This is why you’re losing market share, Gerry

Harvey Norman Store

Image credit: Scott Lewis, flickr

I needed to buy an iPad cable today. Normally, I’d jump on eBay and grab a cheap cable and wait for it to come in, but I was in a hurry today so I went to my local Harvey Norman store, expecting to pick up a cable for around $15.00

Oh, boy.

I have a quick look around, and find what I’m looking for. It’s a braided lightning cable, and it’s on special for $20. “That’s a bit much,” I think to myself. “I’ll look around and see if I can find anything else.”

A sales girl approaches, and asks if I need any help. I reply, “Yes, please. I’m looking for a replacement cable for an iPad mini.”

She then proceeds to show me the range – which is spread all over the store, in three different sections (not including the stand I noticed earlier). All of the cables are off-brand, and cost between $25 – $40. “These seem a bit expensive. Do you have any genuine Apple cables?” I asked. As she walks me to another section of the store, she replies, “I think we’re out of the 1.2m cables, and they’re $39.00…Yeah, we only have the 2m cables – they’re $49.00”

We walk back to the last section, where I ask about the Belkin cables. “Is there any movement on the price?” I ask. “Whatever’s cheapest.”

She takes a random cable off the shelf, and checks the computer.The sticker price of the cable is $34.95 – not the cheapest cable on the rack in front of us. She checks the computer, and says “I can do it for $30.00

SERIOUSLY?!?

I ask for your best price, and you come back with a < $5 discount? I don’t think so. I wasn’t expecting to get it for $10, but I was looking for around $28.To be honest, I probably still wouldn’t have bought it, but we could have worked something out.

Plus there was the fact that she didn’t choose the cheapest cable – it wasn’t even the cheapest cable in front of us. Purposefully ignoring your customers isn’t a way to make money.

So, I declined her “generous” offer, and started to leave. One the way out, I decided to pick up one of the $20 cables I had noticed on my way in. It wasn’t really cheap, but I needed one today, the shops were almost closed, and I couldn’t be bothered going anywhere else.

I walked up to the cashier and handed her the cable. “Just this, thanks,” I said. She rang it through and gave me the total.

“That’s $30 please.”

“I’m sorry – how much was that?”

“$30”

“They’re advertised for $20 on the rack behind you.”

She corrected the invoice, I paid, and walked out. I don’t think I’ll ever walk back in again.

What the heck just happened?

OK Gerry, let’s take a look at the issues I had:

  • Your cables are stocked in five different sections of the store.
  • Your prices are vastly inflated.
  • You had no stock of what was probably the most popular cable
  • The sales staff couldn’t be bothered to knock $5 off an item.
  • When I actually did decide to buy something, I was overcharged.

Stock location

I get it: it can be hard to keep things together. But five different sections is just too much. I’ll give you some leeway on this, because the Apple cables were in a locked glass case – I can understand that. Still, put your stock in one place.

Overpriced stock

This has always been an issue for you. Your business model seems to be: “put out a catalogue every couple of days with really cheap stuff, and force our salespeople to switch-sell to the more expensive stuff, or hope that customers don’t notice that we’ve charged them more at the till.” Even better are the customers that haven’t seen the catalogue and buy straight off the shelf.

I understand that you’re a business and you’re in this to make money. But there’s a line between profit and greed, and your prices don’t just cross it, they set it on fire as they pass.

No stock of popular items

These things happen. However, the sales person didn’t say “…but we have some more on order and they should be here in a few days.” or “…but I can order one in for you.” This was probably because I told her I was looking for the cheap option, but still, this isn’t the first time it’s happened. Catalogue items are even worse. I’ve lost count of the number of times an item has been advertised in the catalogue, and there’s less than three items in the store. Most times, the item advertised is not in stock at all, and hadn’t been for months. Not cool, man.

Resisting discounts

I have to get something off my chest: I used to work for Harvey Norman. I was a computer technician – I processed warranty repairs, provided customer support, that sort of thing. I was damn good at my job too. Customers would wait for 20 minutes to speak with me, because I was the only person they trusted. I had fan mail – I often had multiple letters from customers in the “Raving Fans” segment of your internal newsletter. I also spent some time on the sales floor, and I know those guys and girls do it tough. The pressure is on to make money – that’s why the standard hourly rate is (or was – it may have changed since I left) below award rates: you make up for it in commission. If you don’t make enough commission this month, the pay packet is topped up to award rate. So I can understand not wanting to slash prices to the bare minimum.

But the thing is: I know how much those things cost. I know how much gross profit is made on those items, so I know when I’m being ripped off. I don’t mind paying retail prices – everyone has to make a living, and you can’t sell things at cost. But when I know for a fact that the salesperson could have sold that cable for $20 and still made a profit, I’m going to walk if you offer me $4.95 off. When you can throw in a $20 USB cable with a $70 printer, you know there’s margin somewhere.

Overcharging

This is a difficult one. There’s a lot of stock in the IT section of the store, and it’s all individually priced. If you change the price for an item, every sticker for that item needs to be changed, and you need to match up the batch numbers etc. The stickers don’t get changed nearly as often as they should – anyone who’s stickering isn’t making any money, and everyone wants to make that bank.

That’s usually a good thing – the sticker price almost never goes up, so the customer will experience one of two things: they will take an item to the counter and be pleasantly surprised that the cost of the item is less than they expected, or the sales person can be sneaky and say “OK, the sticker price is [price on the sticker], but I can do that today for [price in POS].”, thus allowing the sales person to appear as though they’re giving the customer a significant discount, without actually sacrificing any commission dollars.

But, there’s a real problem when you’re advertising something in the store, and the POS (Point of Sale) system rings up a higher price. Unless people are paying attention, they’ll be paying a lot more for their goods. This is unethical at the very least. I seriously doubt that you’d adapt the supermarket scanning policy and refund the customer the entire cost of that item if they paid more than advertised.

I should point out that this is not an isolated incident. I purchased a computer game when I was working in the store. It was advertised on the shelf for $5, which was a bargain. When I purchased it, the cashier advised that the purchase price was over $25 (I can’t remember the exact amount, but it was very high). Luckily, I caught that error.

Bottom line: if you’re going to reduce the price of stock, change the price in POS. I know that POS doesn’t let you change the price for an item for a temporary time. The POS system really is a POS. It hasn’t changed since 2000 – it’s time to update. Get with the times, and stop profiting (literally) from other people’s inattention.

Where to from here?

I hope I’ve given you some constructive criticism here. Retail stores can work, but you need to be fair. You’re not the only game in town any more, and you can’t trample over customers while chasing the almighty dollar.

JB Hi-Fi understands this. They have plenty of stock, friendly staff, and reasonable prices. The staff will haggle with you, and offer generous discounts. The salesperson could still have made commission from me by offering a slightly larger discount, which would not have affected commission by more than a few cents, and a request to remember to ask for her the next time I came in looking for a bigger-ticket item. Who knows, I may have been looking t upgrade my Macbook and buy a drone with a GoPro. You never know who will be coming in for a cheap cable today, but replacing their fleet of work laptops next month.

It’s not online stores and overseas markets killing your business. I could buy a $3 cable from eBay and wait a few weeks, I could spend around $15 and buy one from Amazon, including import taxes, or I could spend $35 and buy one from your store. I’m willing to pay more for the convenience of being able to take it with me today, but I’m not sure I’m willing to pay $20 for the privilege.

You can cry and whine and stamp your feet, and complain that overseas online stores should be forced to charge GST on all purchases despite the duty-free purchase price, but it won’t have any positive effect. The issue is not the Australian people – it’s your business practices, the greed of some of your proprietors, and the “I’m only interested in the high-margin products” attitude of some of the sales staff.

JB Hi-Fi gets it – treat customers with respect, and they’ll keep coming back, even if it’s cheaper somewhere else. The “value” your stores may provide is not worth the premium you’re expecting consumers to pay.

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