Page 2of 7to complete the marking and release the results and feedback within two weeksafter the due date. Any inadvertent delay will be communicated to students through a news item in our CD site. Description/ RequiremsIndividual Assignment: Case AnalysisKogan: Changing Aussie Retail Market(Copies of this case and its supporting documents are found in your CloudDeakin)Your task in this written assignment is to answer the following questions after a thorough analysis
Microsoft Word - Case Submission - Kogan.com.docx Case prepared by Dr. Rakesh Pati and Andre Sammartino, Department of Management & Marketing, The University of Melbourne Kogan: Changing Aussie Retail Market In 2006 Ruslan Kogan started Kogan.com out of his parent’s garage after quitting his job. He saw that the price of electronics goods such as television was sold in Australian markets at much higher costs as the middlemen take a lot of margins. As an exchange student in Miami, USA, Ruslan learned the value of online retailing and thought that it could help benefit both manufacturers and customers of consumer electronics in Australia. He decided on seizing this opportunity to remove multiple intermediaries and selling electronics goods to Australian households using an online portal. Ruslan chose to use private labelling, i.e., buy the products from the third party and use Kogan branding to sell the goods in Australia. From this humble beginning, Kogan.com has grown into a highly successful public-traded company with more than 100,000 products in its online store. Kogan.com now dominates the Australian online retail market, and most of their assets and revenue are generated from online electronics retailing industry. However, in recent years, Kogan.com has expanded into service businesses such as Kogan Travel, Kogan Insurance, Kogan Money, Kogan Mobile, and Kogan Internet. However, the underlying business model for all the companies remain the same, and their primary focus has remained in selling electronics goods online. Customers as King Kogan continuously strives to provide its customers with a wide range of in-demand products and services at the best prices. Quick processing and delivery supported by efficient, fast customer service make for a compelling customer experience that’s hard to beat. They have always believed that customers know what they want, and Kogan only keeps the inventory of the products that have high demand and sells quickly. Kogan claims that keeping the customers happy by providing them high value is their strongest competitive advantage. This strategy has helped Kogan.com to gain a strong, loyal repeat customer base. Kogan’s team constantly attempts to exceed customer expectations by introducing continuous innovation and changes in their processes. The employees are encouraged to think out of the box to resolve customer requests and enhance their experience. The top management team has developed a culture of inquisitiveness and innovativeness within Kogan. Such culture drives the employees to always look for better ways to help customers and lower Kogan’s costs. The fast growth and success of Kogan clearly indicate the effectiveness of their customer and innovation- focused culture. 2 Technology at the core of innovation Technology is at the core of Kogan’s innovation and success. Kogan has built its company around the idea to leverage the power of the internet. Kogan prides their strength in analytics, which helps them to predict future buying patterns and demand. Every employee in Kogan has to clear logical and analytical reasoning test and have to improve their data analysis techniques continuously. They have dedicated team members who continually look at trends, analyzing data, analyzing google search statistics, and trying to find the patterns of what are people searching for, in what proportions. Kogan’s strength in data mining and streamlined systems gives them valuable insight into what makes their customers happy. Kogan also builds insights from the internet. By engaging with consumers and using the data naturally captured on the internet, Kogan strengthens their online business. One of the main reasons for Kogan’s success has been their ability to offer unlimited shelf space, huge reach, and more efficient distribution. Strategic partnership as a key to success Kogan has moved into multiple partnerships to provide best quality products to its customers at affordable prices. Kogan has a very strong partnership with Hong Kong suppliers of electronics goods. As they are online retail organization, they have very strong relationship with their delivery partners, who help them to cover their last mile and provide the goods to their customers in time. In recent years Kogan is also entered into many other partnerships which have helped them to serve their customers. Kogan entered into an agreement with Mercer to launch superannuation products under the Kogan brand. In 2017, Kogan entered into a partnership with Adelaide Bank and Pepper Group Limited to provide Kogan-branded home loan products in Australia. They also have agreements with Vodafone to provide mobile telecommunications and internet services in Australia and New Zealand. Their alliance with Greenstone Financial Services help them to provide life insurance and funeral insurance policies to their customers. Kogan also signed a three-year partnership agreement with Medibank which will enable the company to offer budget health insurance to its customers. They have also entered into a supply and logistics agreements to market whitegoods and built-in kitchen appliances to consumers. What does future hold for Kogan.com? Online shopping market is still in its nascent stages, with only 8% of the goods sold via the online portal. However, most of the brick and mortar firms are also moving into online markets to supplement their traditional business model. Moreover, with the entry of Amazon in Australia, the online market in Australia might change significantly. There is no doubt that the road ahead provides many opportunities, but it also might bring many challenges for Kogan. 3 Table 1: Key Personnel Name Title Position Type Greg Ridder Non-Executive Chairman Chairman Ruslan Kogan Chief Executive Officer & Founder Chief Executive David Shafer Chief Financial Officer Financial Controller Daniel Taft Head of Operational development Chief Operating Officer David Shafer Chief Operating Officer Chief Operating Officer Casey Dunn Director of Marketing Marketing Manager Adam Jackson Director of Buying - Partner Brands Procurement Manager Sergiy Bobrovnychyy Director of Imports - Exclusive Brands Procurement Manager Goran Stefkovski Chief Technology Officer Computing/IT Manager Ross Metherell Director of Strategy Other Source: IBISWorld Report Table 2: Financials (in AUD 000) 2019 (AUD000) 2018 (AUD000) 2017 (AUD000) 2016 (AUD000) 2015 (AUD000) Total Revenue 438,895 413,921 290,023 211,192 200,298 Cost of Goods Sold 348,043 331,719 237,824 178,462 171,422 Profit Before Tax 23,403 21,007 6,124 1,431 286 NPAT 17,201 14,111 3,740 809 -69 Dividends 11,434 10,001 3,640 2,460 487 Total Assets 118,397 105,985 80,324 32,443 31,776 Total Current Assets 109,542 99,043 74,441 26,899 28,568 Inventory 75,850 50,200 39,742 20,532 25,073 Cash at Bank 27,462 42,618 32,028 1,808 398 Total Non-Current Assets 8,855 6,942 5,883 5,544 3,208 Property & Plant Equipment 1,566 449 489 571 711 Intangible Assets 5,815 6,493 4,480 4,633 2,498 Total Liabilities 67,417 58,103 37,652 25,373 23,055 Total Current Liabilities 65,378 57,386 37,557 25,330 22,523 Total Non-Current Liabilities 2,039 717 95 43 532 Retained Earnings 13,436 11,571 7,461 7,361 9,012 Source: IBISWorld Report Table 3: Operating Division Segment Name Revenue AUD000 Profit AUD000 Assets AUD000 Online Electronics Retailing 438,895 17,201 118,397 Total 438,895 17,201 118,397 Source: IBISWorld Report 4 Table 4: Geographic Location Segment Name Revenue AUD000 Profit AUD000 Assets AUD000 Australia & New Zealand 438,895 17,201 118,397 Total 438,895 17,201 118,397 Source: IBISWorld Report Table 5: Key Ratios 2019 2018 2017 2016 2015 Return on Shareholders' Funds (ROSF) (%) 33.7 29.5 8.8 11.4 -0.8 Return on Assets (ROA) (%) 14.5 13.3 4.7 2.5 -0.2 Profit Margin (%) 5.4 5.1 2.1 0.7 0.1 Debt to Equity (%) 56.9 54.8 46.9 78.2 72.6 Current Ratio (X) 1.7 1.7 2.0 1.1 1.3 Dividends Paid per Share ($) N/A 0.1 0.0 7172.0 1419.8 Source: IBISWorld Report Table 6: Growth rate 2019 2018 2017 2016 Total Revenue Growth (% change) 6.0% 42.3 37.3 5.4 Sales Revenue Growth (% change) 5.8% 42.7 37.2 4.4 NPAT (% change) 21.9% 277.3 362.3 N/A Shareholders' Funds (% change) 6.5% 12.2 503.6 -18.9 Total Assets (% change) 11.7% 31.9 147.6 2.1 Source: IBISWorld Report Table 7: Largest Shareholders Shareholder Name Percentage Held Country Kogan Management Pty Ltd 22.1% Australia HSBC Custody Nominees (Australia) Limited 18.6% Australia National Nominees Limited 9.3% Australia Shafer Corporation Pty Ltd 8.6% Australia J P Morgan Nominees Australia Limited 8.2% Australia Citicorp Nominees Pty Limited 4.6% Australia Source: IBISWorld Report 5 Table 8: Historical Background 2019 October: Launched Kogan Money Credit Cards in partnership with Citigroup offering credit cards and unique loyalty incentives. 2019 September: Launched Kogan Energy in a partnership with Powershop Energy and Kogan Mobile NZ in partnership with Vodafone New Zealand 2019 August: Launched Kogan Money Super in a partnership with Mercer Australia to offer a low-fee option for retirement 2019 March: Launched Kogan Marketplace where over 100,000 products are available to purchase 2018 November: The company announced that it entered into an agreement with Mercer to launch superannuation products under the Kogan brand. 2017 August: Kogan entered into an agreement with Adelaide Bank and Pepper Group Limited to provide Kogan-branded home loan products in Australia 2017 June: The company entered into an agreement with Vodafone New Zealand to provide mobile telecommunications services in New Zealand under the Kogan Mobile brand. 2017 June: The company announced that it entered into supply and logistics agreements to market whitegoods and built-in kitchen appliances to consumers. 2017 January: Kogan announced an agreement with Greenstone Financial Services to provide life insurance and funeral insurance policies under the Kogan Life Insurance banner. 2017 - December: Kogan signed a three-year partnership agreement with Medibank which will enable the company