From the source: Anthony Spon-Smith, Coco Republic

Inside Retail Weekly: Tell me about the recent US expansion and your entry into HD Buttercup in California.

Anthony Spon-Smith: HD Buttercup is a department store for furniture brands. The main store is quite big, probably three times the size of our Alexandria showroom – I think they’re 8000sqm.

I’ve known the owner for quite a long time. He’s always liked what we’ve done and he wants to do a lot together. HD Buttercup had no outdoor, and outdoor is performing really well for us in the last few years, so we’ve started with that. Outdoor has had very strong growth for us in Australia and we’ve got good supply chain and good designs. The goal at HD Buttercup is to definitely grow with it.

We’ve got more growth to do in the US, but we won’t go crazy. We don’t need a Coco Republic on every corner, but over there, taking sites and rent is riskier initially, so I’m more comfortable with doing wholesale for the moment.

I know the US relatively well, but I’ve not really operated there, so I think doing it this way is the best start and from there it will hopefully grow.

The collection is called Riviera L’Americano, because it combines California and Italy. The lines are clean and contemporary, and the tones are quite Californian. It’s a nice mixture of contemporary but soft, and I think that’s for a lot of homes and it’s where the market’s at. My experience is people want something cleaner outdoors – they don’t want something traditional. Our space is clean and contemporary and we’ve put a surfboard on the wall and there are black clapboards. It’s clean and pretty and right at the front of the store.

IRW: And what’s the customer feedback been like so far?

AS: The gallery opened three weeks ago and it’s been pretty good. HD Buttercup is ordering another big order right now. I was there for the first day and they’re doing super good sales already. They’ll be sold out soon, which is a problem for us. This is retail, it’s all about stock and you can have good concepts but they don’t fly unless you support them, especially in outdoor. People are more willing to wait for a $3000 couch but with outdoor, it tends to be a bit more like homewares, they want it quicker, so you need to have the stock.

IRW: How would you describe the US furniture market right now?

AS: There’s either high-end brands or lower chain brands, there’s not a lot in that middle zone. We’re in the mid to upper range. We’re not super expensive in the marketplace, but it’s quite good quality. Our point of difference is we give good design service. In the US, the choice is you either have quite high-end furniture lines and then you have West Elm, Crate and Barrel, Freedom-style retailers and not a lot in between. There’s an opportunity there for us.

IRW: How would you describe the US aesthetic in interiors?

AS: It’s so varied. If you look at furniture, the world has moved over the last 20 years from buying suites. A lot of older people probably bought the same look in their coffee tables, side tables, dining tables. There are good and bad suites, but people were really into matching things back then. But people are happier now to mix things up and when you look at people’s personalities and fashion, you want to mix – you don’t want to be all matchy-matchy.

But California is different to the rest of the US. It’s so similar to Sydney. LA feels similar to Bondi in many respects because it’s beachy, casual, coastal. LA has the Olympics in four or five years’ time, so what you’ll find is that even in the last few years, it’s been cleaning up a lot. Everything is blowing up and going nuts. Places that were a bit grottier are having an injection of growth, it’s clearing up and urbanising. California is so similar to Australia in a lot of ways. San Fran feels like a mixture of Auckland, Sydney and Melbourne, all rolled into one. They live similarly to Austarlians.

IRW: I think I just assumed the US may have been a bit more conservative.

AS: In the midwest they’re traditional, but they’re all states are different. It’s the thing we forget about with America and China. There are different languages, cultures, foods – that’s the challenge for retailers there. There are such different aesthetics and markets that they have to cater to.

IRW: Is Coco Republic looking at expanding beyond California soon?

AS: I wanted to get to the US because it’s a start. California has 40 million people, there’s 20 million in LA. We look at stores in WA and we’re opening in Auckland, but there’s only one million in Auckland. So when you say to the board that we’ll open a store in LA, the costs aren’t that big a difference, but the upside is that if you can get it right, it can be really good. For me, California and Australia, the DNA of our collections match up. We are talking to a lot of other people in the US though.

IRW: Coco Republic has been around for 40 years in Australia. And international expansion has only just started. Why is now a good time?

AS: I think it’s been an interest of all the directors for awhile. We’ve all wanted to go overseas. We looked at Asia for the last five or six years but I think you need to have the right market for your product and I’m not sure our product is 100 per cent right for Asia. There’s a lot of money there, but is it the right style? We do it because we love it, not just because we want to make quick money.

For the way we sell, being in New Zealand makes sense, we’re just wrapping the whole ANZ thing up, which we’ve done now. New Zealand is easier than doing Western Australia. It’s crazy. It costs the same amount to get a container over to Perth as it does Italy. We’ll probably do something in Western Australia one day. We signed a site there three years ago, but it fell through.

IRW: Tell me about how the plans are going for the Newmarket store in New Zealand.

AS: It will be at Westfield in Newmarket and it’s a high-end offering. We don’t see ourselves as a centre brand, we’re more of a destination so we prefer the bigger stores, but we had good success at Chadstone in Melbourne, so we thought we had a good opportunity for 1000sqm at the Westfield in Newmarket. We were looking at sites there and wondering if people would come, but the centre will have increased foot traffic and the centre itself is really good, too.

IRW: How are plans going locally for the business?

AS: We get quite a few opportunities because I think people like the look of our brand in their centres, but I think we’ll do other things here. We probably don’t need a Coco on every corner, like I said.

IRW: Do you think you’re close to tapping out the number of stores you’d like in Australia?

AS: No, we could do a lot more if we wanted to blow it out. But the US is more exciting to us at the moment to be honest, so we’re super interested in seeing what can develop there and I think we’ve only got a limited amount of time in our days as a team. So I think international is a bigger focus.

IRW: What do you think is behind Coco Republic’s longevity in the Australian market?

AS: I think we’ve got a really challenging but unique ecosystem that we’ve created. Retail and selling furniture and homewares is our main gig, but we wrap it well with design service, the design school and property styling. No-one else in the industry or the world does all those things. It’s unique but very challenging, probably a bit stupid sometimes, but they do bounce off each other very well, we think.

We had two showrooms when we started. It wasn’t even called Coco Republic, it was called Town and Country back then. In our business, I always use the word ‘breadth’, because of the breadth of services and products we offer. In terms of our big showrooms, we have almost everything for every room. We don’t really sell into the bedroom, bathroom or kitchen yet, in terms of sheets and kitchenwares but I think we will in the future. A lot of our competitors focus on just one category, like just leather sofas. We’re quite broad, compared to our key competitors – the styles, offer, price points. We’re in every room in the house.

IRW: You guys also design your own product and you created your own design department, too.

AS: We don’t own our factories, but in the last few years, almost everything is designed in-house.

I switched out the product strategy about six or seven years ago, but in the last couple of years, there was a push to own the design process the whole way through, such as going straight through the factories and designing it.

Before, I’d buy from suppliers around the world and we ran some brands. We were probably more of a house of brands five or 10 years ago. I chose the stuff though, so we were like any other buying team. But designing your own stuff is hard and there’s a different rhythm – you have to be a year ahead. You can’t just go to a trade show and buy stuff so it lands six months later. I’m designing now for next year’s season outdoor – we haven’t even launched this season’s outdoor. It’s like preparing for 12 months plus ahead. I love it – it’s stressful getting into the rhythm to work that far ahead and it is tricky, but we’re there now, thank God.

IRW: Do you still visit a lot of trade shows, too?

AS: Less and less. Everyone does, even if you design your own product, so you can find manufacturers, but I don’t really do trade shows with brands that I’d buy at anymore. When I started, I did. My father used to do a lot of it 20 years ago.

For our business, the size has meant we’re important to manufacturers. When I started and we were only $10 million, you couldn’t go to a manufacturer and ask them to build you something. They didn’t care, but at our size now, we can. It’s an important part of the DNA to say that we designed it and took it all the way through. I think customers and staff respect that process, I think. It’s much better than going and buying something, even though that does take a lot of creativity, it’s a very different process.

IRW: How have interiors customers changed in the last few years?

AS: I think a lot of people use designers a lot more, definitely. There was a DIY movement but I think it’s dropped away. It’s bullshit. I don’t think people like doing their homes, it’s like a dream. Even for designers and design-savvy people you need someone to bounce off for the creative process. Often it’s just the husband and wife. I think the designer is used to save a marriage and helps to be the sounding board – sometimes they do a lot, sometimes a little.

IRW: In fashion, customers definitely want products faster these days. Is that the same case in furniture?

AS: We now launch three main collections per year –  Outdoor (August), Spring (October) and Winter (March).That’s our new calibration of collection launches. It’s important to change and excite the client. We’re changing the collection every six months by approximately 20 per cent. We’re not Zara, but the process is faster and we’re are in many ways a fashion business for interiors. You have to be changing styles all the time, you have to be moving forward stylistically or you become boring.

You’ll always have your classic designs and pieces, but outside of that, your homewares, your occasional tables, various colours can change quite a lot. I think that’s important. We’re quite a fashion business, I think, if you look at our styles and the way we shoot and present them, things have to change.

We change merchandising at each store every week and it’s expensive. It’s ridiculous, but we need it. It’s a super high cost. I guarantee you, not everyone in our industry does that. We’re also out shooting every week and our content is also very expensive. For me, photography and visual merchandising are the same thing, they’re just the ways people see your product.

The furniture business is capital expensive, because you have to invest in a lot of stock in big warehouses. Then you have to move it around. It’s not like selling a pair of sunglasses. For us, we spend a lot of money on merchandising, we have 13 showrooms and we’re changing them every week.

In the Alexandria store, taking two days [to change VM] is not long enough, you need four days to make it amazing, so people who come in every two or three months can see a change when they come back. Investing in the capital expenditure, changing facades, changing wallpapers, we’re launching a new lighting collection soon, but that’s costly – the electricians have to put 20 lights up and it takes two days.

We spend a lot of time on the business and I think it shows. It could be better but in this industry, when you look at customer feedback, it’s usually our highest score – they like the experience in-store.

IRW: What would you say are some of the biggest challenges in the furniture business right now?

AS: Definitely cost of growth, it’s expensive to grow these businesses, especially if you have to grow from your own profits. Digital is a changing landscape and it’s costly. People think it’s cheap and easy, but it’s quite expensive to do a good digital in-store experience. We have to replatform this year on new sites and it’s a big cost and if you put on top of that all the hygiene stuff you need to, shoot your product to make it look good online, that’s a big cost before you get into the tech side. And I think a lot of businesses can’t afford to do that well.

We didn’t really launch online and start selling product properly until about three years ago. We had the same theory as Ikea  – we have big, beautiful showrooms that we spend a lot of money on and we wanted people to come in, we didn’t want them to transact online. But at some point, you have to say, ‘People want to see prices online, they want to buy online’. That’s what the market wants. And I think initially your business suffers for it, but in the long run, it’s a better move.

IRW: Even for the most successful businesses, online sales are still only 20 per cent.

AS: It’s so low. I read an article recently in the US that in our industry, there are heaps of online businesses going offline because they can’t really sustain themselves, whereas retailers are increasingly differentiating. Five or six years ago, a lot of people were going ‘I want to do something online’ because of all the high-growth stories. But they plateau out, so I think inevitably any business needs a mix of on- and offline, it depends on the right mix for them.

Warby Parker is a great example. They were online only and couldn’t keep growing, so they’ve opened up heaps of stores in the US.

I think doing a good retail experience is increasingly expensive but I think it will be something people appreciate. We’re seeing that in our results and we spend a lot of money on it.

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