Finding new store sites ‘impossible’: Harvey Norman

Harvey Norman says it is struggling to find sites large enough for its flagship stores.

Billionaire Gerry Harvey says it’s impossible to find suitable land for the next rollout of Harvey Norman flagship stores in Australia and will settle on redeveloping one of the group’s pre-existing Melbourne stores.

Harvey and his wife Katie Page, chief executive of Harvey Norman, say it is too early to divulge traffic volumes at their first flagship store in Auburn, which at 16,000sqm is the group’s largest worldwide.

Built in the geographic heart of Sydney, it opened in October and followed the successful rollout of seven flagship stores in Singapore, Malaysia and Ireland.

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The flagship stores cost about $50 million to develop plus an extra $10 million-$20 million in fit-outs.

“We want to roll out a flagship store in every state,” says Ms Page, adding that sales in its first flagship in Singapore spiked soon after its opening.

“In Singapore we had a budget for the first six months. We have exceeded our budget,” she says.

“But we will never get a site in Australia as big as Auburn.

‘‘The problem is finding sites … we want flagship stores in every state, particularly Brisbane and Melbourne.’’

On the retail front, Page, who oversees more than 200 Harvey Norman stores in Australia, says one of the biggest recent sellers is the Dolce & Gabbana small appliance range. She says the $800 kettles, toasters and juicers have sold so well the Italian company is extending its range.

Harvey Norman Auburn

Harvey Norman’s Auburn flagship store.

Page says the heavily decorated Smeg appliances, popular in Italy and France, are also selling well in Australia despite the relatively small population.

“We started working with small appliances several years ago when they were black or stainless steel. Now it is a really strong category for us.’’

Page says the Auburn store is tracking well and she will assess its performance at the end of June. “Gerry and I want to have a flagship store in every state,” Page says. However, the difficulty is deciding what store in Melbourne they will redevelop into a flagship.

“We have a lot of real estate in Melbourne. It’s just a question of which store becomes the flagship,” Page says. “The decision as to what part of Melbourne will be hard, but it does not have to be greenfield. This will not be an easy decision.”

In Brisbane Harvey Norman already has a site pegged out in the city’s southeastern suburbs.

On the property front, Harvey says the residential market is the only weakness, with office, retail and industrial performing strongly. He has a team of 30 staff in his property division.

“Office is particularly good. We have a big portfolio of assets and they are still going up in price,’’ he says. “I have horse, cattle, residential properties and warehouses. I have a lot of investment in retail centres and entertainment.

“But it’s impossible to find sites for flagship stores. We can’t get anything that stacks up. If it’s not possible you can’t do it.

“We have the one site in Brisbane, but can’t find anything in Melbourne or Sydney.”

Meanwhile, Page says the fastest growth for Harvey Norman is overseas, particularly in Southeast Asia, Ireland, Slovenia and Croatia.

“I am on planes a lot,” she says. “Five years ago 6% of our profit was from offshore; last financial year it was 22%,” she says.

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