Ruslan Kogan must earn investors’ trust

Ruslan Kogan can topple Gerry Harvey as retailing’s king. But a sloppy share sale is not the best way to gather support.

Kogan.com has been a fabulous investment for early investors. Pic: Hollie Adams

Ruslan Kogan is ready to take the mantle of king of Australian retailing from Gerry Harvey.

If the Belarus-born entrepreneur gets it right he will also take a generation of investors along with him for the ride — just as Harvey has done, especially in the early decades of Harvey Norman.

But first, Kogan has got to earn the trust of his retail shareholders.

A share sale involving founder Kogan’s stock has been controversial. Last week an attempt to sell shares openly failed to conclude successfully. Moreover, the sale of shares came shortly after Kogan announced his group would move into white goods retailing.

The issue is whether Kogan’s sloppy share sale will be a blip on the radar or whether it will represent a style of leadership retail investors will struggle to accept.

After the sale of $42 million worth of stock by UBS, Kogan himself is now down to about 35 per cent of the company, which in turn has a market capitalisation of $683 million.

Kogan.com told the ASX that there would be no more sales of shares before September.

This is not the best way to collect support. Kogan would be well served clarifying for his shareholders why he sold shares and what sort of long-term holding he aims to have in what promises to be the best listed retailer in the market.

For what it’s worth Gerry Harvey has a direct interest in 30 per cent of Harvey Norman.

This is Kogan’s moment. Shoppers and investors are ripe for new leadership.

Kogan.com has been a fabulous investment for early investors. The stock is up from $1.50 this time last year to $7.30, having been as high as $10 a few weeks ago.

What’s more, online retailing in Australia just reached an inflection point. As sales in department stores and other traditional outlets actually drop, online sales across Australia have doubled over the last year.

And there are other positives for local retailers in the coming months as the long-awaited arrival of GST on goods valued at less than $1000 narrows the advantage of overseas online behemoths such as Amazon.

And just to reinforce the point, Amazon has arrogantly announced it is to redirect Australian shoppers to its smaller and more expensive Australian site in the wake of the GST imposition.

(Rivals such as eBay have pointedly refused to follow the Amazon move.)

Meanwhile the property market is not letting the opportunities of online retailing slip by either.

Vicinity Centres has announced it is going to concentrate on its marquee shopping centres, which are destinations in themselves, with a parallel plan to sell $1 billion worth of interests in minor shopping developments, which are clearly vulnerable to the rise in online shopping.

At the same a Deutsche Bank report suggests that as property developers put more money and investment into what are known as “last mile distribution centres” the standards and speed of the online sales sector will improve, in turn further enhancing online sales.