(From left) Brothers Julian Koh, 31, and Joshua Koh, 33, and their cousin Gan Shee Wen, 37, are behind Commune. Besides its four shops here, the firm has 35 outlets in China, three in Malaysia and a brand presence in Australia. Photo: The Straits Times
Five years ago, brothers Joshua and Julian Koh, together with their cousin Gan Shee Wen, set up a retail concept store called Commune to breathe new life into the family's furniture-manufacturing business. In the first of a four-part series about local firms using intellectual property to be more innovative, Chia Yan Min speaks to them about building a unique brand identity and expanding abroad.
Image: Commune website
Q How did Commune start?
MR JOSHUA KOH: We're a unit of Singapore-listed furniture-manufacturing company Koda.
Koda was founded by our grandfather in 1972. The company started small but grew over the years and was listed in 2002. It is now run by the second generation of the family.
The company has traditionally been manufacturing-focused – it makes furniture for overseas brands. But we decided to start the retail business in 2011 because we wanted something to call our own.
We were brought up in the family business – we spent our childhood helping out in the factory – so we have always been inclined towards the furniture industry.
The firm has been coming up with in-house designs for a long time but these had always been on behalf of customers. We wanted to be able to leverage on our own designs.
MR GAN: Koda refocused its design and manufacturing towards the Asian market when the United States and Europe markets slowed after the financial crisis.
That was the trigger for us – we realised the products can cater to the local and Asian markets.
The switch from manufacturing to retail was a drastic change. But we wanted our products to be in people's homes, branded under a brand that people recognise.
In addition, we wanted another avenue to grow the business.
Margins are tight on the manufacturing front – competition is very strong. Customers can simply switch to another manufacturer who's quoting a lower price. But if you sell a brand, people buy into the whole concept, rather than just the product.
Q What defines the Commune aesthetic and what makes it unique?
MR JULIAN KOH: Every piece of furniture is designed in-house and made by our factories in Malaysia and Vietnam.
I head the design team, which has been beefed up. We used to have only two designers, but now we have a team of four in Singapore and another team of two in China, because we realised that good design sells.
We see value in designs that are timeless and hence have greater longevity. We introduce one to two new collections every year, but keep products that are selling well in stores for a longer time.
While furniture is at the core of the business, we're also branching out. We curate all five senses in our stores – we have a scent laboratory in-store for customers who want to customise scents for their homes, we serve coffee to give people that feeling of cosiness and friendliness, and even the lighting is specially designed.
We're also doing a lot of research into consumers and their preferences and bringing in products such as home accessories suited to different lifestyles. We're moving towards becoming a concept lifestyle store that does not sell only furniture.
Q How has the company grown and what are your future plans?
MR JOSHUA KOH: We now have four shops in Singapore and are also expanding abroad. We set up our first overseas store in China two years ago and now have 35 stores there, three in Malaysia and a brand presence in Australia.
We have 17 staff in China, 25 in Singapore, and made US$5.6 million (S$7.6 million) in revenue for this financial year. We expect sales to reach US$7 million to US$8 million in the next financial year.
This is a small percentage of Koda's total business, but there is strong growth potential.
MR GAN: We ventured into China as we had a partner with the network and contacts, who set up 11 Commune stores there within a year.
All 35 stores are franchises. We don't collect franchise fees or royalties; instead, we sell the products to our franchisees. They get the retail margin, we get the wholesale margin – which is higher than the margins in manufacturing.
We sell the same designs in China as we do here, sometimes with slight tweaks.
Our business model is very transparent and the Chinese like it. It helps to be a Singapore brand.
Most people in China go to large furniture malls when they want to shop for furniture and our stores really stand out there. The first differentiating factor is the English name. The second is the fact that the stores are painted black – usually the Chinese don't like black, but we've found that this is not an issue among younger people.
We are looking at expanding into the Philippines, Taiwan and Thailand in time to come.
Q Are you concerned about protecting your intellectual property, especially overseas? How do you manage this?
MR JULIAN KOH: Copying the items is easy, but copying the "software" – that is, the branding – is not easy. There's a reason people prefer to buy things from certain brands and a reason that these brands have a following.
A lot of blood and sweat goes into the design of our products. It's a long process – one month for designing the product, another six months for fine-tuning and bringing it into production.
MR GAN: In markets like China, you can never run away from people copying your products. Sometimes we feel proud that people are copying us.
Enforcement of intellectual property rights is also tough in the furniture industry, compared with other sectors. But one thing working in our favour is the fact that manufacturing in China is not cheap any more, so we have cost efficiency as a mass manufacturer.
We launch new products twice a year to stay ahead of the game. We also put a lot of thought into creating the whole Commune environment.
To most businesses, intellectual property means registering a trademark or design, but the government agencies we work with have been pushing us to be more innovative. We've registered the Commune trademark in all South-east Asian countries, with their support.
We're always asking ourselves what else can be patented and registered, and we intend to continue looking into this to create higher barriers for people who want to come in and attempt to copy us.
Written by Chia Yan Min for The Straits Times