podcast | Feb 1, 2021 |
How Kathy Kuo built a digitally nimble design business

It was the beginning of 2020, suddenly the coronavirus was everywhere and the mood was grim. Entrepreneur Kathy Kuo, founder of the hybrid e-commerce/e-design business that bears her name, sums it up succinctly: “Let’s just shove all of our cash under mattresses and pray for dawn tomorrow morning—[that] was the general worldwide sentiment,” she tells host Dennis Scully on the latest episode of the Business of Home podcast.

Thankfully, it didn’t last long. While Kuo’s sales dried up for a couple of weeks, they started taking off soon after. “The lockdown happened [and people started to say], Well, we still have to eat, we still have to work out, and we still have to love our homes,” she says. “We started to see this paradigm shift where online blew up across the board. … We’ve seen absolutely explosive growth—400 to 700 percent growth rates, year over year.”

Of course, while Kuo’s company was able to capitalize on a sudden surge in online home shopping, her platform was years in the making. The company started officially in 2007, when Kuo was a designer looking to source product online and not finding what she wanted. From the start, she had a plucky, break-the-rules mentality: “What’s this D&D Building? How come normal people can’t go? Why is it that you have to check my ID and badge? Why is this behind an iron curtain? This makes no sense! We need to create a place where designer goods can be accessible.”

It wasn’t until 2012, however, that her site began to grow in earnest. At the time, she sold furnishings from one vendor, and it took the site 3 minutes to process a credit card. But the foundations were laid. Over the following years, she began to develop a unique, catch-all business model. When customers come to Kuo’s site shopping for a few sconces, they often end up buying an e-design package, too. And if they come looking for an e-design package? Well, she’s happy to recommend a few good sconces.

“Our customer service staff are all highly trained designers,” says Kuo. “This is contrary to most dot-coms or organizations that have call centers that do support tickets. Another way to think about this is that we’re a project-based retailer. For example, if you go to Home Depot, you go in because you’re looking to build a shed. You walk out with 26 items in your basket—you’re not going there to buy one screw. … We are under the assumption that people come to us with projects in mind and they don’t understand how to talk about it, and it’s our job to understand the larger product at hand. … The average American buys one sofa every 12 years. When somebody comes to our site asking about a sofa, we better assume they have a full empty house!”

Listen to the episode and check out some takeaways below. If you like what you hear, subscribe on Apple Podcasts or Spotify. This episode was sponsored by The Shade Store and SideDoor.

High Touch At Scale
Kuo’s business is built around a hybrid model. She makes most of her margin on furniture sales, but often it takes a great e-design experience to drive those sales. Consequently, she finds herself attempting the impossible: a high-touch design experience at scale. “[That’s] something that almost no one should ever try to do,” she says. “[But even with 75 clients at once], we have figured out how to do this. And we never repeat a design, we never templatize a design so that Suzie Q and Jack Smith have the same designs. It hasn’t been easy, and there may be a point when we can’t scale it any further. … [To make it work], I hire all of our designers, I create the systems and auditing functions to manage the process. I train our design managers to basically be clones of myself.”

Market products, not design services
Even though e-design packages are a huge driver of product sales, Kuo doesn’t advertise around design services. She’s found that, most of the time, customers don’t really know they’re even looking for a designer yet. “Advertising for people who want interior design services has not been effective for us. … The customer base that comes through those ad channels doesn’t seem to be a winning combination. What [does work] is a love for brand, a love for product,” she says. “They want to live in your home, they want the look on your site. They’re not looking for an interior designer. They may end up with an interior designer, but the general thought for most people isn’t, ‘I need an entire designer.’ They’re just like, ‘I need help decorating, I need a stylish friend.’”

Direct-to-consumer competition
Kuo’s business is a purely digital play. It has worked extremely well for her, and she has no plans to open up a chain of brick-and-mortar shops. However, she acknowledges that an e-commerce approach to selling furniture comes with certain vulnerabilities. “In the digital world, when you can visualize the end product without physically touching it, and someone has experienced the ability to sit in the comfort of their own home at 2 a.m., add to bag and check out, there’s no turning back,” she says.

“We’ve been seeing a lot of our vendor base go direct-to-consumer. They’re saying, ‘Listen, we’ve been drop-shipping for you and 15 other suppliers, maybe we should do it ourselves.’ Yes, they haven’t figured out logistics or acquisition or marketing or branding—and by the way, the brand part is the hardest piece to figure out—but who’s to say they can’t go direct-to-consumer themselves? A lot of what's going to happen in the retail world is there’s going to probably fewer wholesalers. … I also think trade pricing will be eliminated eventually. I don’t care who you are or what you’re buying, [every customer] wants the best price possible. I don’t care how much money you make, nobody wants to pay more than the next person over there.”

Homepage photo: Kathy Kuo | Courtesy of Kathy Kuo Home

Want to stay informed? Sign up for our newsletter, which recaps the week’s stories, and get in-depth industry news and analysis each quarter by subscribing to our print magazine. Join BOH Insider for discounts, workshops and access to special events such as the Future of Home conference.