Kogan welcomes prospect of Amazon

KoganRuslan Kogan has dismissed concerns that the arrival in Australia of Amazon will hurt his own, eponymous business, saying he expects Kogan.com will benefit from the presence of the online sales behemoth.

Amazon has been rumoured to be planning an Australian launch as early as next year, with analysts warning many retailers, in particular JB Hi-Fi, Harvey Norman and Kogan.com, will come under pressure.

“Amazon will hurt some retailers no doubt but the ones they’ll hurt are the ones that are selling the same thing as everybody else at fat margins,”  Kogan told AAP.

He said Kogan.com has a large and growing number of higher-margin private label products, including Kogan electrical products and Ovela homewares.

Private labels accounted for 37 per cent of the group’s gross sales during the 2016 financial year.

Kogan said Amazon would lift the profile of online retail – a sector that currently makes up only six per cent of the total market – and encourage brands to sell online.

“One of the challenges has been convincing brands to take on the online retail channel seriously and they are all fearful of the incumbent retailers and don’t want to upset them,” he said.

“Someone like Amazon would help that conversation significantly.

“Amazon is a marketplace and they would be used in an identical manner in how we use eBay currently.”

Forager Funds senior equities analyst Daniel Mueller said Australia’s online retail sales lagged far behind other developed countries.

“If Amazon were to come to Australia it would lead to a greater take up of online retail and Kogan would be a beneficiary of that,” he said.

“The flip side is that Amazon tends to dominate markets where it operates and it could take market share from Kogan.”

Kogan talked up the potential benefits of Amazon’s arrival during Kogan’s first annual general meeting since it listed on the ASX in July.

During the meeting, held in Melbourne on Friday, Kogan said sales have exceeded expectations and Kogan’s board now expects underlying earnings to beat its prospectus forecast of $6.9 million.

Guidance has been upgraded to $8 million to $9 million in the 2016/17 year, with shares rallying on the news.

Citi analysts said in an August report that JB Hi-Fi and Harvey Norman would face a loss of sales and risk to overall gross margins in competition with Amazon.

Citi estimated Amazon could reach $3.5 to $4 billion in sales in Australia within five years – assuming it launches Down Under within two years.

On Friday, Kogan shares closed up three cents, or 2.1 per cent, at $1.48, though the stock remains below its $1.80 issue price.

AAP

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Comments

1 comment

  1. Vic Cherikoff posted on November 22, 2016

    Is Kogan still in business? I am surprised. The quality of products over several purchases I made from them permanently pursuaded me to shop elsewhere. Ruslan SHOULD be concerned about Amazon. His reputation is very poor with me and there may be others who similarly, would welcome a higher quality supplier such as the Big A.

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