Kogan.com founder Ruslan Kogan pushes loyalty program as online retailer returns to profitability
Ruslan Kogan wants a closer bond with his shoppers through his online marketplace’s Kogan First membership base, which means he won’t need to hand over money to ‘big tech’ sites.
Kogan.com chief executive Ruslan Kogan says a return to profitability and earnings growth for the online retailer has come on the back of its fast-growing membership program, which means it isn’t forced to “rent” customers from the likes of Google or Facebook, giving it a much tighter bond with its shoppers.
The Kogan.com co-founder also said a recent decision to lift the annual price of the Kogan First membership hadn’t dented consumer enthusiasm for the loyalty scheme with discounts, members-only specials and free shipping “over delivering” on savings for the shopper at a time when everyone is looking for value for money.
The online marketplace is also witnessing strong growth in its portfolio of “vertical” products and services, such as energy and mobile phone plans, with consumers checking across platforms for the cheapest deals online for basic services such as electricity, mobile and internet.
“There is no doubt that there is a cost of living crisis out there and the only positive in that for a business like ours is that we’re a value-based retailer, so we’re all about operating as efficiently as possible and driving prices down,” Mr Kogan said as his online marketplace swung back to a small profit of $83,000 for fiscal 2024, from a loss in 2023 of $25.85m as its revenue rose 6.1 per cent to $459.7m.
It also has reinstated a dividend, announcing a final dividend of 7.5c per share, payable on November 29, underlining its return to strong earnings growth and the confidence the management has in the year ahead.
The better result saw shares in Kogan.com rally 15 per cent to $5.05.
Mr Kogan said the online retailer was winning over shoppers from rivals and signing up members at a brisk rate.
“We would have definitely seen some benefit in our sales from people that looked at the big brands or the big retailers, and walk into them and then compared specs, done a few Google searches and gone, ‘hang on a second, I can get a Kogan TV that’s just as good for half the price’.
“Our verticals, being Kogan Mobile, Kogan Internet, Kogan Energy, that’s firing on all cylinders, and I think that that’s driven by the cost of living crisis. Because these types of services have just had a record year. Chances are, wherever you are, Kogan Energy is the cheapest electricity prices and then if you are a Kogan First member you get an even better deal than that deal.”
Mr Kogan said the popularity of its Kogan First loyalty scheme had grown through the year, adding more than 100,000 members to hit 502,000, despite the annual membership price lifting from $99 to $129.
“Even though we raised the price you can’t afford not be a Kogan First member, the value is there, and that’s exactly the type of relationship we’re driving, on top of that, it helps our business.
“Because if you look at our marketing, it would be industry leading in the sense of marketing dollars spent compared to our sales. And part of the reason for that is, once somebody becomes a Kogan First member, it means that they’re coming back to our sites, they’re shopping with us directly and we don’t need to pay for American big tech companies to keep renting customers from.
“So we don’t want to keep paying Google and Facebook for customers and keep renting them from them, we much prefer having a Kogan First customer.”
The return to bottom line profitability marks the end of a string of large losses for Kogan.com stretching back to the first few years after the Covid-19 boom, and driven by operational problems with its warehouses and logistics, bloated inventories and the cost of expensing tens of millions of dollars in options for its CEO and chief financial officer.
“Fiscal 2024 was a milestone year for Kogan.com. Our business returned to a position of profitability and strength, having navigated through the previous two and a half years of turbulence,” Mr Kogan said.
“We got through this by restructuring and improving our operations, focusing on growing the right areas of our business, rapidly growing platform-based sales, and most importantly, investing in our loyal customer base.”
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