- While this Christmas is shaping up to be another poor one as Australians reign in spending, Kogan founder Ruslan Kogan told Business Insider Australia it’s not all doom and gloom.
- Kogan believes there’s plenty of “good retailers” like JB Hi-Fi that are growing well despite a rumoured retail recession.
- His comments come off the back of a huge 18-months for the e-commerce store which opened up 10 new divisions this year, including home loans, superannuation, credit cards, and even energy.
- Visit Business Insider Australia’s homepage for more stories.
Of all the business sectors in Australia, few would appear to be doing it tougher this Christmas than retail.
Flatlining consumer spending has taken a bite out of both merchants and the Australian economy at large. But despite that, Ruslan Kogan, CEO and founder of the eponymous e-commerce store Kogan.com, says it’s not all doom and gloom.
“I was speaking to an older guy who’d been in retail for decades and he said something to me the other day. He said, ‘I don’t remember a single time when people said retail was going well. For 30 years it’s been nothing but doom and gloom’,” he told Business Insider Australia.
“There are actually some retailers that are growing. Look at JB HiFi. Look at Zara. Look at Uniqlo. A tough sector just exposes the good retailers as well as the bad ones.”
Despite NAB chief economist Alan Oster diagnosing a retail recession, JB Hi-Fi has bucked the trend growing full year profits by 7.1%.
Meanwhile brick and mortar retailers continue to shutter stores at the same time e-commerce is tipped to explode.
“In Australia, online retails makes up about 7% of total retail. In other countries like the United States, the UK, Germany, China and others sit at around 20%,” he said.
“It’s growth we know is coming and Australia Post and [CEO] Christine Holgate have done a wonderful job of supporting e-commerce.”
Amazon won’t be the end of Australian retail
But what about Amazon, the US behemoth that was heralded to eat Australian retailers’ lunch? The philosophy that Kogan, and others subscribe to, is that even as Amazon picks up pace here, there’s enough to go around for the few who adapt.
“Amazon will grow over the next 10 years but even before it arrived we already had an Amazon here and it’s called eBay. It’s been around for 20 years and has every major retailer on their platform and we all got on fine with it,” Kogan said.
eBay Australia was quick to get retailers onto its platform in a move that helped shore up its local market share, with managing director Tim MacKinnon telling Business Insider Australia that partnership, not disruption, was its secret sauce.
Within that dynamic, Kogan sees a few key advantages for his business. The first is the relatively small size of the business — Kogan.com accounts for around 2% of online sales — means it can still grow enormously in a sector expected to triple. On the other hand, an economic downturn or retail recession is less likely to hurt it as much as it hurts more established competitors.
“We want the economy to be doing as well as possible but historically during tough times, people will do their research and look around and if they do that, we’re also more likely to get them as a customer.”
Kogan has had a busy 18 months expanding
The optimism is somewhat substantiated given where the business ends the year.
The online retailer, which like all good online companies started out of a garage in 2006, expanded this year into almost a dozen new markets including home loans, electricity, credit cards, insurance and superannuation.
“We launched ten new business divisions last year. At a time when I don’t see which anyone trying new things, I think it’s absolutely spectacular what we’ve managed to achieve,” Kogan told Business Insider Australia.
“With innovation, you’ve got to be prepared to fuck it up. You’ll try lots of things, many of them will fail, many of them will lose you lots of money. But you’ll also get a few right, and they’ll be brilliant.”
Admitting the “first few are always the hardest”, the volatile stock price is a testament to the hot and cold attitude the market has always had towards the retailer. Kogan is no stranger to the sentiment.
“When we revealed the remuneration report at our November AGM, it showed I’d been paid a salary of zero as had the other executive director and there were still a few people who voted against it. Maybe they were being nice and insisting we be paid more but who knows?” he said.
Despite that, the last 12 months have helped vindicate those ambitious plans.
“Any shareholder who has been holding shares for a year would have made a lot of money,” he said.
It’s unhelpful to get too caught up in stock prices, of course. Despite a recent hot run, the stock is still a way off its 2018 record high.
Meanwhile, Kogan doesn’t put much stock in predictions on how Christmas spending will shake out this year.
“Analysts bring out reports every year but really, in the end, my dog has just about the same chance of getting it right,” he said.
For the record, Toko is yet to return our calls.
— Vuki (@Vuki) May 10, 2018