'A stats business masquerading' as a retailer: behind the growth of Ruslan Kogan's company

Ruslan Kogan. Image: supplied.

Ruslan Kogan is more stats geek than shopkeeper.

The pure-play online retailer he founded in 2006, Kogan.com, just posted a 45.7% jump in revenue to $209.62 million for the six months to December. Profit was $8.33 million, up 470%.

“We’re a statistics business masquerading as an ecommerce company,” he told Business Insider.

“It means that every decision we make in our business is driven by data and analytics whether it be who we hire, what products we allocate capital to and how we do our marketing.

“We know what every single cent we spend is doing.”

And Kogan.com shares hit $8 each, up 10.6% today, for a market capitalisation of almost $750 million. Kogan.com listed on the ASX in 2016 at $1.80 a share.

Ruslan, 35, owns about 45% of Kogan.com, today worth about $336 million.

The process of collecting and analysing data to make better decisions runs throughout the business.

Here’s where the profits are made at Kogan.com:

Source: Kogan.com

Exclusive Kogan.com branded products are the largest contributor to profit which gives the company some protection against competitors, including Amazon.

And the product mix has shifted as the company takes on new business lines, creating a portfolio style.

The company has a suite of retail and services business units including Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance, Kogan Health and Kogan Travel.

Kogan Mobile achieved significant growth in the half, accounting for a higher percentage of overall gross profit than in 2017. Commissions from Vodafone grew 340.9% to $4.8 million in the first half, as this chart shows:

Source: Kogan.com

Kogan says the mobile offering shows just how well the company’s strategy is working.

“We’ve got a very valuable brand, we have a brand that is synonymous with price leadership with digital efficiency, a brand that people trust and we’ve been doing it for over a decade,” Kogan told Business Insider.

“Now we have a huge stream of traffic as well. What that means is that we have a very low cost of acquisition and therefore we can partner with the likes of Vodafone or Medibank in industry’s which typically have a high cost of acquisition.

“We can pass on some of the savings of that cost of acquisition to customer in the form of a compelling offering.

“It works for us in industries that are mass market, very competitive and typically have a high cost of (customer) acquisition.”

The company expects more brand growth and to continue to outperform underlying market growth in every portfolio business.

Here’s how Kogan.com sees the market opportunity in each of its verticals:

Source: Kogan.com

Kogan says many potential partners are now contacting Kogan.com.

“It’s gone from where we used to reach out to try and convince a partner … now we’re a public company they are seeing the results and they are reaching out to us,” says Kogan.

The key to growth is customers. Kogan.com has grown active customers by up 40.5% to 1.166 million active customer.

Source: Kogan.com

“Nothing wins a customer like a compelling offering,” says Kogan.

“If your entire business is driven by people who know that we need to make decisions based on a customer being very smart, very rational and having done their research, it means that everyone is focused on engineering win-win propositions

“And when you come up with a compelling offering customers react.”

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