Kogan trumpets ‘retail revolution’ after year of turbulence and triumph

Kogan trumpets ‘retail revolution’ after year of turbulence and triumph

“There is a retail revolution taking place as more and more shoppers learn about the benefits of e-commerce," CEO Ruslan Kogan said.

Ruslan Kogan (Kogan)

Ruslan Kogan (Kogan)

Credit: Kogan

Ruslan Kogan, founder and CEO of the online electronics retailer that bears his name, has signalled a new era for the world of retail as his company emerges from a turbulent FY20 with substantial increases in sales, revenue and profit.

The company reported gross sales for the year of $768.9 million, up 39.3 per cent on the prior year, and revenue of $497.9 million, up 13.5 per cent, compared to FY19. Gross profit, meanwhile, was $126.5 million, up 39.6 per cent on the previous year, which reflected an increase in gross margin of 4.7pp to 25.4 per cent.

At the same time, Kogan’s adjusted pre-tax earnings (EBITDA) increased by 57.6 per cent to $49.7 million, and net after-tax profit (NPAT) grew 55.9 per cent to $26.8 million.

The second half of the financial year ending 30 June, notably impacted by COVID-19, saw the publicly-listed retailer’s business growth accelerate significantly, with gross sales, gross profit and adjusted EBITDA growing 62.5 per cent, 68.3 per cent and 74.1 per cent, respectively. 

Kogan’s active customer tally also grew by 35.7 per cent in FY20. As of 30 June 2020, the business had over 2.18 million active customers.

For the company’s CEO, while the financial ending 30 June 2020 was a troubled one, it has marked a turning point for the retail industry. 

“The second half of FY2020 was an extremely turbulent and challenging period for the world, the country, and the company,” Kogan told shareholders in a statement. “We have built a diversified, resilient business over many years, which enabled us to help Australians in their time of need. 

“In the midst of the crisis, our teams mobilised all our resources to ensure our supply chains remained open, our logistics operations continued functioning, and in-demand products remained available for speedy delivery. 

“There is a retail revolution taking place as more and more shoppers learn about the benefits of e-commerce. We’re seeing record numbers of first time customers, who then go on to make repeat purchases at a 40 per cent faster pace than previously. 

“For us this is a very exciting trend that shows that once customers learn about shopping online, they change their ongoing behaviour. Once someone discovers the benefits of online shopping, I struggle to see why they would ever go back to the old way of doing things. After almost 15 years of preparation, the revolution occurring in retail represents a significant opportunity for,” he added.

In July, the Federal Court found that Kogan breached the Australian Consumer Law by making false and misleading representations about an end of financial year sale in 2018.

In a proceeding brought by the Australian Competition and Consumer Commission (ACCC), it was found that an online Kogan sale from 27 to 30 June 2018 saw some product prices quickly raised by the retailer beforehand, and then dropped afterwards.

The sale, which offered a 10 per cent discount with the use of the code TAXTIME, was sent out to over 10 million consumers via email and 930,000 via SMS messages.

Email advertisements used phrases such as “48 hours left!” and “Ends midnight tonight!” in the attempt to attract consumers.

However, the court found that the advertisements conveyed false or misleading representations as the online retailer increased the prices of over 600 products immediately before the promotion — in most cases by at least 10 per cent.

Just days after the company was found to have made the ‘false and misleading representations’ Kogan lauded his company’s ‘smart shoppers’ and the ‘transparency’ of the e-commerce industry.

The Kogan CEO told shareholders in a business update that he ‘loves’ the transparent nature of the e-commerce industry, while also expounding the virtues of his company’s ‘smart shoppers’.

“The thing I love about running an e-commerce company is that we operate in one of the most transparent and competitive industries,” Kogan said in the statement.

“We’ve been increasing competition for Australian consumers 24/7 for 15 years — all our prices and specifications are publicly advertised every second of the day. Everyone is free to browse and compare, and shoppers choose us when we offer great value.

“Every decision we make in the business assumes that our customers are smart shoppers who have done lots of research — in other words, educated, informed consumers,” he said.

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