When everyone is selling the same things, made in the same Chinese factories, how can a retailer manage to gain an edge? That's the problem that Kogan Technologies had: and its solution is, to be fair, pretty cute. Kogan is already Australia's largest online retailer of consumer electronics, so it was obviously doing something …
Kogan started off like this I believe. He would take payment for yet underlieved goods. All he has done is revert back to the model which makes me wonder why if he is doing so well would he just not pocket the entire amount. I think it's a house of cards waiting to fall personally.
In any even his prices aren't that great anymore compared to what you can negotiate instore these days and you get to see the product first hand unlike with kogan. Truth be told you can get half his junk on ebay from other sellers at a cheaper price in some cases such as his coffee machines etc.
Risk Vs Reward
I think you could plot the risk versus discount on a pretty simple graph.
You can go to a big 'reputable' store and buy a product. It will cost more but they will 'probably' stand behind it.
You can buy a product from a small store or market stall, they will probably be gone or fight you tooth and nail if something goes wrong.
You can buy off the intertubes, but then there may not be a product or company and all those 'user reviews' may be false.
Now you can go to Kogan. One step further along.
Consumer protection laws are an attempt to protect people 'from themselves' but the thing is companies, which have lawyers on staff or retainer or which write the contracts, are usually better at the protection racket.
Buyer be ware, as usual?
lawyers can't overwrite laws however so it's inconsequential what "terms and conditions" are put in place. Plenty of places try to pull this rubbish only when challenged do they fold knowing their bluff was called. I've often said in this country that consumer rights and laws should be taught for a semester in yr 10 since plenty of people fall for cons that legally they can win 100%..
Kogan is a legal business with an abn in Australia and as such is bound by the same laws and responsibilities as any major store in the land. People just need to realise and understand their rights. Of course if the guy goes bankrupt there is nothing anyone can do..
The fact he is asking for money upfront rather than pocketing the diff at this stage in his business indicates he probably has major cash flow problems and is trying to sell it as "advantageous to the customer" due to discount. Good luck with that.
Credit Card Companies
If you pay by card, isn't the card company bearing your risk? (Provided it's not a really cheap TV).
ahh, the infamous "back order"... only on purpose
This sort of reminds me of about twenty, twenty-five years ago, when the mail-order (pre-intertubes) hard/software market was first emerging in a big way; the amount of people left waiting around -- and waiting, and waiting -- for merchandise they'd paid for but which seemed perpetually on back order reached epic proportions, and eventually so many people were pissed off enough that it finally got the attention of consumer-protection and other orgs, and the mail-order outfits were finally forced to adopt the now-common practice of not billing your card until the order actually shipped.
Sounds like this Kogan outfit is trying to "institutionalize" of having your card billed up front and being made to wait around for stuff that's on back order. Ugh.
Works here too
Ever bought a chair, sofa, or suite?????
For most of them you have to "pay" up front before they send the order to the manufacturer, then you wait 6-12 weeks for delivery. Almost yearly one of those sofa chains appears on BBC Watchdog having "gone into administration owing customers thousands"
Pay cash up front and you're screwed. Sign a credit agreement and that is you paying on the day. We're lucky that the credit laws in this country offer some protection.
one born every minute
Funny - I ordered a TV from Kogan around christmastime which is due to ship today.
And no, I could get nothing like the spec I wanted from a High Street or online retailer. It wasn't a huge amount of money - so happy with the risk:reward thing.
I've ordered a few goods recently where "in stock" suddnely turned to "on backorder" after payment was made. Given that the TV was for my campervan I'm happy with the wait in this case.
Actually there are ways to mitigate the risk...
First, this is like a 'made to order' model.
Second there are ways that Kogan can mitigate their risks...
1) Insurance. Yes, there are underwriters for everything and everything can be insured for a price.
2) Kogan can limit his overhead and exposure by reducing his expenses while waiting for the business to grow. Things like direct shipping from the factory where the product never hits Kogan's warehouse for example.
3) Initial profits fund reserves. Once Kogan can generate enough business and hold a percentage as reserves to cover loss, damage, warranty, etc ... the rest can go to pay salaries, bonus, expand business, etc ...
4) Mitigate risk... Kogan can mitigate their risks by limiting the products they sell, only to those that they have an extremely good relationship with the manufacturer and on products where there is high demand and good quality control.
While this could work, the odds are that unless you are careful, and lucky you will go belly up.
Its possible to fail simply because there are not enough consumers willing to take a risk and the economy hits a stumbling block. A consumer is willing to wait 45 days, but what about 90? That is, what happens if there's a problem at the factory? A shipping delay, etc ... Are Kogan's consumers willing to wait? Will Kogan grant a refund or allow order cancellations?
Its an interesting proposition...
Funny thing is, it all use to work this way.
The idea of the deposit down was a major step forward for commerce in terms of balancing risk. Credit cards are just the most recent variation. Working purely on speculation is a big risk and tends to increase prices because you have to make up your speculative losses when you do make a successful sale.
Back when I was a young'in in the scouts, we did all of our chicken barbeque and sub sales the Kogan way. Sell tickets to people before the event. Price the tickets so we had a 50% profit. Take all of the money collected from the ticket sales, buy the raw supplies, and sell the chicken by the side of the road. Had to hold onto enough chicken to cover the ticket sales, but that was no big deal. We didn't speculate on the subs because they were assembled in a church kitchen and either picked up or delivered, so there was no option for opportunity sales.
Not at all new
This is how retail giant Sears started. Sears went to a trouser manufacturer and ordered something like six gross of trousers. "Are you sure you can sell all of those?" asked the kindly factory owner. "I already have," answered Sears.
This really seems like just an evolution of the 'just in time' principle. It's interesting to note that there's a name for people who use this system when it all goes wrong: JITheads