Coco Republic has designs online

In a matter of months, Coco Republic, a furniture and homewares retailer, will go online. That’s hardly a surprise. But what it is selling online may come as a surprise. The company, based in Sydney’s inner-south suburb of Alexandria, will start offering design courses over the internet.

Coco Republic already has a school. In 2010 it opened its own campus in concert with Sydney Institute of TAFE’s Design Centre Enmore.

About 1000 students have since been through its courses, which run from two hours to 14 weeks, Coco Republic executive chairman Paul Spon-Smith says.

“We’re excited about the future of the company in a number of areas,” he says. “One of those is our online platform that will be offering education in a month or so in styling and colour. It’s a global market now. That’s where we see an enormous growth.”

If Coco Republic’s online venture pays off, it will be one of the most successful brand extensions in recent Australian business history and a guide for other consumer businesses struggling to adapt to a tougher retail environment.

The brand of a service or product is its personality, the character that gives consumers a feeling or pull towards it. With a brand extension, a company tries to imbue a seemingly unrelated product or service with that same brand.

Spon-Smith laughs as he describes the essence of Coco Republic’s brand.

“I like to call it stylish seduction,” he says. “It draws you into a place which you wouldn’t otherwise go to.”

Brand extensions are risky things. If successful, they can be highly profitable. The best-known global examples include the move by ballpoint pen maker Bic into lighters and razor blades. The Washington DC-based National Geographic Society has successfully turned a research organisation into a brand now known through many media channels, as well as retail outlets.

Done badly, however, brand extension can turn a company into a laughing stock.

Bic subsequently got it wrong when it introduced disposable women’s underwear.

Beyond being disposable, the garments had nothing in common with pens and razors. The product line required completely different skills in manufacturing and distribution.

Motorcycle maker Harley-Davidson won praise in 2004 for introducing a line of branded footwear. It drew brickbats the next year, however, for licensing its name to a cake-decorating kit. Some brands just don’t stretch that far.

“The expansion needs to be within your passion and vision and essence,” senior strategist at branding agency FutureBrandFlorencia Tarelli says.

Don’t do what Pierre Cardin did in the 1980s. “They went into toilet seat covers,” Tarelli says. “They just licensed this brand to everyone just to get that financial benefit, rather than keeping it tied to the core. If a brand loses its passion and starts thinking only in terms of financial gain, it gets lost.”

Australian retailers can be forgiven for wanting more financial gain.

Coco Republic’s profit after tax fell 7 per cent last year to $1.5 million, even as revenue increased 14.5 per cent to $42 million, company records show.

Developing low-cost new distribution models, especially in services, is one way to build up profit.

Of course, the company that started life 35 years ago as Town and Country Living already has experience combining retail and services. It has an interior design business as well as a property styling business that dresses up properties for sale.

“Property styling started about 11 to 12 years ago,” Spon-Smith says. “It was answering a need from the property market, it just grew embryonically.”

Property styling alone accounted for $10 million of the company’s $42 million revenue last year. The records don’t break down income from other parts of the business but Spon-Smith says that education, along with property styling, will be a mainstay of the doubling in revenue he forecasts over the next three years.

“We see the 100 per cent organic revenue growth over the next three years coming predominantly, but not exclusively, from upcoming new online initiatives in our Coco Republic Property Styling/Marketing and the Coco Republic Design School divisions,” he says.

It may just happen. Tarelli says Coco Republic’s move into education is “a true expansion” that keeps what the company does – design – at its core.

“The reason why it could be successful is that it’s linked to what they do,” Tarelli says.

“They were doing furniture, now they’re teaching. It’s totally an extension and outside their core activity but intrinsically linked to the core of what they like.”

Spon-Smith says it will cost $1750 for the longest course online, a 14-week course of three hours a week. That’s $1000 less than for the same course on site. There will also be “some lower-cost items” in the product range that will principally target expatriate Australians and English-speakers living in east Asia, he says.

Ironically the patchy economy may be helping that market to grow. At a time when retrenchments in Australia and elsewhere are taking people out of the industries in which they have previously worked, many are seeking to try their hands at design, Spon-Smith says.

“A lot of people, because of the economic climate, are having career changes,” he says. “In some classes there’s a disproportionate number of lawyers.”

Extending the brand could stylishly seduce more people into the world of design than would otherwise enter it and in turn the process will strengthen Coco Republic’s brand, he says.

“If the ambition of a company is to [deliver] best practice but in particular with a conceptual skill like design, then it stands to reason you should share it in order to give integrity to your brand,” he says.

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