Kogan – Never say never

Ruslan Kogan was one of the first people in Australia to adapt and embrace online shopping while mainstream competitors were tied heavily to bricks and mortar stores Ruslansuch as Jerry Harvey’s “Harvey Norman”, Dick Smiths and Retravision. Before Kogan came along nearly 100% of retail purchases were through retail stores.

Kogan was a very vocal proponent in the benefits of online shopping and famously entered into a media stoush with Jerry Harvey, Kogan must have been right as his garage to global company founded in 2006 is about to float on the ASX and made over $200M in retail sales in 2015.

Supply Chain

While Kogan was trying to buy a high-end TV for a cut down price he identified a gap in the market and an avenue to deal directly with electronics manufacturers cutting out the middleman. “Ruslan was one of the first people to form direct relationships with the manufacturers in china” says Steven Noble, senior analyst at Australian researcher Telsyte.

Mainstream retailers in Australia pass on the majority of distribution and logistics costs to consumers due to the number of “hands” that the product needs to go through before reaching the consumer on the store shelves.

Kogan has negotiated directly with the product manufacturers and cut out a large number of “hands” in the process, the result is often a sizable discount on the retail price compared to other bricks and mortar establishments and some online peers.

Kogan has kept the supply chain competitive by not signing exclusive contracts with manufacturers, He’s created an online bidding system algorithm , where all manufacturers can see all the orders and others bids ensuring competitive bidding.

Grey Imports & Own brand

Ruslan Kogan pioneered the importation of grey products into Australia, while other retailers were contracted to buy a product at a set price from a set distributer and then pass on the costs to the consumer or charged more for a product in different countries Kogan was able to buy and import the same product from another distributor for cheaper and pass on the savings to the consumer.

Kogan developed key relationships with manufacturers in China and imported electronic good under his own brand name. Kogan identified that most LCD TV’s utilise panels from a small number or premium manufacturers like Samsung, Sharp & Hitachi, similarly with tuners and power boards. Kogan said “Once we make our selection we mass produce and sell at unbeatable prices.”

The 26-year-old says his business cuts out the middle men and acts as manufacturer, importer, wholesaler and retailer. Reduced overheads mean the goods sell for hundred of dollars less than other products.

 Distribution

The demise of Dick Smiths, an Australian electronics institution last year signalled an opportunity for Kogan to increase sales from its business. Kogan bought the online rights, DSEgoodwill and brand.

The acquisition of the Dick Smith online stores increase Kogan’s buying power coupled with the purchasing, ordering and delivery algorithms used in Kogans own business should see remarkable efficiency & profitability. (Kohler, 2016)

Evolution Of Kogan’s “Place”

In the very beginning Kogan was a direct-to-consumer, online-only business that developed a better value, direct and new way for shoppers to get what they need and want but that changed in 2015 when Kogan opened his first “bricks and mortar” pop up store in Chapel St, Melbourne.

“We’re opening a Pop Up store because we have huge amounts of data about the shopping behaviour of our customers that we can use to enhance their experience” says Kogan. (Kogan, n.d.) The company has collected data from it’s online stores on it’s customers buying preferences, were they live and the conversion rate of every product by location. I have also said kogan.com will always remain online only. I should not have used a blanket statement.

Lesson learned: never say never.

So does this mean we will start to see more Kogan “Pop up” stores near you?

Robtempleton                                    robr@deakin.edu.au                          ID#215203221

Kogan, R. (2015) Kogan [Online]. Available from: https://www.kogan.com/au/online-retail-meets-bricks-mortar/ [Accessed 14 May 2016].

Kogan, R. (n.d.) Kogan [Online]. Available from: We’re opening a Pop Up store because we have huge amounts of data about the shopping behaviour of our customers that we can use to enhance their experience [Accessed 14 May 2016].

Kohler, A. (2016) The Australian [Online]. Available from: http://www.theaustralian.com.au/business/business-spectator/why-kogan-bought-dick-smith/news-story/e97bff49159c8f653f2cbc894f51c732 [Accessed 14 May 2016].

Thomson, M.M. (2016) Australian Financial Review [Online]. Available from: http://www.afr.com/street-talk/kogan-ticks-another-item-off-preipo-to-do-list-20160503-gollcc [Accessed 13 May 2016].

Tufvesson, A. (2010) [Online]. Available from: http://electricalconnection.com.au/online-empire-ruslan-kogan/ [Accessed 13 May 2016].

Iacobucci, D. (n.d.) Marketing Management. In 4, ed. MM4. 4th ed. CENGAGE Learning.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s