Listed online retailer Kogan.com Ltd (ASX: KGN) is taking on some large competitors as it moves into a new market in a bid to push the KGN share price to a new 52-week high.
The company said it will start offering electricity and gas plans in an effort to become a one-stop shop for consumers.
The Kogan.com share price rallied 0.7% to $6.82 in morning trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index dipped 0.3%.
Households in Victoria, New South Wales, south east Queensland and South Australia can purchase electricity through Kogan currently, while Victorian customers can also opt to purchase gas through the on-line retailer which sells a wide range of consumer goods – from electronics and household products to insurance and travel packages.
Entering a competitive industry under pressure
The retail energy market is a highly competitive space with strong downward pressure on prices and a federal government who won’t hesitate to score points with the electorate by painting the industry as the Bogeyman.
There’s even talk that Vocus Group Ltd (ASX: VOC) is mulling a spin-off of its “bad” assets (meaning the retail division that flogs power plans, internet and mobile phone plans to households) and keeping the good bits (the infrastructure business).
I suspect Kogan would be keen to at least sniff around Vocus assets, if it isn’t already.
Can Kogan win at power and gas?
Competition and skinny margins won’t turn off Kogan. All its markets are facing similar dynamics and its low cost online and scalable platform lends itself well to such industries.
Kogan is offering power through the subsidiary of renewables generator Meridian Energy, called Powershop. Powershop will provide backend and system support for Kogan Energy customers, according to the Australian Financial Review.
Retail is seen as a tough space but the outlook for the sector has perked up since last month’s reporting season with a number of key players in the sector turning in respectable and promising results.
With falling interest rates, a recovering residential property market and tax cuts, this sector could continue to deliver for investors for a little while yet.
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