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Microsoft Word - Case Submission - Case prepared by Dr. Rakesh Pati and Andre Sammartino, Department of Management & Marketing, The University of Melbourne Kogan: Changing Aussie Retail...

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Microsoft Word - Case Submission -
Case prepared by Dr. Rakesh Pati and Andre Sammartino, Department of Management &
Marketing, The University of Melbourne
Kogan: Changing Aussie Retail Market
In 2006 Ruslan Kogan started out of his parent’s garage after quitting his job. He
saw that the price of electronics goods such as television was sold in Australian markets at much
higher costs as the middlemen take a lot of margins. As an exchange student in Miami, USA,
Ruslan learned the value of online retailing and thought that it could help benefit both
manufacturers and customers of consumer electronics in Australia. He decided on seizing this
opportunity to remove multiple intermediaries and selling electronics goods to Australian
households using an online portal. Ruslan chose to use private labelling, i.e., buy the products
from the third party and use Kogan
anding to sell the goods in Australia. From this humble
eginning, has grown into a highly successful public-traded company with more than
100,000 products in its online store. now dominates the Australian online retail market, and most of their assets and
evenue are generated from online electronics retailing industry. However, in recent years, has expanded into service businesses such as Kogan Travel, Kogan Insurance, Kogan
Money, Kogan Mobile, and Kogan Internet. However, the underlying business model for all the
companies remain the same, and their primary focus has remained in selling electronics goods
Customers as King
Kogan continuously strives to provide its customers with a wide range of in-demand products
and services at the best prices. Quick processing and delivery supported by efficient, fast
customer service make for a compelling customer experience that’s hard to beat. They have
always believed that customers know what they want, and Kogan only keeps the inventory of
the products that have high demand and sells quickly. Kogan claims that keeping the customers
happy by providing them high value is their strongest competitive advantage. This strategy has
helped to gain a strong, loyal repeat customer base.
Kogan’s team constantly attempts to exceed customer expectations by introducing continuous
innovation and changes in their processes. The employees are encouraged to think out of the
ox to resolve customer requests and enhance their experience. The top management team has
developed a culture of inquisitiveness and innovativeness within Kogan. Such culture drives the
employees to always look for better ways to help customers and lower Kogan’s costs. The fast
growth and success of Kogan clearly indicate the effectiveness of their customer and innovation-
focused culture.
Technology at the core of innovation
Technology is at the core of Kogan’s innovation and success. Kogan has built its company around
the idea to leverage the power of the internet. Kogan prides their strength in analytics, which
helps them to predict future buying patterns and demand. Every employee in Kogan has to
clear logical and analytical reasoning test and have to improve their data analysis techniques
continuously. They have dedicated team members who continually look at trends, analyzing
data, analyzing google search statistics, and trying to find the patterns of what are people
searching for, in what proportions. Kogan’s strength in data mining and streamlined systems
gives them valuable insight into what makes their customers happy. Kogan also builds insights
from the internet. By engaging with consumers and using the data naturally captured on the
internet, Kogan strengthens their online business. One of the main reasons for Kogan’s success
has been their ability to offer unlimited shelf space, huge reach, and more efficient distribution.
Strategic partnership as a key to success
Kogan has moved into multiple partnerships to provide best quality products to its customers at
affordable prices. Kogan has a very strong partnership with Hong Kong suppliers of electronics
goods. As they are online retail organization, they have very strong relationship with their
delivery partners, who help them to cover their last mile and provide the goods to their customers
in time. In recent years Kogan is also entered into many other partnerships which have helped
them to serve their customers. Kogan entered into an agreement with Mercer to launch
superannuation products under the Kogan
and. In 2017, Kogan entered into a partnership
with Adelaide Bank and Pepper Group Limited to provide Kogan-
anded home loan products
in Australia. They also have agreements with Vodafone to provide mobile telecommunications
and internet services in Australia and New Zealand. Their alliance with Greenstone Financial
Services help them to provide life insurance and funeral insurance policies to their customers.
Kogan also signed a three-year partnership agreement with Medibank which will enable the
company to offer budget health insurance to its customers. They have also entered into a supply
and logistics agreements to market whitegoods and built-in kitchen appliances to consumers.
What does future hold for
Online shopping market is still in its nascent stages, with only 8% of the goods sold via the online
portal. However, most of the
ick and mortar firms are also moving into online markets to
supplement their traditional business model. Moreover, with the entry of Amazon in Australia,
the online market in Australia might change significantly. There is no doubt that the road ahead
provides many opportunities, but it also might
ing many challenges for Kogan.
Table 1: Key Personnel

Name Title Position Type
Greg Ridder Non-Executive Chairman Chairman
Ruslan Kogan Chief Executive Officer & Founder Chief Executive
David Shafer Chief Financial Officer Financial Controller
Daniel Taft Head of Operational development Chief Operating Officer
David Shafer Chief Operating Officer Chief Operating Officer
Casey Dunn Director of Marketing Marketing Manager
Adam Jackson Director of Buying - Partner Brands Procurement Manager
Sergiy Bo
ovnychyy Director of Imports - Exclusive Brands Procurement Manager
Goran Stefkovski Chief Technology Officer Computing/IT Manager
Ross Metherell Director of Strategy Other
Source: IBISWorld Report

Table 2: Financials (in AUD 000)

Total Revenue 438,895 413,921 290,023 211,192 200,298
Cost of Goods Sold 348,043 331,719 237,824 178,462 171,422
Profit Before Tax 23,403 21,007 6,124 1,431 286
NPAT 17,201 14,111 3, XXXXXXXXXX
Dividends 11,434 10,001 3,640 2,460 487
Total Assets 118,397 105,985 80,324 32,443 31,776
Total Cu
ent Assets 109,542 99,043 74,441 26,899 28,568
Inventory 75,850 50,200 39,742 20,532 25,073
Cash at Bank 27,462 42,618 32,028 1,808 398
Total Non-Cu
ent Assets 8,855 6,942 5,883 5,544 3,208
Property & Plant Equipment 1, XXXXXXXXXX
Intangible Assets 5,815 6,493 4,480 4,633 2,498
Total Liabilities 67,417 58,103 37,652 25,373 23,055
Total Cu
ent Liabilities 65,378 57,386 37,557 25,330 22,523
Total Non-Cu
ent Liabilities 2, XXXXXXXXXX
Retained Earnings 13,436 11,571 7,461 7,361 9,012
Source: IBISWorld Report

Table 3: Operating Division

Segment Name Revenue AUD000
Online Electronics Retailing 438,895 17,201 118,397
Total 438,895 17,201 118,397
Source: IBISWorld Report

Table 4: Geographic Location

Segment Name Revenue AUD000
Australia & New Zealand 438,895 17,201 118,397
Total 438,895 17,201 118,397
Source: IBISWorld Report

Table 5: Key Ratios

Return on Shareholders' Funds (ROSF) (% XXXXXXXXXX -0.8
Return on Assets (ROA) (% XXXXXXXXXX -0.2
Profit Margin (% XXXXXXXXXX1
Debt to Equity (% XXXXXXXXXX2 72.6
ent Ratio (X XXXXXXXXXX3
Dividends Paid per Share ($) N/A XXXXXXXXXX.8
Source: IBISWorld Report

Table 6: Growth rate

Total Revenue Growth (% change) 6.0% XXXXXXXXXX
Sales Revenue Growth (% change) 5.8% XXXXXXXXXX
NPAT (% change) 21.9% XXXXXXXXXXN/A
Shareholders' Funds (% change) 6.5% XXXXXXXXXX
Total Assets (% change) 11.7% XXXXXXXXXX
Source: IBISWorld Report

Table 7: Largest Shareholders

Shareholder Name Percentage Held Country
Kogan Management Pty Ltd 22.1% Australia
HSBC Custody Nominees (Australia) Limited 18.6% Australia
National Nominees Limited 9.3% Australia
Shafer Corporation Pty Ltd 8.6% Australia
J P Morgan Nominees Australia Limited 8.2% Australia
Citicorp Nominees Pty Limited 4.6% Australia
Source: IBISWorld Report

Table 8: Historical Background
2019 October: Launched Kogan Money Credit Cards in partnership with Citigroup offering
credit cards and unique loyalty incentives.
2019 September: Launched Kogan Energy in a partnership with Powershop Energy and
Kogan Mobile NZ in partnership with Vodafone New Zealand
2019 August: Launched Kogan Money Super in a partnership with Mercer Australia to offer a
low-fee option for retirement
2019 March: Launched Kogan Marketplace where over 100,000 products are available to
2018 November: The company announced that it entered into an agreement with Mercer to
launch superannuation products under the Kogan
2017 August: Kogan entered into an agreement with Adelaide Bank and Pepper Group
Limited to provide Kogan-
anded home loan products in Australia
2017 June: The company entered into an agreement with Vodafone New Zealand to provide
mobile telecommunications services in New Zealand under the Kogan Mobile
2017 June: The company announced that it entered into supply and logistics agreements to
market whitegoods and built-in kitchen appliances to consumers.
2017 January: Kogan announced an agreement with Greenstone Financial Services to provide
life insurance and funeral insurance policies under the Kogan Life Insurance banner.
2017 - December: Kogan signed a three-year partnership agreement with Medibank which
will enable the company
Answered Same Day Aug 09, 2021 MMM306 Deakin University


Karishma answered on Aug 11 2021
112 Votes
Global Strategy and International Management
Case Analysis
Kogan: Changing Aussie Retail Market
1. PESTLE analysis : (2) opportunities and two (2) threats in Australian Ecommerce industry due to Covid 19 pandemic with reasons
The Covid 19 pandemic provides several elements of change in the way commerce is conducted and this leads to several opportunities and threats in Australian E commerce industry, based on the change in delivery of goods and services. As education, health care and many more domains are having to operate online, the same holds good for Ecommerce as well.
Economic threat: The economic growth conditions indicate that the per capita income and consumption has come down. This has also resulted in reduced spending and spending only on basic necessities. As the e commerce industry can align itself to these necessities and needs of consumers, it is possible for them to reach out to the consumer better. Yet, there is an economic threat of not being able to achieve the required sales growth and finding it very difficult to sell a lot many products including luxury goods (Helena Martins, 2017).
Legal threat: The legal system has made several rules and regulations which has made it very difficult for the Ecommerce industry to ca
y out its procedures smoothly. The new regulations to check the Covid19 Pandemic has resulted in a lot of difficulties in managing the supply chain effectively. It has also resulted in customer dissatisfaction and incompetency in several instances.
Technological opportunity: As the Covid 19 pandemic
ings in more and more groups of people, form all demographics to use the internet for buying, it presents a great opportunity for e commerce firms as their consumer base widens significantly. It presents a great way of reaching out to the consumers even in the pandemic situation. The internet technologies has enabled people to purchase necessary products through Ecommerce even in these tough times.
Social opportunity: The social factors do present a huge opportunity to the ecommerce industry. As the Covid 19 pandemic has led to a significant reduction in people eating at restaurants and are prefe
ing eating food cooked at home, it has resulted in a higher demand for food processors and other home appliances. This could help e commerce firms achieve higher sales by focusing on the changing social factors and new needs of consumers (Helena Martins, 2017).
In this way the Covid 19 pandemic offers threats and opportunities in different domains. Consumer preferences have been changing rapidly with the Covid 19 impacting their lives and the way in which they shop. Never the less, Ecommerce still does have a lot of opportunity as it adapts to the changes in the external environment. The Ecommerce industry, as in its nascent stage, has taken a big leap through the survival process in these difficult times. It has been able to sustain and grow as well as respond to the changes in the macro environment diligently and dynamically.
2. Porter’s 5 force, analysis and suggestion if E-commerce industry in Australia is profitable for a new entrant (young start-up) - (3) ways for Kogan .com to enhance its profitability in the industry
Based on the Porter's 5 force analysis, the E commerce industry in Australia is profitable for a new entrant if it is competent enough to create USP and differentiate...

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