By Jessica Yun
Kogan.com is preparing to implement a price rise on its membership program, promising customers more savings and extra value after net profits tripled to $10.2 million.
The e-commerce marketplace will lift the cost of its premium subscription, Kogan FIRST, from $99 to $129 on April 8 in a move that founder and chief executive Ruslan Kogan said was designed to give members even more bang for their buck.
Kogan.com founder and chief executive Ruslan Kogan.Credit: Eamon Gallagher
“We are continuing to increase the benefits that Kogan FIRST members get, and in order to keep the program sustainable and providing that huge amount of value to those customers, we have had to make a difficult decision of a price rise,” Kogan said.
“Yes, it’s better to not have a price rise, but they’re still making huge, huge savings across the board.”
More than 60 per cent of Kogan.com’s sales now come from Kogan FIRST members, or approximately 466,000 people among the online retailer’s 3 million customers. Kogan said the program was being continually expanded and had to be funded by a price rise as a result.
“We’re giving away free shipping, express shipping, credits to those customers, they get 2 per cent cashback on exclusive brands, they’re getting double Qantas points, and we’re also giving away hundreds of thousands of dollars of prizes to Kogan FIRST customers,” he said.
“We haven’t had anyone be able to show us a better loyalty program than this.”
In November, consumer advocate CHOICE awarded Kogan FIRST a “Shonky Award”, accusing the $758.3 million company of tricking customers into signing up to the subscription without intending to.
Kogan.com’s share price skyrocketed 23.7 per cent on Monday after revealing a 206 per cent rise in adjusted net profits to $10.2 million and a 590.6 per cent increase in adjusted earnings for the first half of the 2024 financial year. Investors were also pleased by the decision to award dividends again for the first time in three years: the board has declared a fully franked interim dividend of 7.5¢ a share to be paid on May 31.
The number of Kogan FIRST subscribers grew by 15.3 per cent compared with this time last year, generating $22.7 million in revenue for the business, more than double what the program contributed last year.
Kogan.com’s strong profits have come as a result of a broader shift in the e-commerce player’s business model. The company now makes 63 per cent of its profits from its subscriptions and services, which include mobile, insurance and internet plans.
This shift to platform-based sales, where Kogan.com acts as a platform for third-party sellers, means the business makes more reliable earnings through recurring revenue rather than purchasing and storing significant volumes of products to ship to customers.
The online retail business was a beneficiary of the online shopping boom in the early years of COVID lockdowns but then ran into a series of issues, including supply chain and logistics problems, high shipping costs, excess inventory and price inflation.
It over-invested in products during the COVID rush and in June 2022 was sitting on nearly $160 million worth of inventory, which it managed to clear by implementing steep price cuts and selling items at a loss.
Now, only “a fraction”, or 5000, of the 50 million products sold on Kogan.com’s website are actually Kogan.com exclusive brands or products, the founder said.
“They’re very important to us, but that’s only making up about 30 or 40 per cent of our sales now.”
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