How Commune Conquered China With 70 Stores
Founded in 2011, the local furniture retail store Commune was born out of a “concept thinking project” that its parent company Koda Ltd started to find a new business to pursue.
“We always wanted to create a brand that would be our own rather than manufacturing just for other brands,” said Joshua Koh, 37, co-founder of Commune.
With his brother Julian Koh, 35; and Gan Shee Wen, 41, the trio formed Commune to refresh their family’s furniture-making business.
Koda was founded by their grandfather in 1972. It mainly deals in OEM / ODM manufacturing of furniture for global furniture retail brands, and is currently run by the second generation.
Commune is a 100% subsidiary of Koda and buys most of their wood furniture from them.
They had no retail experience
According to Joshua, the decision to open a retail business was “consensus” – the second generation wanted to expand into a new business and the trio wanted to start their own business.
Without any prior professional experience, they had to face a steep learning curve to manage Commune.
Joshua was a financial analyst at Bloomberg LLP and currently serves as the CEO of Commune.
Shee Wen started as a Sales and Marketing Manager in 2005 at Koda Ltd, before joining Commune. He is currently the group’s marketing and sales director.
During this time, Julian started with a product design position at Koda Ltd, involved in product design and branding for Koda before joining Commune. He is now the Group’s Chief Design Officer, and is responsible for their design and innovation functions.
The first few years were a little more difficult as no one really knew the “right” way to run a retail business.
However, after (almost) 10 years in business, we have come to a point where our experience has grown and we are more or less trustworthy to make decisions on how best to run the business.
– Joshua Koh, co-founder of Commune
They also thanked their uncle Ernie Koh, who had a lot of experience working with large retailers under Koda, for guiding them closely on their entrepreneurial journey.
Thanks to him, they were able to come to a “basic understanding of this [they] should do.
China is currently their largest market
When asked to describe Commune, Joshua said it was more of a “lifestyle concept” than a regular furniture store.
Commune had been developed to target a relatively unserved mid-market segment 10 years ago. This is really what made us so desirable when we launched, because no other brand was meeting the needs of the mid-market.
We believe in creating products and collections based on design themes that relate to our clientele, rather than following a certain style of furniture like Scandinavian or Modern Contemporary, which most other brands do.
– Joshua Koh, co-founder of Commune
However, one of the main challenges the startup faces is the small size of the market in Singapore.
“With a population of around five million, Singapore alone would not be large enough for us to grow significantly.”
This is why they were determined to expand internationally. They launched their first overseas store in China in 2014, which has since grown into their biggest market.
“We have chosen China as the main growth market because of the size of its population and also the growing purchasing power of its consumers,” Joshua explained.
“Many companies find it difficult to survive in China due to the competitiveness in the market, but we kept pushing and spent a lot of time understanding the needs of the Chinese consumer.”
Digitization efforts have cushioned their impact on COVID-19
COVID-19 has had an impact on many businesses and retail in particular is one of the hardest hit sectors.
Joshua recognized the effects of the pandemic on the Township, especially during the breaker period.
However, thanks to their investments in digitization, they were able to “still record their sales through [their] e-commerce channels even though stores had closed. “
The Municipality has steadily adopted the technology in recent years. He has harnessed technologies such as virtual reality (VR) and augmented reality (AR) to help customers better visualize what their furniture will look like in their homes.
Additionally, its Common: In Motion platform provides customers with an omnichannel experience so they can shop anywhere in the store.
For example, shoppers can use the app to scan an item’s QR code in the store and purchase it through the app or mobile point of sale.
They can also add items to their cart or add them to their wishlist in the app before going to the store. A salesperson will then scan their QR code integrated into the application, before leading them to physically visualize the products.
According to Joshua, Commune’s sales eventually increased after the breaker.
“We recorded double-digit sales growth in Singapore and China compared to last year for the months of July through September.”
He explained that the work-from-home situation has made consumers want to invest in their homes because they spend a lot more time at home now than they did in the past.
In early January of this year, Commune even launched a sub-brand called Alto, which was created primarily to respond to customer feedback that some of their items were too small for the big houses.
“We created Alto with the intention of meeting the demand of these customers. The designs and materials were also developed with a more luxurious feel, given that the owners of these larger homes also wanted something a little more exquisite.
Alto opened its first store in Singapore at Millenia Walk in December 2019 as an extension of Commune’s flagship store.
Beyond Singapore, Alto has also gained a lot of ground in China, where they have already opened five Alto franchise stores.
According to Joshua, five more will go live in the next six months.
Profitable in just one year
“Our family has always been careful,” commented Joshua.
They invested less than S $ 1 million to start Commune, which quickly became profitable in its first year of operation.
“(We) have been in the dark ever since.”
“This was all mainly due to our mantra of achieving sustainable and profitable growth, rather than high growth.”
Since its inception, Commune has experienced a compound annual growth rate (CAGR) of over 20% per year and has stores in many markets in Asia.
Specifically, they have four in Singapore, four in Malaysia, one in Hong Kong, one in the Philippines and 65 in China.
In the future, they plan to expand their brand’s presence across the world and continue to develop new concepts that cater to the e-commerce market.
“We are looking to expand into other markets in Asia such as India and Indonesia, as these have high growth potential due to their large population size and increasing consumption patterns”, Joshua said.
“Europe is also on our radar because we believe it remains the world leader in furniture design and that by having our brand there we would be able to develop our brand on the world stage.
When asked for business advice, Joshua noted that business challenges are always present, so it’s essential to always take stock of your passion.
With passion for the work we do, we are better able to pick ourselves up when the going gets tough.
It is also important to constantly innovate as the business environment is constantly changing, as are the expectations and demands of customers. Staying constant would ultimately lead to failure.
– Joshua Koh, co-founder of Commune
Featured Image Credit: SquareRooms / Ernie Koh
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