By Patrick Avenell
The closing down sales conducted by the receivers of collapsed retailers have created unprecedented price erosion and historically low consumer expectations on the price of technology, Harvey Norman chairman Gerry Harvey claimed.
Following the collapse of WOW Sight & Sound and Retravision Southern, the receivers of both these entities commenced closing down sales that included some of the lowest prices ever on technology, such as the now infamous $9 auction of Retravision stock held at GreysOnline.
In addition to this, following Woolworths’ decision to sell off its Dick Smith network, that chain has also launched a campaign of sales to clear stock.
“2012 proceeded to be the most challenging year due to unprecedented price and margin deflation in our television and devices categories,” Harvey said. “External factors such as the demise of WOW Sight & Sound, the closure of numerous Retravision stores and the restructure of the Dick Smith brand created a glut of product being sold at never before seen prices.”
During the 2012 financial year, Harvey Norman Limited recorded a net profit after tax of $172 million, down 31.6 per cent from the previous year.
At the same time that Harvey blamed these sales for reducing average sales prices, he also expressed his optimism for a retail market with fewer competitors.
“We anticipate that the home entertainment and technology category will continue to remain volatile and uncertain, however, with further retailer and supplier rationalisation occurring, there is the opportunity for improvement.”
Harvey said Harvey Norman was showing resilience in the face of these challenges, due to its diversified product offering and its “Omni Channel Retail Strategy”. Harvey said this strategy was now the “backbone of the business”.
One of the main reasons for this steep decline was Harvey Norman’s decision to reduce fees and increase “tactical support” for its franchisees.
“The aggregate amount of tactical support provided to franchisees was $124.19 million in the current year, compared to $60.37 million in the previous year,” Harvey said.
At the close of the 2012 financial year, Harvey Norman had 702 franchisees operating in 213 outlets. There are also 76 centrally owned stores in the network. Total revenue from all these stores was $6.2 billion, down 6 per cent from the 2011 figure of $6.63 billion.
“The discretionary retail sector in Australia has been affected by a perfect storm of challenges, including deteriorating global economic confidence; a prudent consumer; deflationary headwinds, particularly in the AV/IT categories; and a high Australian dollar limiting growth in non-mining relating sectors,” Harvey said.
“This has seen consolidation occur in the AV/IT category and has forced many retailers to struggle to maintain margins in the fight for market share.”
This article first appeared on Current.com.au