All TDM Insights
Scaling Up: “The Greatest Australian Hustle” with Ruslan Kogan, Co-founder and CEO of Kogan.com
Podcasts
4 Nov 2022
Screenshot 2022 11 11 110135

Ruslan Kogan joins Scaling Up to discuss how Kogan.com has scaled to become Australia’s largest pure play online retailer. We traverse a wide range of topics from how being immigrant has impacted his entrepreneurial spirit to his mindset on best in class logistics.

 

Listen:

 

Transcript:

 

Ed (02:35): Ruslan, welcome to Scaling Up. This is a bit of a treat for me to have someone who has created what is Australia’s largest pure play online retailer in Kogan.com. Your story is incredible in many respects, and I really want to elicit a whole range of things from today. But let’s go back to the start with your family immigrating from Belarus two years before it became an independent country, the Iron Curtain is being pulled back on the Soviet Union, it’s 1989, you were six years old. Can you give me a sense of what your upbringing was like when you came to Australia?

Ruslan (03:15): Yeah, look, I was born in a shit hole little village called Bobruisk in Belarus, and as a child, you know, you don’t realize all of the things there of being communist and no free markets, no freedom of speech and all of that. They don’t mean too much to a 1, 2, 3, 4, 5-year-old. And I was six years old when we moved here, so all I remember is a loving home, loving parents, lots of fun as a kid, it was all great. Moving to Australia, seeing what my parents went through, you don’t sort of appreciate it or realize that at the time, but it’s very formative, seeing your parents go through immigration and that’s like arrive in Australia with $90 in their pocket work, two to three jobs each whilst always being there for me and my sister whenever we needed our parents. So super, super busy trying to make ends meet.

We grew up in the Elsternwick Housing Commission flats here in Melbourne that were actually just knocked down very recently for a development as a child. We’d loved it. Everything was great. I had lots of kids to play with who lived in the surrounding flats and it’s a great experience in hindsight because you realize what you witnessed your parents go through are very good entrepreneurial skills. An immigrant has to drop everything they’ve got, travel into the unknown, take a massive risk and work their butt off for a potential benefit that may or may not be there. And that’s what I witnessed my parents do for myself and my sister. And while my parents have absolutely no idea about business, they are per hour employees working really, really hard, don’t know what supply and demand is. They don’t know the concept of opportunity cost. They don’t know these basic economics principles that we’re all familiar with.

They can’t teach me anything about business, but they did teach me risk taking and work ethic. And I think that having gone through that immigration process is the best business training that any kid could possibly have and seeing their parents go through that. And I guess that that’s why when you study the business world and you study other entrepreneurs and business people and the biggest businesses out there, you will notice that very often it’s either the immigrants themselves or the children of immigrants because it is a very pre-selected risk-taking, hard-working group of people.

Ed (05:59): It’s such an interesting thread to pull on and Alex Vynokur from Beta Shares was on this podcast last week and really echoed those words. So, there’s no doubt in my mind that this entrepreneurial spirit was ingrained in you. And there’s some great stories of you growing up as a 10-year-old repackaging golf balls and washing cars, and it feels as though that spirit was alive and well right through your childhood.

Ruslan (06:24): Yeah. Well, Alex is incredible. I actually had dinner with him a few weeks ago and he’s got a very similar story. And the way that he’s transforming his industry is just absolutely incredible and we did speak on that topic that the difficulties and the challenges and the adversity that you go through with immigration is the best MBA you could possibly do.

Ed (06:51): Speaking of education, let’s fast forward to what essentially was much of the seed that was sown for what became Kogan.com. And I know you’ve told this founding story a million times over, but for this audience specifically, maybe let’s just roll through it pretty quickly. You’re at the University of Miami, you need to buy a bar fridge and you do what everyone seemed to be doing and that was go to Walmart.

Ruslan (07:17): Yeah well, Walmart in uni was what we learn about as textbook retail, economies of scale, huge supply chains, massive footprint of stores, just efficiencies left, right, and center. And we didn’t even do our research. We all just went straight there and then had to schlep the bar fridges back to our dorm rooms. Next day lo and behold, we see all of the local kids getting it sent by FedEx. There’s a FedEx driver just wheeling it to their dorm room and then you chat further, and all the international kids realize that all the local kids not only didn’t have to go to a Walmart and then schlep it all the way back to the dorm rooms, they paid less than we did. And that was a bit of a realization going, well, small online retailer can operate with greater efficiency than a Goliath like Walmart. And I kept that thought in my head and saw the rise of online retailers. I went on with my studies in Miami and that was definitely one of the big inputs into giving me the inspiration to start Kogan.com after I returned to Australia.

Ed (08:28): Maybe let’s just dig into that briefly, those founding moments of Kogan.com, there’s great stories emerging and very smartly how you bootstrap the business by taking payment up front and putting people on wait lists. Can you just talk to those early years, what was involved mainly around the grit and the determination to get that off the ground and how that played into the business model?

Ruslan (08:53): Yeah, well look, I had to bootstrap it that way because there was no other option. What we’ve seen in the last few years, you just make a pitch deck and everyone’s throwing money at you. That would’ve been far easier to get cracking at that time. But in 2006 when I started it, I’d go and speak to people in the lead up. I’ve got this idea, it’s going to be direct to consumer LCD TVs, they’re perfect for online retail. It’s a high value product in a small box, we can cut out the middleman. The business case makes a lot of sense. No one’s interested. Everyone’s saying e-commerce might work for books and CDs, but other than that, as if anyone’s going to buy a TV without seeing it first. So, I had no other option but to bootstrap, nobody was interested in the idea, nobody was interested in funding it.

So, I said, well, how am I going to fund it? And I pre-sold TVs, I went onto eBay at the time, and I actually sold them at 1 cent, no reserve, one day auctions knowing that I’ve got a mass market product here that lots of people want. And lots of people would say things like, but what if a TV sells for 5 cents? I’m like, does that mean there’s not a single person in Australia? I’m not willing to pay 6 cents for the TV. And I try and explain to people that when you go to an auction of a house and the auction starts at $500,000 and ends for $700,000, do you think if that auction started at $1, it still wouldn’t fetch the natural market price? And people thought that the risks I’m taking are crazy with 1 cent, no reserve auctions daily controlling the sales of TVs because I needed to pre-sell a certain amount, pay the deposit, then order the tv.

So, it was all a pre-sale, a self-funding business around the edges. I did get a few credit cards and got a few mates to take out credit cards and so on to accelerate things. But yeah, it was bootstrapped with a pre-sale, and it worked. I couldn’t do that today because the rules around e-commerce is all like can’t things and you need to ship them immediately. But my view at the time was if I’ve got this product that I’m willing to sell for a thousand dollars while the big-name stores are selling for $4,000, surely there’s people out there that are willing to accept the bargain, but have it delivered a bit later on. So, the entire business was funded with a presale.

Ed (11:24): And really that is what formed this core belief it seems around delivering everyday value. And this theme will continue to emerge. One thing I do want to elicit over the next 20 minutes or so is to kind of dive into an e-commerce masterclass, if you will. And there are lots of different pieces of the puzzle. So, first of all, we’ll kind of attack the business model on the playbook that you’ve rolled out, but many business builders and operators that listen to this podcast are in e-commerce. And recently anyone that’s in the world of e-commerce has seen firsthand that their cost of acquisition, their ability to acquire customers cheaply, has almost disappeared, be it through Facebook ads, Google ads, the cost of those has exploded. And it’s very hard to create not only a brand narrative, but what a brand stands for without some kind of advertising. You were very successful in those early days around creating attention for your business. Do you think that still would’ve applied in today’s market and maybe some lessons that you learnt in creating attention for Kogan.com at the time that other people could apply?

Ruslan (12:39): Look, creating attention for a business, especially a consumer business, is very important. And nearly every business that gets started in e-commerce or gets started as a startup is a challenger business. It’s a consumer champion business. So, it’s a business that looks out into the current market and says, how are customers currently getting screwed? What’s not, right? What’s happening that shouldn’t be happening and how do we do it better? They’re consumer champions. That’s the position that we took from the start. We said, look, the entire reason for forming this business was because I wanted to buy a tv. I was earning a decent wage; I was on a decent wicked in a corporate world but couldn’t afford all of this latest tech. And I realized that it could be done way more efficiently than the big-name stores in this country. As a result of that, it was taking on this consumer champion idea.

And it was actually inspired by growing up, listening to a lot of rap and hip hop and listening to Eminem at the time because I remember there were these battles Eminem had with Ja Rule, and I was going online and downloading these battles and I hadn’t heard of Ja Rule prior to these battles. And then the last response that one say something about the other than the other and back and forth. And then one of the last responses I downloaded from Eminem, he basically said all this bad stuff about Ja Rule. And then he goes, I’m not replying anymore. I’ve sold you more records than you could ever sell yourself. And I thought that’s so true because I hadn’t heard of Ja rule before and even though I’m an Eminem fan, all of a sudden, I know who Ja Rule is.

And then knowing that we’re a consumer champion, got to identify the enemy, the enemy was pretty clear. It was Jerry Harvey at the time. It was everyone talking about the high prices at Harvey Norman, the rip-off, all of that. Our TVs were far cheaper than theirs. So, I started poking. I thought if only I could get a response out of Jerry, it would work in the same way. And I was filming a today, tonight episode. At the time we were launching a new 55-inch TV at a market smashing price way cheaper than everyone else. And when the cameras weren’t filming, I was saying to the journalist, I’m like, oh, if Jerry saw these prices, he would go nuts. Don’t show these to Jerry if you don’t have medical attention on standby. So, then the whole officers, like 10 of us at the time are sitting around watching today, tonight, that evening eating pizza on comes Jerry with a printout of our website with prices crossed, going, oh, they’re only $200 more expensive on this model and we’re only a hundred dollars more expensive on this model and so on.

And that kicked off a war. We were doing a couple of mill of turnover at the time we were almost insignificant. Harvey Norman, which is obviously a very significant and great retailer, they were doing billions, but all of a sudden got a response that made us significant and then the media blew up from there. I challenged him to a live debate because it was election season at the time and so on. And all of a sudden there were all these articles comparing Kogan to Jerry Harvey and Harvey Norman and we were a pimple on the butt of the industry at the time. We were tiny, but it made us significant, and it got us attention. And I guess the key takeout to other entrepreneurs and people building challenger brands is that you need to know who your enemy is. You need to poke the enemy; you need to get a response from the enemy and clearly articulate your story.

Whether it be Subway being a challenger brand to McDonald’s or whether it be Apple being a challenger brand to Microsoft and IBM, whoever at the time it is, you’ve got to very clearly articulate that because as you say, marketing is very expensive. Winning customers by paying for them is very expensive. But whatever you could do from telling your story and propagating to customers why you are there for them and how you are helping their cause and getting attention and publicity behind that is a benefit to everyone. It’s a benefit to your bottom line and a benefit to your customers, because if it’s a benefit to your bottom line, you can sell stuff for cheaper, and your customers win.

Ed (17:18): It’s a great story. And in many ways those formative years, you almost hacked your way to a size and scale that gave you permission to do a whole range of other things. And as I’ve already heard, you focused on of own brand and exclusive brands in those first years, particularly in electronics. And that’s where the brand was initially built, but then built into a whole range of other verticals for Kogan.com. I’m keen to understand not only how you built in data efficiencies in those early years, but then how you decided to leverage your scale. It feels as though you’ve picked up the best bits from a lot of great retailing businesses from around the world. You move from exclusive own brand to more using your distribution leverage to service adjacency. And we’ll kind of play this out a little bit, but you played to your strengths of having created a scale, having created data efficiencies, we’re now going to utilize this distribution leverage.

Ruslan (18:20): Yeah and look, a lot of it comes out of necessity. You know, said let’s have a bit of a master class that’s flattering, but we consider ourselves students of e-commerce ourselves, we’re learning every day. We start every day from the position of there is always a better way. Everything we’re doing today is just the best way we’ve come up with until now and we know that it’s going to be different in a month and a year and five years and 10 years. So, we’re constantly learning, evolving and trying to innovate. So, a lot of it’s through necessity, like I spoke about building a challenger brand and getting publicity for us that came out of necessity because we didn’t have a marketing budget. If we wanted the business to exist, we’re going to have to tell our story pretty well and get customers to our site and see our offering.

With all of our verticals that you speak of in terms of leveraging our distribution, it’s exactly what happened. We’re in an inventory heavy business and inventory heavy business requires cash. So, we’re sitting there thinking how do we launch some divisions that aren’t that cash heavy, that don’t require that investment? And then we through thinking through our business model and the team said, well look, we’ve got a brand we can very easily acquire customers for someone else. And there’s all these infrastructure owners out there who have invested a lot in infrastructure, whether it be at Telco that’s built out mobile towers throughout the country or a credit card operator or an energy provider or an insurance provider. There’s these businesses that have had a lot of CapEx building out infrastructure, they need rapid customer acquisition and we’re brilliant at that because we’ve got a trusted and very efficient brand that delivers value through efficiency to customers.

So, we went to these infrastructure owners, and we said, hey, you want more customers? We can provide that. And rather than you have to spend money on marketing to win new customers, let’s reinvest what you would’ve spent on these customers into the price point and provide a better value service. And out of that is born Kogan Mobile, which is the best deals in the country on mobile access. Our customers win because they’re getting unprecedented value. Our partner TPG Vodafone wins as well because they’re getting hundreds of thousands of customers and our business wins as well. And it’s a cash generative area of the business. It doesn’t require inventory, but it can help us buy inventory and it can help us do some of the other good stuff that we do. So, through necessity that happened and then we’ve rolled that out to other verticals as well. So, a lot of this innovation in our business and the evolution of the business happens through necessity and first principles. So, of evaluating where are we at, what do we need to do, how do we build it

Ed (21:24): From an investor lens, the word that comes to mind is vitality. The ability to actually expand your own addressable market is incredible here. And to be able to think from first principles to play to your strengths, as you said, to keep delivering on your core brand proposition while doing it and around delivering great value has been sensational to watch. And I guess the next step in this has been the integration of a marketplace and it’s pretty clear that the success that Amazon has had in the states in doing this just to create more skew depth. Again, not having to buy inventory creates huge liquidity for you in many aspects of your business and also of course creates an advertising advantage. How did you think about layering on a marketplace to Kogan.com?

Ruslan (22:15): Yeah, look, you could almost brand our marketplace play failure to a degree because we were so late to do it. We evaluated at five years prior to actually doing it and decided at the time to focus on other things. We didn’t quite appreciate the brand and the following and the loyal customer base that we had, I guess better late than never. We did end up launching it five years after we had initially evaluated it and it’s just been an absolute success. It provides so much choice to customers, it’s taken our platform from having a few thousand products to over 20 million items now it’s provided more choice, it creates more competition on our platform because we’re now at the point where in any category we’ve got lots of sellers competing against one another where in the process of launching an advertising platform to help our sellers reach their customers in a better way. Yeah, it’s transforming us into more of a platform business. Yes, we have the very important inventory and especially our exclusive brands inventory business, but also our marketplace is providing incredible value to our platform and ticks all the boxes in terms of what a great business looks like.

Ed (24:00): And the last layer of really driving value for your customers in terms of this e-commerce master class has been subscription. To be able to smooth out your revenue stream, not have to rely on these other channels has been incredibly successful for you. Do you have the same attitude as marketplace? Do you feel like you could have done that sooner or it’s only now that you’ve had permission to do so?

Ruslan (24:28): We probably could have done it sooner. I guess it, it’s something that wouldn’t need the marketplace because you need to be there with a lot of choice and a lot of offering and all of that. But yeah, it’s seen huge success out of our Kogan first program because it does provide a very clear win win win. It’s a win for our customers because they’re getting incredible deals. It’s a win for our business because we essentially invest in our customers and give them the incredible deals, but the customer’s giving us loyalty and return and like you said, from an investment perspective it is creating that subscription model. So, it it’s been a huge success for our business. If we were to look back at it would say, yeah, should have done it five years earlier as well for us just to, it’s nearly 400,000 subscribers you see the other day that India Pakistan match at the MCG in cricket and it’s an absolute packed house. And you look at that and you go that four times over is how many Kogan first subscribers have said, hey, I want to be a member of your website, I want to be loyal to your site. Your deals are incredible, I love them. And that number keeps growing and it’s a great indicator for us as to how value creating what we are doing is but also helps us create value to our customers

Ed (25:57): Without doubt and it also contributes to the size and scale of your business more generally and size and scale matter when you’re trying to deliver price leadership in so many different ways. But I guess with size and scale also comes complexity and probably the greatest complexity in your business, and correct me if I’m wrong, is around managing supply chain and logistics in many respects in the core business. Part of this eCommerce masterclass, if you will, is diving into a mini deep dive into what best in class logistics looks like. From a consumer point of view, it’s pretty easy to understand that costs, speed range, convenience and reliability are kind of key pillars, but to fulfill that takes a huge amount of know-how, a whole range of different inputs. So maybe we can go through a few of them from a warehousing point of view of inbound freight and storage Kogan.com, use third party logistics providers. Has that just been a necessity to be close to your customer without much CapEx or is it actually a strategic advantage do you think, as opposed to owning your own warehouses?

Ruslan (27:13): It’s got its pros and cons and our business through evaluating things that has more pros than cons because it gives you the flexibility to have that area of the business as a variable cost, which for us through a period of scaling is very important. So, we have some excellent partners there that we’ve got strong requirements and some custom-built solutions around how we operate and what we need from them and so on. But what you identify is spot on. It’s a huge area of eCommerce logistics and it makes me sometimes jealous of some other businesses. My parents often shop at Costco, and I’ll go to their house, and I’ll see in the garage like a stockpile of various things, and I try and explain to mum and dad, I’m like, take the per square meter cost of land in this area and how much are you donating to Costco here.

And then on top of the fact that my parents drove to Costco, they walked up and down the aisles, they did the pick and pack for Costco, they then put the items in their car, and they did the last mile delivery for Costco and now they’re providing a satellite warehouse for them. It’s like they have in factored all of that into the costing model, not I get a bit jealous of that because in the e-commerce world that is a huge part of our cost base and something we’re always looking to be more and more efficient in. And it’s a huge challenge because what we’re competing against is somebody driving to a store and taking the item of the shelf and driving home. Nobody’s doing the math’s in their head that alright, the store’s 2.4 kilometers away from my house, petrol cost a dollar 83 at the moment I’m going to use this much petrol, it’s going to take me 42 minutes. And my opportunity cost of the value of my time is this. Therefore, me driving up the road to the store and bringing the item home is actually costing me this much in logistics. What a bargain online provides with these options. No, nobody’s doing that way. Our perceived value is zero and that’s the point that we’re working towards. That’s why we have to make it all as efficient as possible.

Ed (29:48): And you talk about it being a real cost in the business. Most online retailers big and small, it’s probably somewhere between 12 and 18% of their cost base. It is a significant cost and probably aside from acquiring customers is the hardest to execute on and is the murkiest world to unveil and that’s why this is really important. The other thing that I want to touch on is fulfillment. Because historically, as you alluded to, it’s been a very pick and packed model, but I’m keen to understand the movement towards automation and robotics in these warehouses. What can best in class look like? Can you give us some color as to what you’ve seen as to what’s possible using more automation and robotics in warehousing?

Ruslan (30:32): Yeah, so we have very comprehensive robotics setup in the partner warehouses that we work with. It’s primarily for the smaller items. So, 55 inch or 65-inch TVs. There’s very little automation around the larger items or fridges, dishwashers and so on, which is big business for us. Around the smaller item there is a lot of robotics and potentially what the robotics does is it doesn’t cut people out of the process; it just makes it far quicker to kick and pack items. So, whereas typically an operator in a warehouse would need to go to an item and bring it to a packing station, which can be very tedious, time consuming and inefficient because someone might order one item from this area of the warehouse and another item from another area and so on. The automation brings the item to the operator, meaning that they’re focused on picking and packing the orders and the items are brought to them. It’s very efficient, it can massively cut down costs, it can massively improve the speed of pick and pack and customers are huge beneficiaries of it.

Ed (31:46): And where do you think the world’s heading when it comes to automation in warehousing? Do you ever see a world where robotics is completely taking over that even the pick and packing look,

Ruslan (31:56): It will never completely take anything over because it needs operators, it needs people monitoring it, it needs programmers, designers, sometimes there’s even more people involved than in a manual process. It can really speed it up and make it far more accurate and far more scalable. So, it will never be full robotics. There’s operators required to tell the robots what to do, how to do it, and have all the various controls in place. But from a customer perspective, it’s just going to keep improving and improving to the point where the moment your order is placed on a website without any delays, that order is in a WMS system in a warehouse with a robot that’s already bringing the item to a packing station.

Ed (32:48): The last thing around logistics that I’m keen to unpack is around the outbound logistics or what we’d know as freight to the customer and maybe specifically last mile Kogan.com has dabbled in optimizing or trying to optimize its last mile delivery by owning that and many large bulky retailers have seen sometimes the benefit of this and sometimes it’s been tricky to execute. Can you talk to the pros and cons of owning your last mile logistics and maybe also the pros and cons of using courier services for some of your smaller items as well.

Ruslan (33:27): And look, both of those areas have pros and cons because you use other service providers, and the pros are that they’re readily available when you’ve got volume like we do. You can ensure that you’re putting tenders out there and they’re all competing on service and price and so on. And the cons are that you don’t actually control it. So, in the middle of lockdowns, there were periods where most of the providers around Australia had huge delays. There were one-to-two-week delays in last mile delivery. During that period, we very quickly spun up our own last mile delivery services and they were going great guns. We were delivering our own items same day or next day and doing a very quickly wonderful service. Customers were very happy. Once again, we did it out of necessity. We did it because we had because the level of service that the others were able to provide due to no fault of their own, it was a lot of it was government-imposed restrictions, certain shortages and so on.

But that level was not a level we deemed acceptable for our customers. So, we launched our own service. Now having seen the pandemic essentially and things return to normal and fast deliveries from our various providers, we decided to pause that service because it’s not really needed. There’s staff shortages out there, there’s various challenges out there, but essentially we can get a very high level of service from the competition of the existing courier networks. If an environment ever arises where we do need to start that service again, we easily can, but now’s not the environment for it, especially without focus on operational efficiency. Our view on logistics and delivery speeds is that it has to be, we’re not looking to be the absolute best at any cost. We’re looking for a high level of service. We want our customers to receive an excellent fast delivery, but our primary competitive advantage in our business is price. We are an efficiency-based retailer that is able to cut out the middlemen and run a very efficient supply chain to give people the items that improve their lives for the best possible prices.

Ed (35:51): It’s interesting because at the top one I mentioned optimizing for cost, speed, range, convenience or reliability, you can only really choose probably two of those five that can be your proposition to have all of them. You need a size and scale that probably isn’t possible in the Australian market. It’s interesting that in line with your brand, you are still trying to drive cost as it comes to logistics.

Ruslan (36:16): Yeah, you’ve got to know what you are best at and what your competitive advantage is and flaunt, but like you know said, cost and speed for instance, you can’t optimize for both of those. If we’re optimizing for speed and you place an order right now, we could get someone quickly driving to the warehouse, taking the item, jumping on a flight and delivering it to you. That would be optimizing for speed but not necessarily cost. So, you’ve got to know exactly where you sit, what your customers love about you. And for us, delivery speed is important, and we would be one of the fastest in the country to deliver. For instance, I was just commending our team prior to jumping on this call because yesterday afternoon I ordered dishwasher tablets and I’ve just got the notification just before our podcast that they’ve arrived already. So less than one business day between order and delivery. And that’s a very good level of service, but we’re not going to blow cash for the sake of incremental minutes or hours onto that speed. We want it to be very good, but our core position is efficiency and price.

Ed (37:30): Do you use an alias when you place an order on Kogan.com? I’ve got a sense that they might see the boss coming.

Ruslan (37:36): I do it, it’s not in my name.

Ed (37:39): The last topic I want to attack is scaling people and culture. And for any business there’s complexity in that. But specifically, for Kogan.com, you’ve got engineers creating interface for the customers and data engineers and software engineers. You’ve also got warehouse pickers and packers and everything in between. So, there’s a huge variety of people that work for Kogan.com. I’m going to pick out a few things that I want to talk to and interestingly, it usually works the way I talk to topics, and you give the examples. I’m going to give the examples as to what some research throughout from 2014, I think they might still apply, but it gives a sense of a rule of thumb of how you kind of think about these things. Particularly when it’s talking about the qualities and competencies you look for and test for when hiring. Interestingly, 2014 you said that as a rule of thumb, if you get a CV from a Gmail account, that’s a pretty good heuristic this person is tech savvy and should probably go through to the next round. I’m sure there’s a shortcut version that Kogan.com use when looking through a multitude of CV’s. What are the things that stand out when they’re coming through that that would make someone really fit into Kogan?

Ruslan (39:01): Interesting. You bring up that one about Gmail. I remember I did a LinkedIn post, and it actually went viral and had thousands of comments on it. Most of the comments being negative along the lines of that is discrimination. How could you hire based on somebody’s email address and so on. And I remember our people and culture manager coming to me at the time saying, do not ever publish something like that again without running it past me. I upset a few people with that post. I remember going back to the people and culture manager because I got our team to, as part of our application process@Kogan.com, there is an aptitude and logical and analytical reasoning testing that happens as part of the application process. So, I actually have the data of what aptitude scores somebody with a Gmail account has compared to a Hotmail account. So, I went to our people and culture manager.

I’m like, all right, so I want to do a follow up post now saying that, hey, there was a bit of an uproar when I said Gmail people are better, but here’s the hard fact showing that they are actually smarter in these areas of logical and analytical reasoning than Hotmail people, should I publish that? They’re like, no, no, no, no, no, just leave it. Look, in the early days of the business, the view was that nearly everyone at some point had a Hotmail account and then Google came along with the search don’t sort technology and much bigger inboxes and a better way of managing information. And there would be people out there who had a Hotmail account. So just kept it forever and didn’t bother to keep up with the times. And the sort of people we like are the ones who do keep up with the times and monitor technology and change and they’ll go and change over to a Gmail account.

That was our view and given that every time we put a job ad up, we’d have thousands of applicants. And especially that I was very heavily involved in the recruitment process for many, many years. It was an easy filter. It’s not a perfect filter. I’m sure there are some super intelligent people out there with a Hotmail account, and I’m sure there are some absolute idiots out there with a Gmail account. And it worked as a general filter. You’ve got to, once again in the name of efficiency, you’ve got to find what works for you and is efficient. The problem with it obviously is, and we noticed that as the business grew bigger and bigger and bigger and now has hundreds of employees, is any concrete rules like that you put into place, you tend to hire lookalikes. So, at one point we had a hundred highly logical and analytical data driven people in the business, which is great because that’s at the core of our culture. But as we scale, we like to mix it up a bit to make sure that time there’s a decision that needs to be made or an argument that we’ve got multiple opinions from multiple perspectives because our customers are everyone. So, we need to make sure that we appeal to everyone.

Ed (42:04): Another little tidbit that emerged from the research was sometimes you ask a prospective employee; an email goes to them with a test at 9:00 PM and the expectation is they don’t know this at the time that it’s back by midnight. And that is just another quick filter rule of thumb that you can roll over to say, we actually value hustle in this organization. We really value people moving at speed.

Ruslan (42:29): Yep.

Ed (42:30): I’m sure that there are other little things that have emerged in your culture that are similar kind of heuristics.

Ruslan (42:36): Yeah, look, that was something we did in the early days of the business when there was the start breaking through in two of the most competitive industries out there. We were primarily a consumer electronics brand and a retailer, which is massively competitive. And then at the intersection of those two. So yeah, we wanted hustle in the job interviews. We said, hey, I’m really busy. You’re probably not going to get too much praise. You’re probably going to be massively underappreciated. You’re probably going to be overworked, but this will be highly satisfying, and you’ll get a lot of inner fulfillment out of kicking lots of goals and making a huge difference. So, it was a certain type of person we wanted in the early days of the business and people across the organization knew that they could send me in an email at 11:30 PM and have a response at 11:32 PM. They knew that they’ll receive emails from me at 2:00 AM they’ll receive emails from me at 7:00 AM I think the world’s changed a bit. Now you’re see in people’s signatures, the wokey kind of, I’m working at 6:00 PM but that doesn’t mean that you are expected to respond or that’s not the work ethic I grew up with, but each of their own, I’m sure it works for some people. I wouldn’t tell other organizations or other people how to be, but you’re not going to see that on a Kogan.com signature.

Ed (44:00): And when it comes to transparency, it’s something that you just touched on. You were very clear around your expectations for incoming employees as to what they might expect. I also read there’s an expectation that if people are included on an email reply all is part of the culture. It’s not I’ll reply to the person that’s emailed me. There’s no conversations behind closed doors. It’s all out in the open. Has this scaled as the business has scaled,

Ruslan (44:26): It has scaled. So, when the only thing that’s changed these days is very often, we’d say in an email chain of lots of people, it’s like, hey guys, should we just all get in a room and discuss it? Because email is a great form of communication. It’s not the only form of communication and it, it’s sometimes not a good form of communication for something that requires a lot of back and forth and new ideas and debating and things like that. It’s probably not the best. But yeah, we like the whole reply all culture because when I worked in the corporate world, one thing I’ve learned very well is what not to do and the organizational internal politics and the various conversations going on in the background, but also the lack of accountability. Stand by your comment. If somebody sends an email to these five people, do reply all. If you disagree still feel free to reply all. There’s nothing wrong with that. We never attack the person. We attack the ideas, we discuss ideas. We can disagree with ideas. We’re all on the one team. We all respect each other, and we will never play the person, but we’ll disagree with ideas. Sometimes we’ll praise ideas. So, we will criticize and disagree openly, and we will praise and agree openly as well.

Ed (45:41): What I’m curious to unveil is how all these have come together over time as the business has grown. Do those cultural values still hold true today as they did back in 2014?

Ruslan (45:55): I’d say to a large degree, yes. There’s some that don’t work at scale. There’s some that you know, obviously need to change or evolve or improve. But yeah, to a large degree, even now, there won’t be any secret conversations behind someone’s back when there was an email sent about something, it’ll be a reply all or everyone gets into the room. So, all of that is ingrained. We want our team swimming upstream to challenge the status quo. All opinions are valid. We have disagreements all the time. We have disagreements at the most senior levels, but they’re always respectable, constructive disagreements. We never play the person. Most of those things have scaled like yes, some of our recruitment tactics in terms of wanting a broader range of views and a broader range of opinions and people of various different backgrounds and so on. That has evolved. As you know now, we’re a much, much bigger team. We’re not 20 people in the one room. But yeah, largely we have been able to keep that culture through scale.

Ed (47:02): Ruslan, it’s been awesome to unpack what has been, not just an incredible founding story, but the journey to being as a mention at the top, Australia’s largest pure play online retailer has been immense. And to try and uncover some of these secrets has been a joy for me. So, thank you so much for your time. It really has been a pleasure.

 

Read The full Article
Previous
Scaling Up: Democratising the investment industry with Alex Vynokur, CEO and Founder of BetaShares
Next
TDM featured on the “Equity Mates” podcast
TDM is currently not open to new clients
Processing...
Thank you! Your subscription has been confirmed. You'll hear from us soon.
ErrorHere