Ruslan Kogan, now aged 32, has decided to take on Coles and Woolworths. He has promised Australians that his new online grocery store will halve our weekly and monthly shopping costs. Originally renowned for selling cheap electronics, Kogan has decided to expand into groceries appropriately naming its website, Kogans Pantry.
Some may be surprised, others may be thinking why the hell… but so far so good in many people’s eyes. The non-profit organisation ‘Choice’ has supported the new site, saying certain products were comparatively 40-50% cheaper than their equivalents at Coles and Woolies.
Kogan's business model has always been focused on cutting out the middlemen in order to provide competitive prices to customers. This business model worked when Kogan took on Samsung and LG at aged 24, selling TV’s bought from the same factories in China at lower prices. But, will his model continue to work within the groceries arena and how are Coles and Woolies going to react with a new kid on the block?
Kogans Pantry can be expected to carry over 600 supermarket products including big name brands. Lower prices on the website are a result of Kogan’s direct deals with manufacturers. The website sold 30,000 items within its first 6 hours of being open at the beginning of Feb.
Mr. Kogan said, “We knew there was a lot of negative sentiment around supermarkets in Australia, we knew people didn’t like them very much, but we had no idea to what extent.”
One particular aspect that you need to be aware of is the website's product range. It doesn’t have the same selection as Coles and Woolworths and you will find it focuses on non-perishables. Kogan's 600 products don't really compare with Coles, for instance, who offer more than 15,000.
Kogan's range consists of items such as household cleaning products, health and beauty, batteries and canned / packaged food. One thing you may notice that is different is the disclaimer on products: ‘this product may be an international variation and may differ in some respects from other similar products available from local retailers.”
Choice compared a selection of products to understand what items were cheaper and by how much. Their results found the following:
Kogan: Vanish Napisan Plus (1kg) - $3.80
Woolworths: Vanish Napisan Inwash & Soaker Plus Advanced (2kg) - $13.96 / $6.98 per kilo
Kogan: Gilette Mach Razor blades (10 pack) - $19 / $1.90 each
Woolworths: Gilette Mach Razor Blades (12 pack) - $36.55 / $3.05 each
Kogan: Tilda Steamed Rice Brown Mushroom (250g) - $2.54
Coles: Tilda Steamed Rice Brown Mushroom (250g) - $3.74
Woolworths: Tilda Steamed Rice Brown Mushroom (250g) - $2 (special offer)
Kogan: Duracell Duralock AAA batteries (4 pack) - $2.96
Coles: Coppertop Alkaline AAA batteries (4 pack) - $5.50
Kogans shipping charge is a fixed rate of $9.99 and you can order as many goods as you wish. But, their delivery times are longer than Coles or Woolworths. Their website states that some products can take as long as a week to deliver, whilst others can take up to 3 weeks.
To refresh your memory, Coles’ delivery fees range between $6 and $13 depending on location, time of day and length of delivery window selected. Alternatively, orders over $100 and receive shipping free.
Woolworths on the other hand scale their shipping charges depending on how much you order. Up to $149 costs $11, $150 - $199 will be $9, $200 to $249 costs $6, $250 to $299 is $3 and anything over $300 is free.
There are some great financial motives to shop with Kogan, such as better products (e.g. Duracell batteries) for less than competitors. The entire experience is online via either their website or by installing their app. Plus, supporting Kogan and shopping with them will force Coles and Woolies to reduce their prices and become more competitive. This will result in all Australians benefitting overall.
However, as for Kogan taking over they have a long way to go, even Aldi and IGA have decades of business to do before they reach the size of Coles and Woolies. Not to say Kogan doesn’t have the ability or potential, but their biggest challenge will be maintaining stock levels on everyday products and trying to speed up delivery times to be more competitive. Aussies might be prepared to wait two or three weeks for a heavily discounted TV, but I'm not so sure whether the same tolerance level would apply to groceries as well.