EXCLUSIVE:Serious Questions Raised As To Source Of Dick Smith Online Products
Serious questions are being asked about the source of Kogan sourced products now being sold on the Dick Smith web site, as the Company moves to try and raise $50 Million via an IPO.
A leading Japanese manufacturer of consumer electronics products recently purchased two of their own products from the Kogan owned Dick Smith online store.
What they discovered horrified senior executives of the Company, resulting in an International investigation of how the products came to be ranged on an Australian web site that is trying to trade based on the past reputation of the Dick Smith brand. Also being investigated is the source for components used in the assembly of the product.
At this stage the Company does not want to be named as they are currently investigating the matter further with both their legal representatives and Australian Consumer authorities.
One of the product that was purchased online at the Dick Smith online store and shipped from Kogan stock held in Australia, as opposed to the second product that was a grey imported product shipped from overseas.
The local product that was not supplied by the manufacturer had a serial number that had no correlation to the actual model being sold.
ChannelNews was shown the product during a recent visit to the manufacturers offices.
“This product appears to have been made up from cannibalised parts. It is not a genuine product nor does it represent the end product associated with our products. This product also has no warranty from us nor will it ever have a representative said”.
When asked whether the Dick Smith purchased product represented false and misleading product representation they said “Yes”.
“The serial number on the product is fake and the serial number label is fake”.
Questions are also being raised as to whether the components are actually fake.
“We do not know at this stage, who assembled the product being sold by Kogan but it was not us”.
Original products made by this vendor are sold by leading retailers such as Harvey Norman, JB Hi Fi and leading specialist stores.
ChannelNews is currently waiting for further tests and analysis of the products before we reveal the name of the Company and the product model.
Currently Kogan is trying to raise additional capital to fund his business.
The AFR reported last week that broker Canaccord Genuity, has locked in cornerstone investors for online retailer Kogan’s initial public offering which is set to be reveal in coming weeks.
At this stage the broker has locked in about $30 million in cornerstone bids from fund managers, which was expected to be the bulk of the $50 million-odd IPO.
Fund managers said the offer document put a $140 million enterprise value on the retailer, which would represent 20-times forecast earnings before interest, tax, depreciation and amortisation for the 2017 financial year of $7 million.
It comes as Kogan management prepare for their IPO roadshow, which is expected to see them front potential investors over the next week or so, ahead of prospectus lodgment next month.
New investors were told most of the funds raised from the IPO would be used to grow the business.
Retail analysts and observers are sceptical that Kogan has room to grow in the Australia market, with Aldi growing share in the both the consumer electronics and appliance house brands markets.
At the same time both JB Hi Fi and Harvey Norman are growing their online operations selling genuine products made and certified by manufacturers.
Some say that the move to acquire the struggling Dick Smith brand name was more a strategic move to try and legitimise an IPO by acquiring a known entity over the Kogan brand which is best known for house brand products and products sourced from questionable sources in Asia.
The company has been marketed as the No. 1 pure-play online retailer in Australia, with sales around $200 million, 2.3 million active subscribers and 28,000 products.
UBS who are now involved with The Good Guys float, has chosen not to be involved in the float after initially exploring a relationship.
Ruslan Kogan the founder of the Kogan online business has opted to keep the bulk of their shares.
In the past Kogan has been forced to pay penalties of $32,400 after being found guilty of making false and misleading representations about the price of products being sold via his online operation.
An investigation by the Australian Competition and Consumer Commission late last year resulted in the penalty being handed out in January 2016.
The ACCC issued the infringement notice because it had reasonable grounds to believe that Kogan had made false or misleading representations about the price of three computer monitors advertised by Kogan during a Fathers’ Day promotion on its eBay store, in contravention of the Australian Consumer Law.
Before or at the start of the promotion, Kogan increased the prices of the three computer monitors featured on its eBay store.
“It is simply unacceptable for businesses to raise prices before applying a discount in order to give consumers the misleading impression that they are obtaining a larger percentage discount than is actually the case,” ACCC Acting Chair Dr Michael Schaper said.
“Truth in advertising and consumer issues in the online market place are both current enforcement priorities,” Dr Schaper said.
Kogan has not commented for this story.