Melbourne’s Ruslan Kogan is not your typical businessman. He wears hoodies and trainers and retains a healthy dose of boyish charm. But don’t mistake this for naivety or immaturity because when it comes to business, he is smarter than most.
This year, he is the first person ever to have two businesses (Kogan Technologies and Milan Direct) in BRW’s Fast Starters list. And 2010 will be the second year Kogan, who is worth around $16 million, has appeared in BRW’s Young Rich list. And he’s still three years off turning 30.
The idea for Kogan Technologies, an online consumer electronics store, was born while he was a student. Coming to the end of his business degree at Monash University in 2003, he chose to spend a semester in Miami, Florida. Here, students were furnishing their dorms with goods they bought online and had delivered to their door, while he’d been buying things across town and struggling home with them on the bus. Worse still, he was paying more.
E-commerce was still in its infancy in Australia, but Kogan could see the potential. The opportunity to pass on massive savings by importing cheaper goods from China and then cutting out the middlemen (warehousing, logistics, distribution) and the overheads of a physical store, added up to a very attractive business model.
From humble beginnings
In 2006, he started Kogan Technologies as a one-man show from his parents’ garage. He didn’t actually have any money to buy stock so he put televisions up for pre-sale on eBay. His prices were too good not to take a risk on, and people soon snapped them up, enabling him to pay for his first container to be shipped from China. Too easy. Until eBay closed down his account that is, leaving him with half a container of unsold TVs and no way to pay for them to be delivered. Thanks to friends rallying around and taking out credit cards for him, he rustled up the $40,000 needed and the rest is history.
Kogan Technologies’ strength is in its very lean business model. Even now there are only 15 staff. Kogan brand goods, which now include hi-def camcorders, blu-ray players and more, are manufactured in China, loaded into containers, unloaded at their warehouse in Melbourne where shipping labels are attached before they’re out the door again and direct to the customer’s home.
[Next: From electronics to Eames chairs]
From electronics to Eames chairs
Less than a year after setting up the consumer electronics business, Kogan set up online furniture store Milan Direct with business partner Dean Ramler. He’d come back from travelling in Europe and seen the emerging trend for reproduction retro furniture like Eames lounge chairs. Milan Direct now has a UK operation too and debuts in the BRW Fast Starters list this year. It’s another lean business with no staff in the UK. Everything’s outsourced to third party warehousing and logistics companies and when you ring the UK number your call will be answered by someone in Melbourne. It’s working though and Kogan Technologies is now looking to expand into the UK too, as well as the USA.
If you can do it with TVs and chairs, surely you can apply the same successful business model to selling anything online? White goods are next on the agenda, driven by demand from the consumer electronics customers. And after that? “Maybe jet skis and boats, from China too. We have some jet skis we’re waiting to try out,” says Kogan. “It’s a tough job but someone’s got to do it! Australia has the highest use per capita of jet skis so it seems like a good plan. We’re in the final stages of some really exciting stuff.”
The Google factor
Behind the scenes too, almost everything is done using the multitude of free tools offered by Google. In an effort to maintain consistent internal business systems, everything is recorded on company wikis within Google Docs, everyone uses Gmail, consumer shopping trends are researched using Google Insights and between Kogan and Milan Direct, around $1,000 a day is spent on Google AdWords campaigns. Kogan and Google have become inextricably linked and everyone’s a winner.
Not surprisingly, with such a non-conventional founder, Kogan Technologies is not your average workplace and the company culture is important to Kogan. “All our staff are free to make suggestions. All our processes are optimised by the people who work closest to them, so the person dealing with after-sales service is the person telling us how those processes can work better. After all, they know the issues customers are facing best.
“Because we’re still relatively small and flexible, we can decide to put a product on sale within a week or two of having the idea. As the company grows, we’re realising more and more how different we are to everyone else. Recruitment’s a good example. We get sent some amazing resumes but the people only last three days with us. They need to really get the whole online space and have a ‘go, go, go’ attitude like the rest of us.”
Gen Y staff ‘get’ online
Kogan says the average staff age is young. The guy behind the majority of their web analytics, a crucial part of Kogan’s success, is a 19 year-old student. He’s one of three on the senior management team. “Most guys his age would only get the opportunity to work somewhere like Coles. We don’t work like that. He totally gets SEO and our culture. He’s from a generation that Googles everything. If he needs to learn how to do something, he Googles it. It’s simple. He’s had several pay rises because he can prove he is making us money. If he keeps adding value, we keep paying him more.”
Does he think he’s a good boss? Not really. “I’m a bad people manager,” he admits. “But we do run a meritocracy. If someone runs an ad campaign and can show me a return on investment, they’ll be rewarded for that. Equally, if someone doesn’t perform I’ll tell them about it in no uncertain terms and I’ll cc everyone else in as well. Some people say that’s unfair or bad management but that’s the way we work. If you don’t like it, get out.“
People don’t though and Kogan says his team love coming to work and are passionate about their products and the business’ success. “Everybody has a passion for technology at Kogan. When we get a new product in, everyone crowds round like kids around a Christmas tree, really excited. One of the most exciting parts of the job is getting to play with all these gadgets.”
Unorthodox management style
Kogan’s also come up with two key questions which are proving to help recruit more successfully. “I ask them which email account they use and which internet browser, and to explain the reasons why.” Anyone looking for a heads up on getting a job there should know that the answers are (not surprisingly) Gmail, and Mozilla Firefox or Google Chrome. Applications from a hotmail address are not looked at favourably. “About 99 percent of the time, if they answer those questions the right way, it’ll lead us to a good candidate for us,” says Kogan.
His management style may be unorthodox but it’s working for him. In financial year 2008, Kogan Technologies’ turnover was $3 million, in 2009, $8 million and this year, more than $16 million. For Milan Direct, revenue was $2 million in 2008, double that in 2009 and more than $8 million this financial year. These figures put both companies in BRW Fast Starters this year and made Kogan the first business owner to have two companies in at the same time. The companies are growing fast and they’re about to move into new, bigger office premises in Melbourne.
Business in his blood
Kogan Technologies wasn’t Kogan’s first business at the age of 23, it was more like his 15th. His first was at age 12, collecting abandoned golf balls from the local course, washing them, putting them in egg cartons and then selling them to golfers on a Saturday morning. Not surprisingly, he drives a hard bargain, admitting he’s every sales assistant’s worst nightmare. “You always have to remember that something is only worth what someone’s willing to pay. We don’t look at what other people re selling things for, we look rather at what people are actually paying for them.”
There is no way Kogan’s business model is as basic as simply as cutting out the middleman either. It’s all about smart online strategy too. Not having bricks and mortar stores is actually an advantage, not a disadvantage, says Kogan. “It gives us extra, really valuable information. The big retailers make their decisions based on very poor information. Customers walk through a store and there’s no way of looking at where they stopped, what they looked at, how long they looked at it for and whether they decided to eventually buy it or whether they then left or went on to buy something else, and what that was. Using web analytics, we can find out all that information and tailor our site to the needs of our customers. We make all our decisions based on facts.”
AdWords adds up
You can’t really argue with his logic. The same goes for spending so much money on Google AdWords. “It’s great because it’s so targeted,” he says. “It’s perfect. You only pay if someone goes to your site. And you only attract people who are interested in what you have to offer. We never made a conscious decision not to do other kinds of advertising but we just don’t because it’s not relevant.”
If it’s this simple, why isn’t everyone else doing it? Maybe because it isn’t actually that simple and there’s some clever strategy behind it all. “I wish there was some competition. I’d love competition. That would get me out of bed in the morning,” says Kogan. “There’s no one out there who’s a direct competitor.”
Single Kogan says he doesn’t have time for a girlfriend at the moment but admits he wouldn’t mind settling down in the next few years. Right now, he’s too busy working, playing hard and enjoying a lot of international travel. In other ways too, he’s living the life of a successful young entrepreneur. He’s training for his pilot’s license and he just bought a BMW Z4 convertible. But he is, and always has been, a self-confessed geek. So maybe what they say about geek being the new cool is true?
