Branding tips for retail brands – What we all can learn from Gerry Harvey and Warren Buffett

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“Be fearful when others are greedy and greedy when others are fearful” Warren Buffett 1986.

It seems Gerry Harvey follows this adage to a tee.

In the middle of the Covid-19 pandemic, his company Harvey Norman has had one of its best years increasing revenue to June 30, 2020 by 7.6% to $8.23Bn with a jump in net profit of 19.4% to $480.5million. Gerry has been quoted in the press saying he has never seen times likes this! In fact, the Australian sales in the new financial year have increased 38.4% even though 18 stores have been closed in Victoria!

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From a branding point of there are a number of things that we can learn from Gerry.

- Don’t cut back on marketing – just because everyone else is.

As we read the paper version of the Sydney Morning Herald, we notice a couple of things about it, firstly it is half the size it was before the pandemic, clearly there is still plenty of news but a whole less advertising -save for a whole 8 page  lift-out section from Harvey Norman on Saturday and from Domayne (owned by Harvey Norman) on Sunday. These lift outs are easy to read and beautifully and clearly laid-out.

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- Don’t reduce price – Price is the enemy of branding!

It is clear from the increase in Harvey Norman’s net profit that Gerry Harvey did not increase revenue by reducing price. In fact, you could argue that he actually increased price or refused to discount.

Too many Australian companies try to improve revenue by discounting, but this is simply a race to the bottom of a never-ending pit. Rather, look to what Harvey Norman does, instead of discounting the price of items they offer the following (as per the current lift out quoted above):

a) 60 months interest free – no deposit and no interest – way before Afterpay, Harvey Norman was offering an instalment plan – what’s more he gets the manufacturers to fund this plan

b) Bonus Harvey Norman gift card – up to $500 when you spend from $1,000 to $10,000. Once again, this is not a discount on an individual product, rather a 5% discount on total purchase and locks customers into buying more product from Harvey Norman

c) ‘Bundle and Save’ offers – e.g. Cooking packages from Smeg, Westinghouse, AEG etc. These offers are provided by the supplier normally for volume purchases and again provide value to the Harvey Norman customer but are not affecting Harvey Norman’s margin.

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- Finally, Harvey Norman is still very focused on retail. In fact, if you listen to Gerry Harvey he believes digital sales will only be between 10% and 30% of his total sales. At the moment 90% of sales come from physical shops.

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This demonstrates that while online is important, it is just one part of your channel mix - or the way you deliver products. What is critical is that they are all aligned.

So that you are not doing better from shopping online vs going into a store. Online simply provides a channel for people who can’t get to a store or don’t need or want to talk to a salesperson.

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What can we learn from Gerry Harvey and Warren Buffet:

- Don’t invest less on marketing – just invest smarter. You may well be able to increase your advertising and marketing presence. It is clear that Harvey Norman is a fan of Warren Buffet ie; “the time to be ‘greedy’ is whenever everyone is ‘fearful’”. Harvey Norman are using traditional media to increase their share of voice and customer offers where others have retreated.

- Don’t discount but use pricing to add value. Pricing techniques include: 1. offering interest free and instalment plans (Afterpay etc), 2. Reward customers for volume buying by giving percentage off total purchase and, 3. Use ‘bundle and save’ offers to represent buyer value (and drive incremental sales)

- Physical stores are not going to disappear. There will be foot-traffic after the pandemic and there will be online sales. The trick is to make them work together seamlessly.

So, our advice at BrandQuest is to follow Gerry and Warren’s lesson, and see if you can prosper when everyone else is fearful.

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