HE HAS built a business empire with no shops, minimal overheads and a finger in every pie: electronics, travel and groceries.
Now he’s taking on the mantle of Australia’s other great self-made entrepreneur, Dick Smith.
Ruslan Kogan’s surprise decision this week to revive the Dick Smith brand was in many ways emblematic of his entire career: a mix of calculated self-promotion and coldly analytical business nous.
The 33-year-old started his business selling private label TVs in his parents’ garage 10 years ago.
Once notorious for taking potshots at competitors online and in the media, Kogan appears to have grown somewhat less outspoken lately.
During the death throes of Dick Smith late last year, Ruslan declined to comment. “I don’t like to kick people while they’re down,” he told news.com.au at the time.
Well, Dick Smith went down, and the Belarusian-born founder of online retailer Kogan.com, whose personal net worth is estimated at upwards of $350 million, swept in to pick up the pieces.
Sure, the physical store network and some 3000 jobs are still going, but Kogan got his headline: “Kogan rescues Dick Smith”.
He also got massively increased buying power with suppliers, and a $95 million-a-year online store that will quickly become profitable when ported onto Kogan.com platform with its proprietary fulfilment algorithms.
“It’s a shame what happened with the decision to shut down the stores, but it’s good that all of the employees will get their entitlements,” he told news.com.au.
“It’s also good that the brand’s getting saved, and it’s going to be supporting Aussie jobs here in our south Melbourne office.”
Dick Smith stores across Australia will soon close.Source:News Corp Australia
Despite Kogan’s fond reminiscence of visiting Dick Smith stores as a kid to look for parts to upgrade his computer, the decision to purchase the brand’s intellectual property, website and customer database — sold by receivers Ferrier Hodgson amid “aggressive” bidding, including from a Chinese buyer — was a “pure business calculation”.
“But when you’re [making that calculation], you acknowledge that brands are very valuable, and this is one of the most iconic brands that we have in Australia,” he said.
Aussie entrepreneur Dick Smith, who founded the electronics chain before selling to Woolworths in 1982, said this week he had spoken to Kogan and given him his blessing.
“I’m very happy,” he said.
“I don’t know him but I understand he’s very ethical and I think his formula is good.”
Mr Smith said he believed Kogan could repair the brand and believed “no lasting damage has been done”.
“I think his formula is the one for the future. While Gerry [Harvey] is alive it will be hard for anyone to compete with him. That’s why I think Ruslan Kogan’s idea is really brilliant — don’t get out and compete with Gerry Harvey but compete in low-overhead, web-based sales.”
Kogan says he was “very happy that Dick was very happy about it”, and “very pleased that we were able to keep it in Aussie hands and Aussie owned”.
“They’re all wins, and a great brand does form part of the business case,” he said.
“Dick Smith is one of the most accomplished Australians, he’s a proud Aussie and he loves supporting Aussie jobs. He’s done incredible things in aviation as well, he’s been Australian of the year.
“I’m just getting started with the things we’re doing, so I don’t think I deserve to be mentioned in the same sentence as him.”
While Dick Smith’s crusade is Aussie jobs, Kogan says his is more personal.
“I was asked what I want my legacy to be. I want to be remembered as a good son, a good brother and a good boyfriend. That’s my crusade,” he said.
“I like Dick’s crusade and I think it’s very important. I’m going to have kids one day, and they’re going to be Aussie kids. Anything that can be done to improve Australia’s economic prosperity is a great thing.
“It’s the best country in the world, so supporting it is very important.”
Dick Smith says Kogan’s model is the way of the future.Source:News Corp Australia
Kogan admits the Dick Smith brand has had “probably the worst few years its ever had”. “But we also know that in order to rebuild a brand, nothing works as well as delivering on your promises,” he said.
Dick Smith is Kogan’s first “off-platform” venture to be run separately to the Kogan.com site, which makes an estimated $250 million a year selling everything from TVs and smartphones to baby suppliers, bedsheets and camping gear.
“The reason was highly calculated, there was a lot of analysis that went into it and a lot of strategic planning that took place,” he said.
“We were able to be the winning bidder because there’s not a single retailer in Australia that’s better positioned to be able to execute on a business plan for those assets to make it profitable very quickly.”
He points out that Kogan, Australia’s largest pureplay online retailer, is actually the most efficient retailer in the world. Amazon.com does $637,000 revenue per employee, while Kogan.com does close to $2 million.
“Our efficiency is actually increasing,” he said. “We have heavily invested over the last couple of years in systems and processes to fully automate fulfilment.
“When somebody orders something from our website, not a single Kogan staff member has to manually interact with that order or touch it up until the customer receives it at their place.”
That growth, he says, is coming from the “convenience consumer”, who realises time is a precious commodity. “For a while online retail was all about the tech-savvy customer, the person who does a Google search and wants to compare prices and save money,” he said.
“Now they buy online because they don’t want to waste the time driving to the shopping centre. They want to click, buy and know it’s going to be dispatched quickly. I don’t know of any Australian retailer that dispatches items faster than we do.”
Kogan.com now sells everything from TVs to bedsheets.Source:News Corp Australia
Kogan, borrowing from the Aldi model, now has around 15 private label brands.
They span across a range of categories including Fortis sports and fitness gear, Certa power tools, Komodo outdoor and camping supplies, Estelle female personal care, Ovela homewares, Bubbli baby and toddler products and Nutrivance health and wellbeing.
Speaking to Alan Kohler earlier this week, Kogan explained how margins for these categories were “a multiple” or margins in TVs because there is less competition — meaning every time he has extended his brand, his gross margin expanded.
Importantly, a lot of the Chinese suppliers for Kogan’s home-brand products overlap with Dick Smith’s suppliers, and Dick Smith has existing relationships with suppliers Kogan hasn’t had an in with in the past.
“We’ll obviously become a lot more important to them,” he said. “Our volume is going to get bigger, we’ll have more leverage, and the ability to negotiate better deals in order to ensure consumers get better prices.”
Over coffee at Sydney's Hilton Hotel in November, news.com.au asked why he didn’t do as much media as early in his career, when he would appear as a talking head on everything from the ABC’s Gruen Transfer to the TV news.
(Ironically, at that same meeting, then-Dick Smith chief executive Nick Abboud and his team were spotted sitting at an adjacent table, apparently upset about a JB Hi-Fi catalogue spread before them.)
“It doesn’t move the needle as much as it used to,” Kogan said. “Most people now know what we are and how we operate.”
In the old days, he explained, Kogan.com would see a notable spike in traffic every time he appeared on TV, in print or in an online news article. These days, with daily traffic to the website orders of magnitude higher, the benefit to him is minimal.
So was the Dick Smith purchase another way to move that needle — a publicity stunt?
“If that was a publicity stunt, it was one expensive publicity stunt,” he said.
