Kogan faces a risk with Dick Smith takeover
Ruslan Kogan has been warned that he has a huge task rehabilitating a “toxic” Dick Smith brand after revealing today that he purchased all of the online retail assets of the business.
While Dick Smith himself has hailed the move by a man who bought electronic components from his stores as a child, retail experts say Kogan runs the risk of damaging his own brand with consumers who lost money with gift cards and lay-buys.
Barry Urquart, managing director of retail specialists, Marketing Focus, said that Kogan had been canny in recognising an opportunity in taking over the failed business, but he needed to be wary of fall-out from consumer creditors expecting him to honour their gift cards.
In particular, he warned of potential ill-will from customers contacted through the database.
“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.
“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.
Kogan said as a kid who grew up buying components in Dick Smith stores, he wanted to save the legacy of the brand.
“(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.
“Dick Smith is one of the most iconic Australian retail brands and we will be able to leverage the millions of dollars we’ve invested into online retail systems and architecture over the last decade to sustainably run the business.”
Smith has welcomed the decision by Kogan, but highlighted that following the disastrous previous ownership, he must handle the brand with integrity.
“I’m happy with it as long as he remains running an honest ethical business,” Smith told Mumbrella.
“The reason I did well is we ran a totally reputable and honest business. I think he can quickly rehabilitate the brand.
“I am pleased it is being bought by an Australian.”
Smith said he had spoken to Kogan before he bought the brand and believed Kogan’s own entrprenurial spirit reflect his own approach to business
Kogan will take control of the business in July but has not taken on the liabilities.
Urquhart also warned that while Kogan had developed a successful inline model he would have to work hard to make sure he could transition Dick Smith customers who currently did not shop online to his online model.
“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.