Bloomberg Businessweek (Europe)
How Ruslan Kogan built an off-brand online empire Down Under
From 1,000 cheap TVs to an Australian online retail empire “There is a real gap in the market here”
Australia’s most aggressive online retailer got its start with an impulse buy. A decade ago, Ruslan Kogan was living in Melbourne, fresh out of school and doing consulting work for Accenture. At night, he made extra cash selling imported T-shirts and wallets on EBay. He decided to lay out some of his savings on a high-end, $5,000 TV but didn’t want to pay full price.
On a whim, Kogan contacted the brand’s little-known Asian manufacturer. He posed as a retailer, claiming he’d be interested in buying 100,000 TVs if the company would send him a sample unit for cheap. The TV maker made him a way better offer: all 100,000 for $1,000 a pop. “In that moment, I thought, There is a real gap in the market here,” Kogan recalls. “I quit my job, and my mum cried because I was going to become a TV salesman.”
It proved to be a good bet. Kogan couldn’t afford to pay for 100,000 TVs, but he persuaded the manufacturer to sell him 1,000 at a deep discount. They were the first items he branded with his name and sold on his website, Kogan.com, now one of Australia’s fastest-growing businesses. The site makes most of its money selling Kogan-branded electronics and other private-label gear. Five years ago it moved $14 million in goods; Kogan estimates this year’s total will top $356 million.
Kogan, now 33, was one of the first in Australia to master online retail. That’s partly because the country’s traditional retailers, such as Harvey Norman, were slow to embrace the Internet and build easy-to-navigate websites, says Steven Noble, senior analyst at Australian researcher Telsyte. “Ruslan was one of the first people to form direct relationships with the manufacturers in China,” Noble says. “He got there early and became a big player.”
Kogan holds 80 percent of his private company and has a net worth north of $250 million, ranking him among Australia’s wealthiest young entrepreneurs. A fan of fast, gadget-filled cars and yachts, the chief executive officer has become the country’s reigning Internet playboy. And he isn’t shy about picking fights with rivals or politicians.
Born in Belarus, Kogan and his sister, Svetlana, moved with their parents to Australia when Ruslan was 6 and grew up in the housing projects of a Melbourne suburb. He didn’t speak much English when he arrived and went to school with ox tongue packed in his lunchbox. “I would never have classified it as difficult at the time, but we were teased quite a lot,” he says. “We had acorns thrown at us and were just that little bit different.”
But the culture of Australia made
a massive difference in his life, Kogan says, because it offered opportunity for budding capitalists. At 10, he started a business collecting, cleaning, and reselling lost golf balls at a local country club. A year later he was washing cars by appointment. By the time he finished high school, he’d run more than a dozen small businesses, including one designing websites and another installing bar-code readers at gyms to track member attendance. While Kogan’s IT skills led him to Accenture after university, he continued to scour markets looking for inefficiencies to exploit.
Which brings us back to those TVs. To help secure the lowest possible price for those first 1,000 units, Kogan spent a few days redesigning the manufacturer’s website, adding diagrams and images and improving the translated product descriptions. He partly covered the upfront investment by applying for $45,000 worth of credit cards and quickly selling the TVs for as much as $2,000 each, which left him with a healthy profit while still undercutting his rivals.
Over time, Kogan.com expanded to sell all types of discount electronics, as well as outdoor gear, housewares, and vacation packages. “We’re 90 percent as good as the product that costs twice as much,” Kogan says. In 2011 the site began carrying name-brand devices, so Kogan’s A$279 ($207) Agora smartphone sits alongside the latest Apple iPhone (A$719) and Samsung Galaxy (A$469).
As his business grew, Kogan became a master of attracting free publicity. In 2009, when Australian Prime Minister Kevin Rudd’s administration delivered $900 checks to taxpayers as part of a stimulus package, Kogan renamed one of his 37-inch TVs the Kevin37 and priced it at, yes, $900. His feud with Gerry Harvey, the 76-yearold billionaire co-founder of Harvey Norman, has also generated a lot of press. “When he says he’s cheaper, if he is, it’s very marginal, and sometimes he’s dearer,” Harvey told a local newspaper in 2010, calling Kogan a “con.” “But it’s all unbranded s---. It’s not the quality product.” Kogan has responded by calling Harvey a dinosaur.
Harvey and others are starting to catch up with Kogan’s Web design, says Telsyte’s Noble. “Five years ago, the websites of the most prestigious department stores were just embarrassing,” Noble says. “They still have things to learn but are not nearly as far behind as they used to be.”
To stay ahead, Kogan has tried to move faster and squeeze manufacturers more. He doesn’t agree to exclusive manufacturing deals for Kogan-branded products. Instead, he’s created an online bidding system, where all the manufacturers can see his orders and one another’s bids. Besides price, the software’s bid rankings weigh factors such as credit terms and delivery speed. “We have distributors all over the world and have told them we have no loyalty,” Kogan says.
At the company’s Melbourne headquarters, many of the 200 employees spend their days poring through online search data to keep pace with consumer interest. When searches for a particular model of TV spike on Google, the company orders more. “Traditional companies hire a research firm to find out what people want through focus groups,” Kogan says. “One will say sunglasses, and nine other sheep will say, ‘Yes, me too, sunglasses.’ Google searches— this is absolute honesty.”
Although Kogan has had some success expanding to New Zealand and England, it’s unclear whether his model will hold up against global competition. He’s always looking for ways to improve: Tacked up on his otherwise spartan office walls are posters from past McDonald’s and Coca-Cola ad campaigns. He remains inspired by a drunken 4 a.m. burger run. “I ordered a Big Mac but asked for one beef patty, a chicken patty, one and a half slices of cheese, just taking the piss out of the guy,” he says. “Thirty seconds later, the burger was there and made perfectly. I was like, Wow, think about all the systems you need in place—processes, accounting, training—to produce that for $5. I knew I could learn a lot from that organization.”
The bottom line Kogan has built a personal fortune north of $250 million with generic electronics bought and sold at deep discounts.