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.