The Harvey Norman juggernaut continues to push aside all before it with nearly $60 million splurged in the last two months on a 21-store expansion. But arch rivals Dick Smith Electronics and the Coles-Myer group remain unfazed and are also planning expansions of their own.
Any which way you look at it, expansion moves by the big players spell potential danger for the non-service-providing independent dealers as computer retailing moves further into the mainstream.
Retail business boost
In a swift and decisive round of acquisitions, Harvey Norman has significantly boosted its retail business over the last two months through 21 new outlets in New South Wales, Western Australia and Tasmania.
The acquisitions, involving a capital outlay of "approximately" $58.5 million in total, were described by Harvey Norman's national financial manager, John Skippen, as "easy expansion".
"We were in the process of setting up in regional Western Australia and were looking at Tasmania, but in both cases were approached by local retailers who obviously thought we were going to have a negative impact on their business," Skippen said. "So they approached us to see if we were interested in taking over.
New additions to the Harvey Norman business include the $45 million investment in May for the seven-store Joyce Mayne organisation in NSW, $10 million for seven of Loughrans' stores in Tasmania and $3.5 million for a group of Wesfarmers' stores in regional Western Australia.
Prior to the arrival of Harvey Norman, none of these stores had any involvement in computer retailing and all but one in Tasmania and Western Australia will now have new computer franchises installed in direct competition to any existing computer dealers in their vicinity.
Skippen said Joyce Mayne would keep its own identity but both other chains would be rebadged with the Harvey Norman name, while all three would be adopting the franchise model which has proven so successful for the parent company.
In response to the news from Harvey Norman, Frank Kavanagh, Myer-Grace Bros' national buyer for computers and software, said: "We do have some exciting expansion plans of our own and will be announcing those to our suppliers in the next few weeks."
Over at Dick Smith Electronics, public relations manager Rachelle Connor concurred that expansion opportunities are waiting in the wings.
"We are continuing with our own plans and are pretty confident with the direction we are heading but it is not necessarily the same as Harvey Norman's," she said.
"We have plans for lots of new Powerhouse stores in the future. At the moment we are only prepared to announce that we will soon have an extra one in Sydney."
Harvey Norman's general manager, computers, Tony Gattari, sees huge potential in Western Australia and Tasmania as well as healthy competition with Joyce Mayne in NSW. He also alluded to the fact that there are further expansions afoot in the near future with stores planned for Marion in Adelaide during September and a second store at Enfield (SA) in 1999 while a Darwin outlet is also scheduled for next year. Neither South Australia nor the Northern Territory have any Harvey Norman stores at present.
"We have seen a great surge of sales in mass retailers and see enormous potential for growth of computer retailing in the future," Gattari added. "It is our opinion that rising sales have come about as a result of two things: first, the clampdown on sales tax evasion has had a positive effect; and secondly, the broad media attention given to certain failed dealers has assisted the more traditional, well-known retailing names."