In a few short years, Ruslan Kogan has grown Kogan.com from a start-up in his garage to Australia’s leading online electronics retailer. Here he reveals his tips for importing from China, managing growth, and what he really thinks of Harvey Norman
TRADE EXPRESS: Although the world wide web has been around for a long time now, it’s only been in recent years that it has really taken off. Why do you think that is?
Online shopping changes a lot of paradigms. The concept of face-to-face trading and exchanging of goods for money has survived thousands of years. The Internet has disrupted all of this. It takes a while for people to adjust to a massive change like this. We can now buy something in our underpants on our iPad while watching TV and then have it arrive at our doorstep the next morning—it’s an incredible advancement to retail.
I recognised the trend many years ago and knew it would change the world. When I suggested to people in 2006 that I am starting a business that will sell TVs online, they thought I was crazy. They would say things like “as if someone will buy a TV without seeing it first”. Times change pretty quickly. Two years ago I had a full day training session with my mum trying to teach her how to use a computer and a mouse—the whole ‘double click’ concept was a bit too much for her. These days you can’t get her away from the computer. She does all the household shopping online, books all her holidays and even buys fashion and accessories from overseas.
TRADE EXPRESS: Traditionally, imported goods have always been sold at a premium here, and perceived as more expensive. How and when did you discover that the opposite could be true?
Different regions around the globe have different competencies. Germany is the best at manufacturing cars. Australia is the most efficient at producing quality wheat. China is the most efficient at producing quality consumer electronics using assembly line techniques.
As global freight networks have advanced significantly over the years, freight has become a smaller and smaller component of the cost of certain products. As a result of this, businesses are able to source products from the global market that has the highest level of competency at producing them.
TRADE EXPRESS: Kogan.com has grown very quickly—and it’s much harder for you personally to oversee a larger organization. What aspects about rapid growth of your company concern you?
Managing rapid growth is a good challenge to have. I can think of much worse challenges. We have gone from being a $20m business to a $200m+ business within the space of a year. This has meant significant upgrades to a lot of our systems and processes and we have had to scale many areas of the business.
We have an incredible team of people and they have handled it very well. I remember when I hired my first employees six months after Kogan started. I was so scared to let go of tasks and I would still answer all phone calls, check over every single email and wouldn’t let them do anything by themselves. I very quickly learned that it’s not possible for me to work over 24 hours in a day and I would have to find a way to empower my team. The solution was simple—ensure everyone you hire is much better than you at something.
TRADE EXPRESS: What were some of the difficulties you’ve had dealing with companies in China?
In China, everything is about mass volume. With Australia being a relatively small country, when I started out it was near impossible to convince factories to cooperate with us on small orders—they were simply not interested. Our business grew very fast and now we have outgrown all those factories that we worked with initially and now we have the world’s biggest factories begging to work with us.
TRADE EXPRESS: How did you overcome those difficulties?
The first factory I had chosen to work with laughed at me when I asked them to manufacture a single container of 80 TVs for me. I was shattered. This would have meant it was impossible for the Kogan business to get started. I lost a few nights sleep thinking how I could create a win/win situation with that factory and convince them to accept my small order. It was very difficult because they told me commercially it is not viable for them and they would lose money if they had to set up an assembly line to make 80 TVs. They said the assembly line would take them close to a day to set up and the 80 TVs would take under 10 minutes to manufacture. Usually all their customers order 10,000+ units at a time.
I finally found a solution. Many huge Chinese factories are billion dollar companies but all of their documentation, marketing material and user manuals is in Chinglish and very unprofessional. For instance, their pricing spreadsheets would use 12 different fonts and nothing would be aligned. I stayed up for a few days and re-did all of their marketing material and turned it into a western professional looking document. I redid their pricing spreadsheets. I fixed all their user manuals. I then emailed it back to them and said, “I understand you don’t see the value in making 80 TVs for me but please see the attached work I have done, there are other ways I can bring value to this relationship.” They emailed me back within a couple hours thanking me for what I had done and accepted my order. They then contacted me a few weeks later saying they had won a massive customer in the USA because that customer said they were by far the most professional factory.
TRADE EXPRESS: Part of your marketing success has come from picking very public fights with larger companies (such as Harvey Norman)… is that a marketing strategy?
I’m in a unique position at Kogan. We are a manufacturer direct to consumer. We’re not bound by any contracts or agreements like other companies are to keep their mouth shut. We say it how it is. I actually think Gerry Harvey is an incredible businessman who has achieved amazing things.
TRADE EXPRESS: Do you have any tips for companies considering importing from China?
Make sure you do your research and your comparing Pink Lady Apples with Pink Lady Apples. Many things in Asia look the same but the internals and components are very different. You need to always be on your ‘A’ game and have a very thorough understanding of the industry in which you operate.
TRADE EXPRESS: What role has DHL played in the success of Kogan.com?
Supply chain logistics is very important for Kogan. We drive every business unit to operate at maximum efficiency so that we can reward our customers with the best prices in the world. Every freight requirement we have gets put through a very competitive tender process. DHL is a key player in that process.