Kogan accuses Harvey of fear-mongering over impact of dollar drop on online retail
- 21 June, 2013 07:45
Let the retail wars begin (again). And they begin online with a blast for bricks and mortar giant, Gerry Harvey, from online mogul, Ruslan Kogan.
As the Australian dollar dropped to a 33-month low, around the $0.92 mark against the US dollar, Harvey Norman chairman, Gerry Harvey, and AMP Capital chief economist, Shane Oliver, were both quoted on its impact, forecasting price hikes of up to 10 per cent including petrol, whitegoods and electronic equipment.. Harvey was quoted as saying: "We're negotiating with manufacturers as we speak,. Our prices will go up. Everyone's will."
Read more: http://www.smh.com.au/business/prices-to-soar-as-dollar-falls-economists-and-retailers-warn-20130620-2okqv.html#ixzz2WnSUHXJC Not so, says Kogan, Founder and CEO of Kogan.com, which is set to record $300 million in revenue in 2013.
In a statement, Kogan,claiming the attempted fear-mongering by saying that online prices will soar was particularly concerning. While Kogan is not in a position to comment on what Harvey Norman and other major bricks and mortar companies are going to do to their prices, from the perspective of online retail - this pricing assertion is simply not true, Kogan said in a statement. It claimed the latest Credit Suisse consumer electronics pricing index clearly shows the price of technology dropping at Australia's biggest online retailer, and the price gap between it (Kogan.com) and the bricks and mortar stores (Harvey Norman, JB Hi-Fi, and Dick Smith) widening.
"It's ludicrous to have a bricks and mortar dinosaur out there in the media telling the public what online retailers are going to do to their prices. Gerry should not be speaking on behalf of our industry when Harvey Norman is not a real part of it, and does not understand online retail," Kogan said. "It's very interesting timing for Harvey to come out with these comments, veiled as a community service message. I think Harvey Norman is looking at some dismal numbers to end the 2013 financial year and this is an attempt at urging people to buy something at his stores before June 30.
When the AUD was high, Gerry was whinging that people are buying too much from overseas. When the AUD plunges, Gerry whinges that prices will go up. When prices are low, Gerry whinges that he has to sell more to make the same profit. When the prices increase, Gerry whinges that people will buy less. What does the man want? How do we appease him?" Kogan said some ome retailers use the excuse of a falling Australian dollar to raise prices, but this should not be the case, especially in the consumer electronics industry. The fact is that the way technologuy is manufactured is always getting smarter and more efficient.
To put this in perspective, the average $200 smartphone now has over 100x more processing power than the billion dollar computer system used by NASA to land a man on the moon in 1969. This trend has never stopped, he said.
"A few years ago a 46" LCD TV used to cost over $3000. Now we sell them for $439. Efficiency in manufacturing technology advances much faster than any currency movements. Even with the dollar plummeting nearly 10 per cent in the last two months, the prices of Kogan TVs are cheaper than they've ever been," Kogan claimed. "Consumer Electronics is one of the most competitive industries in the world, and it has been this way for a long time. The currency exchange is something that is a constant for all retailers and manufacturers. This means that while we compete against each other to win customers, the business with the most innovative business model and the highest level of efficiency will always win.
"What's not sustainable cannot be sustained. As such, you are more likely to see some dinosaurs of retail go out of business rather then cut the margins of their already unprofitable business models." Kogan said technology made the world a better place. The reason people now buy more technology than ever before is because it is an investment rather than an expense. When people bought any device it improved their lifestyle by much more than the ticket value of that item.
A smartphone, while it costs you around $200, actually improves the way people communicate, keeps them connected to family, friends, business colleagues and enables them to research information on the go at the press of a button. This added much more than $200 of value to their lives.
"As such, we never see people putting technology purchase off till later. Even through the GFC, we saw a massive spike in sales. People may cut back on eating and travelling but they won't cut back on items that significantly and instantly improve their livelihood, Kogan said. "I can confidently tell the Australian public not to worry: the prices of your technology purchases will be cheaper in the future than they are now. That is the promise of an efficient business model designed for smart shoppers."
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