A few days after we exclusively revealed that Ruslan Kogan had stuck his hand up to buy the ailing Dick Smith online operation, which has seen a massive slump in revenue since its parent Company was placed under administration, a senior Vice President of a leading brand said “there is no way that we will deal with Kogan”.
COMMENT:Has Kogan bought A "Toxic" Lemon From Dick Smith
Now it’s official, Kogan has not only got the Dick Smith and Move names along with their related web sites he has also got access to the trading records along with the name and addresses of over one million Dick Smith customers who face being bombarded with Kogan or rather Dick Smith deals.
This deal was not about the Dick Smith web site but all about the data mining potential of the one million plus name that Dick Smith have on their database.
The real risk is that he has overpaid for a database that from day one could see tens hit the unsubscribe button in protest at treatment that Dick Smith dished out to their customers.
Right now the Dick Smith name is “Toxic” according to marketing experts after thousands of their customers were burnt by a Company who took money from consumers and then failed to deliver as promised.
Now Kogan, who really wants the brand to add a new layer of credibility to his operation, months out before an attempted float is going to have to deal with a lot of baggage associated with the Dick Smith brand, this includes a Senate Inquiry, a possible ASIC investigation and an ongoing media campaign.
Online forums are riddled with people who have had problems buying a Kogan product, this could have a major impact when people research information on the Kogan operation ahead of any float.
By acquiring Dick Smith Kogan is attempting to buy legitimacy.
He want’s people to think that he is making it in life and that by buying the Dick Smith and the Move online brands that he is capable of growing revenues and profits.
When Dick Smith online was run by Dick Smith customers had hundreds of stores where consumers could easily pick up a product, in fact more than 28% of Dick Smith customers collected their online orders from a local store.
All that disappears with Kogan.
What he is left with a click and deliver operation Vs a click and collect operation similar to what the likes of JB Hi Fi and Harvey Norman are able to deliver for customers.
From day one the value of the Dick Smith online operation is being eroded. Only 31% of Dick Smith customers have ever bought 3 products or more from the mass retailer.
Barry Urquart, managing director of retail specialists, Marketing Focus claims that it is not until a customer has purchased three products or more that they “actually become a real online customer”.
He said “72% of people shopping online still go into a store to complete the purchase. They are going to have to learn those patterns and routines,” Urquhart said.
Urquart, claims that Kogan has to be wary of fall-out from consumer creditors expecting him to honour their gift cards.
“If they are going to communicate it will be emotional, confronting and affronting,” Urquhart said.
“It has potential for huge brand damage. they are not buying the goodwill of Dick Smith, there is none.
Urquart told ChannelNews that the original Dick Smith made his name selling cheap made in Taiwan “made in Asia” products that consumers actually wanted.
Urquart also told Mumbrella that “Because it has been extended for such a long period it is a toxic brand and you have Dick Smith the individual and then Dick Smith the brand. Dick Smith the individual they have no control over what he says and so it is very dangerous.
“(I want) to save the legacy of this great Australian brand by transitioning the business to an online-only model, and providing Australians accessibility and affordability for the most in-demand electronics products,” Kogan said earlier today.
Kogan who takes control of the business in July at the start of the 2017 financial year has not taken on the liabilities.
He is going to have to take responsibility for dealing with distributors and vendors in an effort to list the same brands that Dick Smith listed.
According to sources 34% of the products listed on the Dick Smith web site were Dick Smith house brand products sourced by Dick Smith, these brands could be replaced with Kogan house brand products in some categories.
At the end of the day this is a high risk investment and one that investors should keep well clear of as it will take at least 12-18 months for any observer to get a clear picture of the value of the acquisition.
Let’s remember Dick Smith management kept telling us that everything was honky dory, sales were growing right up until the door was slammed in their faces and they were all sacked as the Company sank to a mire of debt, lies and overpriced stock.