Online Retailing as a Developing Trend in Business

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Executive Summary

Online retailing can be seen as a dynamically developing trend in business. One of the successful examples of such trend can be seen through the case of Kogan Technologies, a fast growing Australian company selling consumer electronics, founded by Ruslan Kogan in 2006. The business model of the company is based on ordering products with particular specifications from factories in China and selling them online under the Kogan brand. Kogan Technologies has just recently entered the UK market with plans to expand into the US along with other US markets. With several controversial ads banned in Australia, it can be stated that there the company should consider the brand positioning of their product, prior to expanding their operations. The present report proposes a mixed method study to identify and investigate the factors consumers attribute to brand value of Kogan Technologies. The proposed hypothesis of the study states that there are factors attributed to the Kogan Technologies brand, which influence the customers’ intentions to purchase. The identification of those factors and their utilization in marketing initiatives will help the company to better position their brand and build their expansion strategy in the future.

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Introduction

An overview of the recent trends in online commerce clearly show that such commerce seized to be an online analogue of physical retail stores. At the same time e-commerce is no longer an experiment in business modelling. Now, the successful examples of leading trade online clearly shows that e-commerce is a perspective and dynamically developing sector of the market which is now utilized in the majority developed countries (Priestley and Stretton 2002).

An example of a purely online business project can be seen through Kogan Technologies, a fast growing Australian company selling consumer electronics, founded by Ruslan Kogan in 2006. The business model of the company is based on ordering products with particular specifications from factories in China and selling them online under the Kogan brand. With the elimination of inte3rmediaries and middlemen, Kogan technologies sell products which are lower in prices through the company’s own online shop. One of the core aspects of Kogan Technologies’ main strategy and the focus of its online business can be seen through the controversial rivalry initiated between the CEO of Kogan Technologies, Ruslan Kogan, and the CEO of Harvey Norman Holdings Ltd, Harvey Norman, an Australian retailer, among which sold products are consumer electronics (Kogan 2010a). Such rivalry is based on establishing the price forming factors and the value of brands in largely similar products. Kogan Technologies has just recently entered the UK market with plans to expand into the US along with other US markets. In that regard, the value of such strategy should be evaluated in order to understand the factors that form the value of the product, and the priority of brands among such factors.

In that regard, the present report details a proposal to investigate the factors attributed to the bran value of Kogan Technologies.

Methodology

The report proposes using a mixed method research design, combining focus groups and surveys in order to identify and investigate the value people attribute to the Kogan Technologies brand name. The rationale for using a mixed method approach can be seen through gathering qualitative data for exploration of the issue, while quantitative data will be investigated the relationship between the issues explored. Certainly, there are more assets to the brand under which the company operates, and which are more than just functional assets. For example, brand attributes can be associated with warranty, exact match with customer needs, warranty commitment, excellent customer service, etc. The identification of the factors will be implemented through focus groups, which main aim will be discovering the directions and diagnose the situation. The advantages of focus groups can be seen in being easily conducted, and at the same time the dynamics of the group will help identifying common themes in the value attributes associated with the brand of Kogan Technologies. The weakness of focus group, in that regard, can be seen through those same dynamics, where dominant participants might influence the opinion of the group (Belk 2006: 257). The questions that might be asked during focus groups might revolve around topics such as:

  • Why do you prefer products by Kogan Technologies (Kolb 2008)?
  • What are you feelings about the brand?
  • What are the associations such brand brings about?

The participants will be selected through convenience sampling, where participants can be selected from the users of Kogan blogs, Kogan Facebook page, and/or people from the surroundings who either purchased or about to purchase Kogan products. The results will be analysed for common and emerging themes.

The quantitative aspect of the research will be conducted through surveys in which the themes identified in the previous part of the study will be tested. One the one hand, such aspect will avoid the limitations of the qualitative part of the research. On the other hand, the will contribute to the generalisability of the study. A suggested method for using the surveys will be distributing the surveys through site visitors, where Likert scale questions will determine the correlation of the attributes identified with the intention to purchase Kogan products, or the lack thereof. The quantitative data will be gathered electronically, and will be analysed using any suitable spreadsheet program, e.g. Microsoft Excel.

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Secondary Data

One important element of Kogan Technologies strategy is the promotion of the products they offer, not as low-quality and/or low-cost substitutes, but rather as products with quality similar to major brands (Kogan 2010b). The cost-reduction is an achieved through eliminating intermediaries between customers and manufacturers (Timson 2010). The basis of the model implemented by Kogan is not only in the online sales, but also in high quality of the product. According to Kogan, the minimalist online retailing can save up to 50% of the cost found in the traditional retail stores. Most electronic consumer products are manufactured in China, with foreign companies investing “billions of dollars in manufacturing, primarily for product export” (Cho 2009). In that regard, with Kogan Technologies emphasizing that the products manufactured, are those assembled in the same plants in which major brands manufacture their products lines. Nevertheless, the promotion of the main features should be free from price comparisons with other brand name.

Value comparisons should be clearly identified by, for example, identifying the brand name, features, and model. Price comparisons, on the other hand, should only be made where the good or service has previously been offered or sold for the higher price (Avenell 2010).

Thus, it can be stated that being free from the name of a popular brand, and not being able to compare the prices of products offered with other brands, the company might lack a clear positioning of the products they offer. The latter is specifically true, when considering entering other markets. Accordingly, the threat of entry in such market is very low, where one of Kogan Technologies rivals, Harvey Norman announced that he will enter the online market, through opening online stores selling goods manufactured in China (Moses 2010). In that regard, many new entrants into the electronic consumer market will be able to follow the basic business model of Kogan Technologies, which can be explained through the following steps:

  • Identify popular product specifications through product review and customer questionnaires.
  • Made contact with a Chinese factory directly with the determined specifications.
  • Shipping containers with the products as they are sold, avoiding the costs of inventories.
  • Using Kogan Technologies name, under which the products warranty is applicable.

In that regard, it can be stated that the model is highly replicable, and thus, if there are TV states under the brand name Kogan, there might be other products sold using the same model, but under a different brand name. Thus, despite the fact that Kogan technologies underlining the value of products taken by brand name, the company itself use its own brand name as a product attribute that bears a certain value for consumers. Considering the controversies in banning certain advertisements by Kogan Technologies, it can be stated that there vague areas in the company’s brand positioning and the way they should advertise it.

The value of the brand should not be underestimated. In that regard, as argued by Aswath Damodaran, a finance professor at New York University Stern School of Business, a brand is the most sustainable competitive advantage (2010). Accordingly, Damodaran defined the value of a brand as the ability to sell the product as a premium price. Following such definition, there is no brand name for Kogan Technologies at all. Attributing to the brand name what usually should be attributed to aspects such as quality, styling, service and reliability, people are giving too much power to the brand. In that regard, it can be stated that in the case of Kogan, people are not attributing any factors to brand name. However, there is a certain value for Kogan Technologies, considering its fast growth in the market. The identification of the values consumers attribute with Kogan brand name will facilitate positioning the brand in the market and accordingly, conduct suitable marketing initiatives that will promote such value.

Hypothesis

The main hypothesis that can be derived from the study is that there are factors attributed to the Kogan Technologies brand, which influence the customers’ intentions to purchase. The identification of those factors and their utilization in marketing initiatives will help the company to better position their brand and build their expansion strategy in the future.

Report Layout

The study proposed will be structured as follows:

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  • Introduction: The part in which the background of the brand issue will be introduced, providing a historical overview of the company in question – Kogan Technologies. This part will consist of the following parts:
    • Problem statement – A statement of the problem t be investigated and its significance to the company.
    • Purpose statement – A statement of purpose indicating the aim of the study and its structure.
  • Literature Review: A review of scholarly articles on the value of branding. One of the core readings will be focused on the presentation by Aswath Damodaran, which states the significance of brand value. Other scholarly articles will investigate the importance of brand name, specifically in online retailing. Gaps in knowledge will be also identified.
  • Methodology: this section will describe the steps that will be followed to conduct the research.
  • Findings and analysis: The findings of the study will be explained and interpreted in the context of the stated problem.
  • Implications and limitations: This section will deal with the way the findings can be useful to the case of Kogan Technologies in particular and in online retailing in general. The limitations of the study will be indicated as well.

References

Anonymous (2010), ‘What’s the Value in a Brand Name?’, Breaking News. Web.

Avenell, Patrick (2010), ‘ACCC blasts Kogan Technologies: bad advertising hurts retailers’, The Intermedia Group. Web.

Belk, Russell W. (2006), Handbook of qualitative research methods in marketing (Cheltenham, UK ; Northampton, MA: Edward Elgar) xi, 595 p.

Cho, John H. (2010), ‘Transforming China’s Electronics Industry’, Cisco.

Kogan (2010), ‘Kogan launches video attacks on rival retailer Harvey Norman’, Kogan Technologies Pty Ltd. Web.

Kogan (2010), ‘Kogan Product Reviews’, Kogan Technologies Pty Ltd.

Kolb, Bonita M. (2008), Marketing research : a practical approach (Los Angeles: SAGE) xiii, 292 p.

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Moses, Asher (2010), ”He’s a con’: Harvey’s war on cheap TVs’, The Sydney Morning Herald. 

Priestley, Michael and Stretton, Marilyn (2010), ‘E-commerce across Australia’, Parliament of Australia.

Timson, Lia (2010), ‘Entrepreneur cuts TV middle men’, The Sydney Morning Herald.

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BusinessEssay. 2021. "Online Retailing as a Developing Trend in Business." December 8, 2021. https://business-essay.com/online-retailing-as-a-developing-trend-in-business/.

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BusinessEssay. "Online Retailing as a Developing Trend in Business." December 8, 2021. https://business-essay.com/online-retailing-as-a-developing-trend-in-business/.