Deal direct and you're out!: Harvey Norman issues ultimatum to vendors

Deal direct and you're out!: Harvey Norman issues ultimatum to vendors

In the face of rumour, innuendo and cold hard evidence that its suppliers' are moving towards direct-selling models, retail steamroller Harvey Norman has "drawn a line in the sand" and will boycott any vendor who sells direct.

Tony Gattari, HN's general manager, computers and communications, feels the traditional distribution roles of manufacturers, wholesalers and retailers are under threat because all the major global players are "living in fear of the so-called 'Dell model' ".

"There is going to be an almighty ruckus in the industry soon and it is fundamentally to do with the roles of the manufacturer and the retailer," Gattari said last week.

"We are now moving into this incredibly dangerous area where global vendors are beginning to feel they have to sell direct because of the success of Dell and the Internet.

"The traditional channel, certainly Harvey Norman, is not going to lay down and die for these vendors. We will fight them all the way for our rights in this market," he said.

There is no doubting the Internet is changing the way computers are being bought as well as manufacturers' attitudes towards the retail market, Gattari said. As a result, his organisation is positioning itself for a stoush to retain customers and is prepared to throw the next punch.

Taking a stand against this invasion of retail turf, HN is asking all retailers - large and small - to join its proposed boycott of any manufacturer incorporating a direct-selling component into distribution channels. "It is just not on," Gattari exclaimed. "Let us go into this battle with unity."

To start the ball rolling, Gattari said he was going to send a memo to the com-puter franchisees of "all Harvey Norman and subsidiary companies", which in part will read as follows:

"The continuing financial security of the holding company and its franchise operators is a promise we make to all our proprietors. Attempts by manufacturers to sell direct to our customers jeopardises our business.

"We do not, cannot and will not support those companies who wish to become competitors to Harvey Norman.

"Trading [with them] will cease if this occurs. It is that simple. Head office will advise you of those occurrences."

It's simply good business, according to Gattari. "Direct-selling manufacturers are the greatest threat we have ever faced in the channel and I think any dealer supporting vendors with that sort of strategy is digging its own grave," he said.

"If we have to compete against our manufacturers and suppliers in selling product, our fundamental rights as a retailer are being threatened and we will not let that occur without a fight.

"There are no grey shades here," he said. "It is a black-and-white issue. We have drawn a line in the sand and we are not going to move.

"We cannot stop them from doing what they think they have to do but we would be remiss not to protect our interests and hit back if we have to.

"As far as we're concerned, if they want to do retail business then they can do it by themselves."

Feeling that a united front of retailers could persuade the big names from pursuing online direct-selling models, Gattari has some clout to wield. The organisation boasts over 100 outlets around Australia and New Zealand and projected 1998/99 computer and communications sales of $520 million.

"We can't stop them but we can certainly stop buying from them," Gattari claimed.

"I am looking for and asking for support from our competitors. We are fighting the same battles and we want to call all retailers to arms so that we can face this challenge on a unified front.

"There have been numerous triggers to this and ARN has been writing about a lot of them recently," Gattari said. "Everybody in computer retailing is threatened by these moves by manufacturers and I would suggest that there is a lot more positioning going on amongst the big players than what has been uncovered or announced.

"The industry has to protect itself. No one else will do it for them. One of the ways we can do that is to just not deal with companies who want to compete against us."

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