The Gatekeeper

Ruslan Kogan is a well-known Australian entrepreneur. Not just because he has made successful businesses and is worth more than 400 million dollars, but because he is a driven ideologue. He is the vocal nemesis of traditional retail. And it shows, in his company and public image.

Ruslan Kogan was born in the Soviet Union. His parents migrated to Australia with as little as $90 in their pockets, working hard to make ends meet. Kogan, as you might say, was the child prodigy of entrepreneurialism. He created more than twenty companies since the age of 10, some as daring as scavenging lost golf balls to resell at golf clubs. This passion for risk and business eventually drove him to find and fill a large gap in the market, and become the exceedingly wealthy individual he is today.

In his early twenties, Kogan, influenced by the online retail kickoff in America, discovered that for Australians, ordering directly from the manufacture was ridiculously cheaper, especially with electronics. Why? Chronic inefficiency in the offline retail system.

And so he founded Kogan.com.

Kogan.com is a private retail enterprise operating under the proprietary limited legal structure. And interestingly enough, while Kogan set up the business in 2006, the company was not officially registered until 2007. Yet another amusing part of the entrepreneurial mindset: testing now, approving later.

While the company’s structure, with its founder also acting as CEO, is very similar to many other entrepreneurial enterprises out there, Kogan and his company are exceptionally agile and innovative. This agility and innovation makes Kogan.com the mortal enemy of the “bricks and mortar” retailers, those which trade in large halls showcasing their goods such has Harvey Norman. These large dinosaurs from a less interconnected world may be big, but their inflexibility makes their markets weak to entrepreneurs like Kogan.

Where businesses like Harvey Norman and The Good Guys have to pay for staff, land and electricity, Kogan.com, at least initially, needs one man and an internet connection. Where traditional retailers need to ship their goods in bulk, store them for months on display before selling them, all Kogan.com needs is a website with pictures and a willingness to forge connections with manufacturers overseas. The entire company is almost a one-man show. In fact as Kogan says, “it was started with no external capital and zero dollars.” Extremely lean.

But why is this significant? 

In his own words: “As an independent online store, we are able to go straight to the manufacturers, and bypass the agents, importers, wholesalers, distributors and retailers that are usually part of the retail process.”

Kogan.com, is about efficiency. Ruthless efficiency. Many other companies, including Divvy, which I looked at in my previous blog post, are about constructing a bridge between supply and demand which did not previously exist. Kogan.com is about destroying the river and the bridge, completely changing the landscape. Shaping the world so that the only thing separating supply and demand is a chain-link fence, where Kogan.com stands as gatekeeper.

This ability to undercut prices and ‘destroy the river’ comes from the business’s core. Kogan.com is built entirely around something intangible, light and cheap: knowledge. Its main benefit, agility, rests on the fact that Kogan.com can exist on manufacturing connections, and a few website architects alone. Kogan has even said that he “will never outsource IT,” and will always retain the company’s core, the skilled and knowledgeable individuals at the heart.

The weightlessness of the company can easily be seen by how far it has soared. It has grown 200-300% every year since 2006. Such exponential growth is seen in only the most successful start-ups. Kogan.com is surely one of them.

But it’s not about the money, it’s about sending a message.

Ruslan Kogan, with the success of Kogan.com, has been advocating, albeit informally, for the transformation of the retail industry. He has made such outrageous statements as “Aussie retailers are Apple’s bitch,” and has delivered speeches describing the coming apocalypse for “bricks and mortar” retailers alike. His call to the tides of change is not a hypocritical act, his company is already jumping ahead with new ideas, such as building a community feeling of social credibility by providing a live feed of purchases on the store page.

An interview with Ruslan Kogan conducted by KochiesBiz

This agile, innovative company, riding on the back of technological advancement and globalisation still has one significant disadvantage. The company has suffered from significant criticism surrounding Kogan’s persona.

In 2012, Kogan decided to charge a tax for all customers who used Internet Explorer. While the tax was not actually enforced and remained optional, Kogan wanted to encourage people to avoid Internet Explorer due to its atrocious compatibility and catering difficulty. Kogan.com shortly after, disappeared from Bing search results.

Kogan.com shows that the agile, one-man start-up, single public persona enterprise is extremely achievable and effective. This does not, however, make it immune to the heavy gaze of the public, or the embarrassing moments, which can lead to financially detrimental outcomes. Especially if the founder is an entrepreneur, driven and opinionated.

That Convenient Mutual Friend

Whether it be creating a trend, solving a problem, or influencing culture, history or ideas, entrepreneurialism is one of the key ways in which individuals can change the world.

By looking at entrepreneurial businesses, we can explore not just differing structures, but also different cash flows, different balances of company values and the different ways passionate individuals make their ideas reality.

Divvy Parking

Nick Austin’s business Divvy is a prefect example of a one-man start-up. The company was founded in March of 2013, and just last month boosted its investment funding to $5.3 million. It is even discussing plans to expand into foreign markets.

But what does Divvy do?

The Problem

Divvy is an entrepreneurial solution to a specific but cascading problem. In the CBD’s of Sydney and Melbourne, traffic is terrible, most of it comes from people driving through to their destinations, some of it comes from vans and small trucks and some of it comes from drivers circling around desperately trying to find a cheap park. In fact, this minority can increase congestion by up to 30%. Not only is parking often hidden in the inner city or secured by business which don’t use many of the spaces they own, it is also expensive; the average price of parking per hour is around $20 in Melbourne and Sydney.

Nick Austin and his business not only plan to make parking more accessible, but also reduce this price to around $6 per hour. How?

The uncomfortable, tense atmosphere of a congested city road

-Mario Roberto Duran Ortiz-(cc)

The Solution

Divvy is a mobile and desktop application which takes advantage of the unused parking spaces of around 50 property groups in Sydney and Melbourne. These spaces which would alternatively go unused are being opened up through a payment system managed by the Divvy Parking app. A user can search for parking spaces near any location and rent them out monthly.

In their own words: “We use technology to create a digital marketplace allowing owners to list their spaces quickly and allow commuters to search for those spaces, and book them, at a touch of a button.”

“Divvy manages the whole aspect of the booking including payments, reporting, member communication. We essentially create transparency where it didn’t exist before. We automate the whole transaction and we make it safe.”

The Structure

While it is not entirely clear, the Australian propriety limited company currently seems to generate revenue from investments and from cuts made to Divvy by the property groups partnered with the app. A commuter uses the app to find the parking space they desire, then pays rent through the app to the property group or individual which owns it, with Divvy being payed a portion on the side. Because Divvy acts as the market for such transactions, they can afford to broker deals which break out of the price-fixing instigated by large car park companies such as Wilson’s Parking. Property groups partnered with Divvy can only gain money from this arrangement, despite the low prices Divvy claims to aim for, making it a very attractive market to become a part of.

Divvy plans, however, to expand the market, appealing to small businesses and even individuals, which would possibly change this model. Divvy could still be considered as in early stages of starting up, and in the future may transition into a publicly trading company, generating revenue from the stock market.

In all, Divvy’s profitability is only limited by the number of deals it can make with companies and individuals which own car spaces, and thus it is very scalable.

They are already geared up on Facebook and Twitter, and have over 3000 likes and followers on both platforms combined

But this has been done before

Divvy has been called the Airbnb of parking spaces. Divvy, like many start-ups, is a middleman. The resource has already existed for some time; parking spaces that could be rented out to the public have always dotted Australian cities. The reasons why these property groups never decided to rent them outright, or at least, were never able to gain the momentum Divvy has, is not entirely clear. The reality of the situation might be that for these groups, the amount of funds generated by renting out their unused spaces is minuscule, or they simply lacked the effort, drive or marketplace to sell them.

In this sense Divvy is force, a force combining elements of a pre-existing puzzle, just like Uber, Airbnb, or even eBay. These companies are almost convenience based. Their entire business model built around the concept that the world, in all its complexity, is inefficient in distributing resources.

Build a bridge between what people have and what they need

-Adam.J.W.C.-(cc)

Divvy is yet another point of proof that businesses do not always need to create something new. It proves that there is always room for another daring entrepreneur to build the bridge between what people have and what they need. In fact I would go as far as to say that services like this are essential to the development of a nation flung into an era of technological advancement, massive populations and ever more complex interconnectedness.