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4 thrifty nerds: Kogan Technologies

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When the legendary thinker Edward de Bono looked at some of the world’s business high achievers, he underlined that they shared a central characteristic – they thought outside the square. Ruslan Kogan is out there and could wind up as a household name and could thank former prime minister Kevin Rudd partly for his success.

And while the former PM has indirectly helped this budding entrepreneur, his role model was someone who was not only a lateral thinker, but was also committed to taking on the ‘big boys’ and determined to deliver lower prices to consumers.

“My inspiration was Richard Branson,” Kogan reveals. “I admired the way that he enters new markets relentlessly, every new business market he goes into is a ‘David and Goliath’ situation.”

The start-up challenge

According to the founder of Kogan Technologies, this start-up sought to provide the best possible electronic products at the best possible price, by assembling the highest quality components from other manufacturers, facilitating the sale of products to the consumer through “minimalist online retailing”. This can cut out up to 50 per cent of the costs that go with the traditional retailing model.

In a nutshell, it is New Age retailing without the store and the margins.

“I started Kogan Technologies after recognising a huge gap in the market for affordable LCD TVs – and later, general consumer electronics devices,” Kogan explains. “From research into the power of an online direct business model and visiting numerous consumer electronics manufacturers, I soon realised how much customers could save from buying direct from the factory floor, rather than through complicated and expansive supply chains.”

So, how hard is it to chop out the traditional players?

“We sold our fist container of LCD TVs – with zero start-up capital to begin with – in 2006,” he recalls. “After a successful shipment, and securing a reliable supply, we sold the first Kogan-branded shipment a few months later that same year.”

Kogan Technologies sounds impressive but it started very micro with one person – Ruslan Kogan.

“In the beginning it was just me,” he says. “My first focus was to sell one container of LCD TVs to see if it could be done.

“I didn’t have any starting capital so I borrowed money from every possible source and pre-sold televisions with a one cent reserve on eBay to help raise the money.”

And behind this growth story is an online one.

“As we have grown, we have learnt a lot about how to maximise the power of the internet to grow as well as communicating with our market and customer base,” he says. “We have developed a very strong website and online community through the Kogan blog and leveraged this both as a market research tool, customer feedback forum and a launch pad for new products.”

Kogan doesn’t recall facing setbacks, but instead can only see past opportunities, which he made the best out of. He thinks that by operating as a 100 per cent online-based business, on a direct business model, he has been able to capitalise on opportunities faster than his competitors.

The advantage of the direct link is not just with the suppliers to save on costs, it also delivers competitive insights from the customers.

“Our competitive advantage is that we deal directly with the manufacturers who make the product on a daily/weekly basis,” he says. “We ship each container of Kogan products as they are sold, so we can respond quickly to any changes in the market.

“We also speak directly to our customers through the Kogan Blog on our website.”

This has provided an avenue for the online retailer to ask people exactly what they are looking for Kogan to source and it also gives the operation all-important feedback on their purchases.

Piggybacking on politics

But this is not just a story of a Gen-Y geek, who happens to be retail savvy; this guy has the street smarts on marketing, leveraging off the pulling power of a former prime minister and his economic stimulation package goals.

Recognising a great marketing opportunity, a press release emerged, which said:The KEVIN 37 shot to fame in March 2009 after Kogan Technologies announced the television was being offered at a $900 price point to coincide with the Rudd Government’s stimulus package that will give $900 to each Australian taxpayer in March and April 2009.”

Customers were also further induced with a promise that they would receive a free KEVIN 37 t-shirt with each purchase.

And in case that didn’t win you over, the marketing mind of Ruslan Kogan threw in this: “Kogan Technologies is a 100 per cent Australian owned and operated business. All profits are reinvested into the Australian economy.”

So, is the current economic challenge a threat or just another opportunity to this online entrepreneur?

“I think the current climate has presented us with opportunities more than anything – the market has driven people to look to gain better value from the dollars they spend,” he ventures. “We understand that in these times, businesses that can add the most value to the customer experience will thrive.

“We are always listening to customers’ needs and as a result, are in a far better position to respond to the market when developing our products.”

Kogan argues this is the time for cost cutters, but the product has to stand up to the diverse and demanding standards of customers.

“Cutting costs while ensuring our quality and services are of a high standard is always a key focus,” he adds. “For example, all our product user manuals are available to customers in a digital format to cut down on costs and minimise the environmental impact associated with printing hundreds of manuals that most people will only read once.”

This is in addition to the usual stuff of pushing their manufacturers and suppliers very hard on reaching the lowest possible prices.

“The KEVIN 37 TV, for example, was first offered to consumer with a standard high-definition screen. After we launched the product, we were able to push suppliers to upgrade the entire range to Full High Definition (1080p) at the same price,” Kogan says. “We immediately passed this opportunity on to consumers to offer an upgraded version at the original price.”

Growing into the future

However, the challenge of encouraging Aussies to buy big things such as wide-screen television sets online has been a real difficulty.

“One of the main challenges has been educating people that have not traditionally bought goods online about its benefits,” Kogan admits. “We were quick to build credibility with existing and new online shoppers as we made sure we always delivered on promises and maintained a string line of communication with the online community.”

That said, it remains a challenge but this guy looks equal to the task.

And what about the future?

“We would like to expand overseas – it’s not only Aussies that love a bargain,” he says.

Why am I not surprised at this optimistic, back-myself answer? The Branson inspiration should never be underestimated.

If you’re looking to work on your business rather than being stuck in it, book in for a complimentary business assessment today with Switzer Business Coaching.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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