Analysis by Claire Reilly

Harvey Norman launched into the e-tailing world last week, quietly updating its company website with an online sales interface. The price offering is varied, with some products cheaper and some more expensive than the prices of Harveys’ competitors.

But in terms of understanding the nuts and bolts of the website, and exactly how much the consumer is saving by shopping online, one must dig a little deeper. The devil is in the detail, and the website’s terms and conditions certainly make for interesting reading here.

Harvey Norman exists as a network of independently-owned franchises, which may have made the move to a consolidated online store a difficult one. Many analysts have noted that Harveys’ structure is cumbersome, including Macquarie Equities Research analyst Rob Blythe, who said that a recent fall in Harveys franchisee profit margins “could indicate the franchisee model is cracking”.

In order to set up an online store within its existing business framework, the company set up Harvey Norman Online (HNO) as “an independent franchisee,” stipulating in its Website Terms and Conditions that “neither Harvey Norman nor any related body corporate of Harvey Norman sell any goods whatsoever”.

It also specifies that HNO “is not related to Other Harvey Norman Franchisees” and that goods for sale on the online store may not be available at franchise stores around Australia. Furthermore “where the Offer Goods [online products] are available from an Other Harvey Norman Franchisee, the price for the Offer Goods may vary from the Offer Price [online price]”.

So, despite the decision to opt for an independently-run online business, Harvey Norman’s franchise structure is still at play here. With this clause, Harvey Norman has essentially stated that the online store is within its rights to undercut other franchises.

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Another point of interest is the fine print on Harvey Norman’s Best Price Guarantee. Under the guarantee, if a consumer purchases a product from Harveys and then finds the same product for a cheaper price from a competitor, they are entitled to a refund of the price difference.

However, in the Guarantee Terms and Conditions, Harvey Norman stipulates that “the Best Price Guarantee does not apply where the competitor has an online store only, and does not have a physical retail store in Australia”. It is also void if “the identical product is advertised…[by] commercial resellers or distributors who sell direct to the public, parallel importers, grey importers [or] direct importers”.

This condition becomes relevant when considering JB Hi-Fi’s recent move into direct importing and the launch of Canon’s direct-to-consumer online camera store. While consumers may cite JB’s lower price on the Asus Eee Pad Transformer to get a refund from Harveys, they may not do so for one of its direct-imported Nikon cameras.

Without any physical stores in Australia, Gerry Harvey’s arch-rival Kogan also falls outside the realms of the Best Price Guarantee. If a consumer buys a 64GB Wi-Fi Only iPad 2 for $783 from HNO, only to find it on Kogan’s site $94 cheaper ($689)*, they are not covered by any guarantee.

Considering the changing landscape of the Australian retail industry – especially the fast-evolving world of online retailing – one may well question just how viable and relevant this so-called "Best Price" guarantee will continue to be.

*Prices correct at time of publication.