Brother and sister Paul Vallely and Clare Walsh’s Kukoon Rugs started out selling rugs on eBay and has grown into a leader of innovation and design. They talk to George Morahan about the firm’s path to success and their plans for the future

Over the past 19 years, Kukoon Rugs has grown from selling rugs on eBay to a thriving online business at the forefront of innovation in production and design with sales of around 10,000 per week.

Clare Walsh and Paul Vallely, its co-founders, were inspired by their parents, who had an ornaments shop in Newry in the 1990s. Their father, Kieran, later became a market trader selling giftware, homeware and rugs.

He passed away in 2016, but Walsh says he “got to see some of [Kukoon’s] really good years”. Kieran didn’t have a particular love of rugs and, the way his children tell it, he wasn’t much of a wheeler-dealer. But he was straightforward and hardworking, using his days off to make improvements to storage and efficiency.

“He bred resilience into us,” Walsh, the firm’s creative director, says. “We were always the first people to arrive at the market and the last to leave, just in case somebody came late. He believed that you went, you were always there. If the weather was bad, you went because you don’t want to get a reputation of, ‘Oh, sure, he mightn’t be there’.

“He made us understand how crucial it was to be reliable to the customer. While his face-to-face service might have been a lot of what not to do, I think we actually did learn from the importance of that bigger piece: you’re always there and the price is always good. You’ll have what they’re looking for.”

Walsh and Vallely, its chief executive, started Kukoon in 2006 as they were completing university. Vallely studied business management at Queen’s University Belfast while Walsh graduated from DIT Bolton Street in property economics as the market was crashing.

Of her class of 45, only a couple managed to get jobs in the sector. The college soon suspended its property auctioneering course due to a lack of uptake. The siblings moved back in with their parents to focus on the business and sent orders through the post office.

Kukoon now has nearly 1,000 rugs for sale on its website (ranging from €10 to €500), including upwards of 600 exclusive designs created with local artists and designers, and the company distributed 350,000 rugs in the UK last year.

After making a seven-figure investment in its online platform, Kukoon has projected sales of £16.5 million, with profits on track to double year-on-year to £2m this year. In 2026, the firm expects sales of £20m and profits of £2.4m.

The latest accounts for Kukoon Rugs Ltd with Companies House show retained earnings of £1.3m and net assets of £1.7m as of March 2024. Having opened bricks-and-mortar stores in Newry in 2013 and Belfast in 2017, the company had announced plans two years ago to open four or five more before opting to enter into partnerships with established retailers such as EZ Living and Woodie’s instead.

The EZ Living partnership has proven fruitful. In the first six months, Kukoon sold 30,000 rugs at its concessions in EZ Living’s 21 Irish stores. It is now advancing similar deals with “a couple of big multinational retailers” in England, one with around 50 stores in the south and another “largely based in the north”.

The company operates a showroom model at EZ Living with rugs on full display. Customers can make their order and have it delivered in two or three days. Future partnerships will also include “an education piece” featuring a large stand with samples and monitors to explain product varieties to customers better.

“We’re lucky enough to have a product that a lot of big retailers don’t like offering, and we are offering solutions to them,” Walsh says of the partnership model. Kukoon hasn’t given up on expanding its retail presence though, and Vallely says it is “still actively looking at retail opportunities”, particularly for flagship stores in Dublin, Galway and Cork.

The company board recently signed off on a retail store plan, and Vallely hopes it will open at least one new store before the end of the year. “In terms of opportunity and playing the game in front of us, the EZ Living and Woodie’s partnerships, we’ve got really deep into [them], and they’ve been a great success. So that’s taken priority over the last 12 months rather than retail stores.”

You might not think that rugs would be a product ripe for innovation, but Kukoon has produced a prototype for Soft Washable, a foldable, washable rug that can be transported home in a small duvet bag with a zip, two handles and a plastic window.

The company works with several manufacturing partners, mostly in Europe and Asia. It has two key factories in Turkey and another in India. The company makes up “a significant percentage” of production at those facilities, according to Vallely, who says a lot of the product developments made in recent years has been “done hand in hand with us…and probably at our request”.

Kukoon also has a quality control office in Turkey with two full-time employees. In all, the firm has 55 staff. Their manufacturing partner for Soft Washable in Turkey is a man who Walsh says “loves rugs” and who will refuse certain production requests because he’s “tied to quality”.

They are committed to him, despite occasional issues with logistics and communication. “He just has that natural want, and that natural ability to see the future demand in the market,” Walsh says. “He’s very willing to invest in machinery because the machinery is improving the product offering all the time. It’s completely transforming the rug market.”

Traditionally made with looms that would take up the size of a factory store, the process for making rugs on a commercial scale is now closer to digital printing than weaving, which has allowed for Kukoon to work with artists. Modern machinery can print their designs onto a wide range of fabric bases.

“We’ve been doing this for 20 years, and I would say there’s been more innovation in the last two years in terms of products than in the years gone before,” Walsh says. He says they have always been “early adopters” in terms of sales channels, partnerships, territories and now products.

The Soft Washable prototype is made with 68 per cent recycled cotton (another version is 80 per cent) and Kukoon’s long-term goal is to make a 100 per cent recycled rug. Difficulties with the binding and backing likely mean this is a couple of years away, at least.

After Brexit, EU exports as a share of sales fell from 25 per cent to zero per cent, but the company is now selling a couple of hundred rugs per week internationally without any marketing push. The US forms a “tiny part of business”. The company’s rugs would attract tariffs on products of Indian origin, but Vallely believes there will be no material impact on the trajectory of the business.

Beyond the partnerships being negotiated with UK retailers, the siblings are eyeing “a huge expansion” in Europe and America. “It will be thoughtful. We won’t be able to spread quite [thinly]; it will have to be an evolution where we bring full brand strength and education strength with us,” Vallely says.

“There’s no reason that can’t be done. Operationally, structurally, we can do it. “There’s a lot of localisation involved, and there’s a lot of getting your roots into a local market from a sales and brand perspective, but a lot of the other parts of the business are very, very replicable internationally.”

Sibling rivalry

Walsh and Vallely started Kukoon when they were 19 and 22 respectively. Walsh was still in university during the first eight or nine months of the company’s existence, but when she returned, they realised they couldn’t work in the same office because they were chatting too much.

Walsh says they’re now “down to weekly disagreements” and that they work “quite well together for the most part”. Like any siblings, they’re “well fit to argue” but they recognise that their strengths are complementary, with Vallely handling business operations as chief executive and Walsh more product-focused as creative director.

“We’ve had to carve a path out together,” Walsh says. “As I reflect back, there’s been a lot of ups and downs through it. The early years were phenomenal. We, just the two of us, had to crack on, and it was exciting and everything was new.

“You probably don’t realise you’re going through it, but speaking to lots of other businesses over the years, it’s a very similar story, be it siblings, married couples or unrelated partners. “You then have a couple of years where the business changes again, finds its feet, and you bring more people in, and the dynamic changes and you go through teething pains.

“We had points of disagreement because we were scrambling around trying to find the best way forward. I think probably in the last five years, we’ve both found ourselves more in the roles we’re naturally aligned to, which has allowed us to work really well together.

“We’re working in two different areas of the business, and we trust each other to get the job done,” she adds. “I don’t think there’s a different future for either of us at this point.”

Photo: (l-r) Clare Walsh and Paul Vallely. (Pic: Supplied)