dick Smith is really undermining its service here when it could have a better managed process. It needs to establish a process for each major product line describing the full specs of the product. Have the customer read in-store those specs so they understand, and to sign off on those product specs, sales policy, as well as directly dealing with customer issues. They can say 'But the Xperia is our best selling item, and we never get any complaints about them'. Well, deal with mine! Maybe you are systematically snubbing customers. Maybe those customers have subjective standards because they have never had a Nokia E61i or E63. The Dick Smith product disclosure was also lacking. Why was their policy pertinent to phones not presented at the phones display cabinet. Why? Because customers would see it?

There seems to be a company policy of keeping customers in the dark. Phones are a technical item, and company policy seems to be to evade that fact rather than to manage the process. One of my best quotes....I am sure I will be remembered for centuries coming:
'Risk is managed, not avoided'.
Clearly at Dick Smith the 'guarantees' are shallow rhetoric because I took steps to protect myself and the sales process has maligned me. Thereafter the responsibility is theirs because they designed the sales process; and they have the relationship with the manufacturer. That is why they are the custodian of the customer's interests to the extent that they are. If they don't want a paper trail - fine! - Design an online solution for managing the process. Really! Its not rocket science. These retail chains have really fumbled on their business strategy. The problem I suggest was that Gerry Harvey is not very smart and Dick Smith lost direction when it was bought out by Woolworths. Dick Smith is a pretty smart guy. I think Woolworths has failed with this doubt because its a small division and they failed to differentiate it from food, which is not so easily sold online.

I will keep you posted on how this issue unfolds. I will go back to the store to take photos of the camera display, the sales 'disclosure' high above the sales staff, and then escalate the complaint to head office.

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Tuesday, January 18, 2011

Retail associations as bad as Gerry Harvey

The Australian Retailers Association and Australian Sporting Goods Association are 'self-righteously' claiming that Harvey Norman and Myer were silly to proceed with their GST campaign. They label it as a 'public relations nightmare'. The problem is not just these two companies, its the pragmatism or 'moral relativism' of the industry associations as well. They are no better. This is not a 'perceptions' problem. There is no good way to increase taxes. The disaster for these two companies was not standing for an idea or principle; but rather for a 'self-serving agenda' which entailed extortion or the use of force through it at the interests of consumers or anyone. Doing it during Xmas or recession is a side issue. That just elevates the level of hostility.
There is a broader problem here of business being 'anti-principled', concrete-bound idiots only interested in making money, at the expense of 'minds'. They repress such concerns because of the political context in which they minimalise the importance of ideas by pursuing concrete 'materialistic' agendas. The misdirection of these complaints unfortunately leads us to a socialistic backlash; as if we need another collectivist revolution. That is the paradox...socialism undermines people's capacity to think, and we then get a reactionary political movement towards more government because people are injured by collectivist government. The so-called self-perpetuating myth.

Tuesday, January 11, 2011

Retailers penalised by government

There is another reason that retailers get a bad deal. The rents are high in Australia because the govt keeps property prices high by constraining the supply of property. We are one of the least densely populated countries in the world, yet councils/state govts with no income taxing powers extort wealth through restricting the subdivision of land. Apparently Australian rental rates are 2nd to New York. This of course is reason enough not to have a retail presence in Australia, or at least to make online sales the basis of your business.
This is not to suggest that the government should widen the GST tax, but rather that they ought to stop taxation and remove silly regulations, i.e. Greater accountability. The implication is that all retailers are penalised by the state.

Gerry Harvey - fairness or extortion

Assistant Treasurer Bill Shorten argues...big retailers displayed a "streak of defeatist protectionism".
This is unfair. Protection is characterised by the existence of tariff barriers, subsidies, import quotas and the like. This is not what the retail coalition is campaigning for.
They simply want equal taxation treatment of online sales, not a system that is tipped in favour of overseas operators. They don't want special treatment for themselves. They want it to be removed from offshore competitors.
The problem with this argument is that you don't achieve fairness by loading taxes on people. You achieve fairness by taking them off yourself. Gerry Harvey cared little about the impact upon others, his interest was 'equal slavery' to our government, as opposed to differentiated slavery. The argument is not solely 'equality' but a question of freedom. He was insensitive to others political and financial interests...people for whom a tax imposition means a great deal more to than it does to him. It did not help that he raised the debate during a recession and at Christmas. For this reason....I call him an extortionist...because he is effectively sanctioning increases on taxation for Australian consumers, when he should be attacking the stupidity of the taxation system and canvassing a 'user pays' system.

Market power in Australian retailing

This article offers one of the better analyse of the Australian online retail trade. It makes the point that Harvey Norman need not be exhibiting the pricing power. It may be wholesalers or manufacturers. The question is which? We raised this point in one of our blogs as well. I suspect the answer is that its certain manufacturers like Sony and Toshiba which have significant brand power. I think there is a tendency for retailers in Australia to mark-up those cheaper products to the Sony prices to make them appear more 'reasonably' priced. i.e. Most price-sensitive people will buy the lower-priced import, and retailers will mark-up their prices, knowing that that is where most customers will fall. It only works as long as people don't go online. i.e. So long as customers are ignorant. i.e. Scared of online transactions. Clearly the fear factor is disappearing and Gerry Harvey is starting to see it in store sales.