He is one of the true high flyers in Australian business, but surprisingly Gerry Harvey, CEO and one of the founders of Harvey Norman has a reputation for being well grounded and approachable. Australia’s culture of equality is deeply ingrained into his thinking and defines the way he does business. Despite being one of Australia’s few billionaires, Gerry Harvey has been known to travel economy class when he flies and is not averse to staying in a 3 star motel when it makes sense. From time to time he has reportedly greeted visiting executives from abroad in bare feet and when it comes to his own employees – his office door is rarely closed. He has a reputation for giving people who demonstrate initiative the opportunity to realise their potential and he will tell you that a key to his success has been getting the right people and giving them the support they need. Gerry Harvey is not one to follow conventions either. In some circles he has been described as a pioneer in retailing and a bit of a maverick. In 2006 The Bulletin listed him as one of the 20 most influential business leaders and he now has built an empire that spans across Australia, parts of Asia and Europe.
Harvey is the perfect example of what is possible in retail if you put your mind to it, regardless of your background. Gerry Harvey grew up in a pub near Cowra in central NSW and at the age of 15 decided to leave school. He eventually went back after securing a scholarship and went on to university to study commerce while working a day job in a bank. At the time the average wage for a junior was equivalent to $8.00 a week and Harvey very quickly realised this income wasn’t going to cut it. As it happened he also hated university, so he decided to drop out and landed a job as a door to door salesman firstly selling vacuum cleaners and later selling television sets. At the time, he received a commission of what would have been $10.00 for each vacuum cleaner sold. In an interview with The Bulletin he said, “They reckon a salesman is born, but I reckon I proved that wrong. I couldn’t sell fish on Good Friday. I was bloody hopeless”.1 He persisted with the job and learnt the skill of selling by studying the other people he was working with. Fortunately, he had the gift of being a fast learner and ultracompetitive and was eventually earning several hundred pounds a week. He even held the record for selling the most vacuum cleaners which at the time was 31 units in a week.
It was during this time Gerry Harvey got the idea to offer goods on a “buy now pay later” deal interest free. He would use the interest free offer as a hook to close a sale and was able to do so because he would purchase the vacuum cleaners wholesale at equivalent to $100 a piece and sell them for what would have been about $400. The salesman was transforming into a retailer.
It was also during this period he struck up a friendship with Ian Norman, who eventually persuaded Harvey to go into partnership with him. The pair invested in a Sydney auction house in Sydney in 1961 and formed Norman Ross. At the time Harvey was only 22 and their discount store was more or less a first of its kind in Australian retail.
In the early stages they even hired a rock and roll band to play outside their store to attract the crowds. To secure the right stock at the right time, Norman and Harvey advertised in local papers and offered suppliers a little more for their merchandise provided they received extended payment terms. Harvey says, “This gave us the capital to grow and from one shop we expanded into several stores”.2 Norman Ross became one of the most successful discount retailers in the country with 42 stores throughout NSW and Queensland generating $240 million in turnover. In 1982, Gerry Harvey and Ian Norman cashed in their chips, selling their operation to Grace Bros.
It wasn’t long before the temptation to get back into the retail game took hold. In the same year they set up the first Harvey Norman store in Auburn Sydney. Harvey says that he only intended to open one shop at the time, but the first store was such a success that within three months they opened a second store. In the space of five years Harvey expanded the business to 13 stores throughout New South Wales before listing the business on the stock exchange. In 1987, the same year the business went public, Harvey established the home computers line as part of electrical sales. A number of industry experts have argued that Harvey’s understanding of market trends and his ability to respond to them with impeccable timing is one of his key talents. In this instance, Gerry Harvey had picked a winner.
The home computer market exploded and in the early nineties Harvey Norman opened its first computer superstore – the first of its kind in Australia. In an interview on Channel Seven’s Sunrise, Harvey said that people told him he was mad, but the moment the business opened up its doors, it took off like a rocket. The business rapidly grew beyond 100 computer superstores and if someone had have bought shares in Harvey Norman in 1987, they would have multiplied their money about 150 times in the space of 14 years.3
The other factor that gave Harvey Norman an edge over its competitors was specialisation. Gerry Harvey realised that customers wanted stores that offered staff with expertise in the product ranges they sold so they could be useful in assisting with their purchase decisions. Harvey developed his own franchise model to suit the needs of the business by making each department a separate franchise operation. His line of reasoning at the time was that by giving each person a slice of the action, you would get the very best out of them. However, the problem he saw with the franchising models at the time was the high cost of buy in. He also understood that often franchisees made very little out of their business.
With the Harvey Norman franchising system, franchisees don’t pay to become part of the operation. Harvey wanted to make sure there was real incentive for franchisees so they are driven to look after customers the way he would. The system is quite simple. Harvey Norman charges its franchisees an ongoing franchise fee which gives Harvey Norman as much return as possible while ensuring the earning potential of franchisees is not compromised. Franchisees operate within certain guidelines, but are given a lot of flexibility in making decisions in their day to day operations. Head office provides advice when necessary and monitors various KPIs such as inventory levels, gross profit, wages to sales ratios and how much time they are spending in the business. The business really supports franchisees and, if they are struggling, head office might move them to a different store or temporarily subsidise them rather than immediately terminating the franchise. According to Harvey, there is one franchisee who would have pulled in over three million dollars in 2006.4
It’s clear that Harvey believes it’s his people that have made his business successful and that they perform best when properly valued. His faith is reflected in staff loyalty – he has many staff members who first joined in the 1960s.
As Harvey Norman has gone from strength to strength, Gerry Harvey has expanded the chain beyond Australian shores. He now has operations in New Zealand, Malaysia, Singapore, Ireland and, interestingly, Slovenia.
Harvey Norman opened a store in Slovenia’s capital Ljubljana several years ago and recently opened a second store in the coastal city of Koper. The logic behind choosing Slovenia is that it is an ideal part of Europe to set up a prototype operation. It is cheaper to set up shop in Slovenia than countries such as Germany, Switzerland or France, yet it is the richest of all the former Yugoslavian countries. Its location is also attractive, as it is surrounded by Austria, Hungary, Italy and Croatia. The second store in Koper is only 20 kilometres from the Italian city of Trieste. Koper attracts a large number of wealthy tourists from northern Italy, which positions the group perfectly for a move into northern Italy in the future.
Gerry Harvey fully intends to become Australia’s first world retailer. Harvey Norman now has over 200 stores and owns a number of other companies including 55 percent of Rebel Sport, bulky goods retailer Domayne and Joyce Mayne. Harvey also has a number of other interests in property, share trading, and cattle. If that’s not enough to keep him busy, he also has a passion for horses and is a joint partner with John Singleton and Rob Ferguson in the thoroughbred auction house, Magic Millions.
He says that money has never been the driving force behind his need to expand both his core business and other interests, as he doesn’t spend a lot on himself apart from on horses. In an interview with Ljubljana Life, he said his competitive nature and his desire to consistently achieve have kept him going. He also said that when it comes to retailing, he gains satisfaction out of seeing people develop over time. When someone who started out as a salesman becomes a business owner through the Harvey Norman system of franchising, he feels an enormous sense of pride.5
Gerry Harvey’s love of retail continues to motivate him at the age of 67 and he has no intention of stopping in the near future. He believes that retail is a career that is highly underrated and undervalued, and it should carry as much merit as any other profession such as medicine, law or dentistry. He has pointed out that many fortunes have been made in the retail industry across the globe over the past 150 years, including the Wal-Mart family who are the wealthiest family in the USA.6 Harvey’s enthusiasm for the industry coupled with his ability to keep it real, not follow the crowd and try something new have served him well. No doubt he will continue to surprise and inspire us all for many years to come.
