Can Harvey Norman reconcile its enormous investment in bricks and its need to add more value to its online presence?

Harvey Norman’s legacy retail model is simply not a good fit for its proposed online venture, but is it dead in the water before it floats?

Harvey Norman stores are franchises which are part owned by Harvey Norman Holdings and the franchisee. Gerry Harvey suggested that his online foray will “cannibalise” his franchises. This statement suggests that he will be selling online at store prices which will be easily comparable and uncompetitive.

It’s no wonder Mr Harvey doesn’t think the venture will turn a profit. It probably won’t and is perhaps, at least partially, motivated by shareholder pressure.

So can Harvey Norman reconcile it’s enormous investment in bricks and it’s need to add more value to its online presence? Probably, but it doesn’t look like the current strategy will achieve this goal.

The move has been widely slammed by online competitors who, for some reason, see Mr Harvey as the face of old school retail. The word “dinosaur” has been thrown around a bit.

The fact is that Gerry Harvey is a shrewd operator, he has changed his business before, adjusted to the times, and succeeded when faced with larger threats than this. Plus, he probably doesn’t give a shit what his competitors think of him or his business.

But is it all doom and gloom for the idea of Harvey Norman moving online? I don’t think so.

Already the next phase of online commerce is visible on the horizon. Harvey Norman may have lost round one and some successful startups (and some vocal upstarts) have gained a foothold in the market, but keep an eye on Gerry Harvey.

Harvey Norman is faced with the dilemma of either being competitive online and risk bastardising their traditional retail market, or sell online uncompetitively to preserve the retail franchise model. The first option is pointless and the second is dumb.

I hope the folks at Harvey Norman simply stop thinking of the dilemma they have in terms of “If we launch online it will devalue our retail operation”.

There are a raft of smart strategies in the new online commerce landscape for Harvey Norman outside the product based “list, sell, and ship” of his competitors.

I say dispense with the idea of creating a product based online store. Gerry Harvey has been resisting it because he knows the “pointless and dumb” equation. Use a model which incorporates the stores to either ship or as a pick up point. Take advantage of the geographical spread of the stores and offer localised deals. Move away from single sale and ship offerings. Move straight to the next generation of collaborative procurement models and use your brand to leverage social networking to spread deals.

There is too much focus on the challenge for Harvey Norman to mitigate online competitors by becoming one too. That just won’t work. I’m getting sick of the personalisation of the argument with Gerry Harvey becoming the pin up for “old retail”. In a lot of ways I hope he kicks some ass with this opportunity.

Mr Harvey, there’s another way. There are online models which will fit the Harvey Norman structure without killing traditional retail.