internet, omnichannel... blah blah blah

It's against popular consensus both in the Analyst community as well as the media, but I agree with Gerry Harvey regarding the internet.

I don't believe the internet will ever amount to a significant amount of sales for the likes of HVN or DJS. These department stores have a high cost base and cannot compete with likes of online only players, such as Amazon (once they enter the Australian market), specialist websites and online classifieds (eBay).

As a consumer who shops online and in store, I would not even consider looking at their websites compared to online players. The number one reason people are shopping online is PRICE (then probably convenience). HVN/DJS will not be able to compete on price with the likes of online only department stores and specialists not mention eBay, their cost base is simply too high.

HVN should continue to focus on the areas of their business which are not impacted so much by competition online such as their furniture, bathroom and kitchens, flooring etc. They still have a large market share in this space.

The deflation in electronics and the competition from online has been savage, but ultimately this has to lead to a consolidation of bricks and mortar electronics retailers. We have started to see that already in WOW Sight and Sound, Dick Smith, Retravision etc. I think this will continue, the likes of the Good Guys, Bing Lee etc. will not all survive.

The internet is reducing the competitive advantages of these department stores (shrinking their moats) and profitability (ROE). However, some will survive and they will be the ones with a strong balance sheet, brand awareness and strong market shares. Throw in a wiley old Chairman with a large stake in the company and I would argue that HVN will be one of the survivors. I'm not saying HVN is a great investment at these levels, but I don't think it's even close to the armageddon that the media would have you believe.

In short, HVN will be here in 10 years, a lot of other retailers will not, but it is very difficult to see any competitive advantage in the online market.

Keen to hear your thoughts, I’m sure not everyone will agree.