Kogan KGN Strategic Valuation, page-10

I was looking at buying before Covid but (to my regret) didn't end up doing so. I too have been discouraged by the insider selling. I've also been put off by the fines for dishonest conduct from inflating prices then having so-called "sales". I saw a lot of price gauging happening on the Kogan website with hand sanitiser and masks in the middle of Covid, along with freezers and other in-demand items. I'm surprised no action has been taken by the ACCC. Perhaps I'm misreading the situation. The prices they were charging Australians during lockdowns for essential items was beyond unreasonable.

In an unregulated market it's good business to sell for as much as people will pay. Tinder charges different membership prices (so I'm told....I admit to nothing!) according to age, occupation, nationality. Coca Cola received a lot of backlash a few years ago for trialling different prices on its vending machines according to the day's temperature. Hey, why not? It's a capitalist society and nobody is forced to buy.

My point is Kogan, in my opinion, seems to play fast and loose with ethics. I've been concerned for a while about investing with a company willing to deceive customers. If it has a culture of deceiving customers it would certainly misleading shareholders without a second thought. And secondly, I'm concerned about the Australian public turning against the company in response to perceived unethical practices. I purchased a couple of items from Kogan last year. The service and prices were excellent.

However, I found the website a bit tacky and the "a customer in your area bought X two minutes ago" messages reminded me of a used car dealership or cold-calling small energy retailer. I couldn't imagine JBH, Officeworks (Westfarmers) or HVN being sued by the ACCC for unethical practices.

That all said, l like the growth and pure internet retail play here. There is certainly space for Amazon and other retailers in the online space. I'm somewhat concerned about stores with a bricks and mortar presence taking over the online space through a hybrid model of online and offline retailing. The online sales of traditional retail chains is growing at a rapid pace. Although having lived in China for many years, I can see just how far behind the big First Tier Chinese cities we are in mobile payments, internet commerce and same-day delivery. There is a huge opportunity for Kogan to expand. In China, online retailers like JD.com comfortably co-exist with offline retailers. At current prices, given the projected growth I have little doubt purchasers of KGN will be very happy over the next few years. And the industry tail winds are huge. For myself though, I'm still not comfortable in owning the stock.