Just mentioning the name of rich-listed, Ruslan Kogan, the founder of online electronics retailer Kogan Technologies, is likely to send a shiver through the spines of competitors Dick Smith Holdings Ltd (ASX: DSH) and JB Hi-Fi Limited (ASX: JBH).
According to BRW, Kogan has a person wealth of $320 million which is sensational when you consider that the business was only established in 2006 and also when you compare it to the market capitalisation of Dick Smith at $470 million.
While to date Kogan's focus has been on taking market share from the established bricks-and-mortar electronics retailers, according to a report in the Australian Financial Review he has now set his sights on expanding his retail empire into sporting and outdoor goods.
Competition heating up
To date, these two sectors have been regarded as "niche" categories and somewhat protected from the full force of both the consumer spending slowdown and online competition. Indeed unlike department store Myer Holdings Ltd (ASX: MYR) whose share price is down around 40% since late 2009, Super Retail Group Ltd (ASX: SUL) and Kathmandu Holdings Ltd (ASX: KMD) share prices are up 78% and 82% respectively over the same period.
That could all be about to change however with Kogan launching his own branded range of sporting goods with outdoor and camping equipment expected to follow. It's certainly a worry for shareholders in Super Retail and Kathmandu – margins are already being squeezed and further erosion from low-cost online-only competitors such as Kogan will only make those margins thinner.
Value Trap?
Investors need to ask themselves if it is simply too dangerous to own bricks-and-mortar consumer discretionary stocks. While there appears to be value emerging, a further erosion of earnings could cause that value to disappear.
