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Business of Home Podcast
Markor's Mark Feng on the AI opportunity in design
01:03:09
The chairman and CEO of Markor—the conglomerate that includes Caracoke, A.R.T. Furniture, Jonathan Charles and Rowe—weighs in on the state of the furniture industry today, and offers a look at his own AI startup, DecorX.
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A
This is business of Home.
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B
I'm your host, Dennis Scully. Every week, I'll be speaking with leaders and innovators from all corners of the home industry. My guest this week is Mark Fang, the chairman and CEO of Marcor, a conglomerate that includes a large retail and manufacturing operation in China, as well as brands like Caracol Art Furniture, Jonathan Charles and Roe Markor was founded in a remote Chinese city in 1990 by Mark's father, an artist and former interior designer. While it's grown into a sprawling international operation, Marcor still retains its origins as an art and design first company. Now Mark is looking to add technology into the mix with the launch of his own AI company, Decor X. I spoke with Mark about the confusing state of the furniture industry today. Balance balancing high design with commercial appeal, and why he thinks over time, AI will transform every part of the industry. Hi, podcast listeners. This month I'm catching up with designer Amber Lewis, a former guest of the show, about her new rug collection for Laloy. Today we're talking about how Amber and Laloy first started working together. Amber, I know you've had a relationship with the laloi family, Amir, Steven, and Cyrus for a while now, but remind me how the relationship got started.
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All the way back in, I would say like early 2020, they DMed, you know, just old, good old fashioned. Slid into the DMs, I think just.
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Sent you a little note on the gram and said, hey, we'd love to work with you.
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C
And now I'm on the 473rd collection.
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A
Of rugs you have made.
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You've been a prolific rug making partner, so obviously, obviously, the relationship works well. Tell us, tell us why.
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One of the things I love the most about Laloy is Amir has an incredible eye for vintage design. And so when I got to understanding their brand a little bit more, I was so appreciative of his appreciation for vintage and vintage inspired looking rugs and their quality. It's, it's wild because, like, you can see in the market, so many vendors that are wanting to recreate that vintage look, they had the ability from a construction standpoint, from an aesthetic standpoint, from the way that Amir appreciates the pattern of Old World, these beautiful old vintage rugs, he really let that reflect in the design. And so I appreciated their, you know, their, their view and their lens on making sure that when they were creating rugs that they really did nod to an old vintage piece, which is tough to do.
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B
Later on, I'll be talking with Amber about how her partnership with Aloy has Evolved over time. For now, on with the show. And I want to jump in, Mark, by talking about Highpoint, you are still at High Point. I am just back from High Point and I saw a lot of people and talked to a lot of people to hear their perspectives. I'm eager to hear both what you were imagining High Point was going to be like and what was going to be top of mind for everyone. And then as best you can tell, what it has turned out to be.
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A
Yeah, I'm still in High Point, as you can see. I'm in my office. It's raining outside. It's really cold. I have this puffer jacket on, which is unusual.
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B
You've got layers on.
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A
That's right. Yeah. But coming into High Point, you know, honestly, we all know the macroeconomic environment and the geopolitical things are tension and you know, so we were hopeful and we were hopeful for one reason, because September was the best month we've had for the past 24 months.
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B
September, you had your best month sort of across the board or were there specific.
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A
Across the board in terms of orders, we kind of have distribution over 100 different countries as well. So for us it was good and you know, largely for international as well. So we were seeing a little bit of upward momentum. So we were cautious, anxiously hopeful coming into High Points. Okay. But overall, so both from my perspective and the word that I'm hearing from the street is that we were all presently surprised. So for us and all of our brands, some of our brands have had basically double the last market. So it's been shocking. Yeah, some of our brands have done, but across our four brands, we've seen double digit growth. Traffic has stayed stagnant for us compared to last market. But we're just finding that whether you're interior designer or whether you are a buyer from a retail operation or you're an E commerce player, people are here to place orders so that we're pleasantly surprised by. And you know, I walk the street, I go to our friend's showroom as well. And that seems to be the theme that we're hearing is that, hey, traffic is a little down, that's rain here and there. But we're all seeing that people are starting to make big purchases and they're investing in their businesses.
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B
So many of the showrooms that I spoke to said they, they told the salespeople, okay, have the tariff conversation quickly when they come in the door so that you can move on and get them focused. So I mean, what's to say about tariffs right? Everybody sort of knows what they are. Was that a quick conversation you were able to get through? Did anybody have anything brilliant to say on the subject? Revolutionary. You hadn't heard before? I mean, I'm curious.
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A
Honestly. Our personal experience is that we talk very little of tariff. Everybody's tired and, you know, we're all kind of navigating the whole thing together. And we're transparent and we don't have any information that other people don't have. So we just jump right into the product and knowing that we will navigate and adjust, you know, as the world change.
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B
For several markets now, we've been talking about the fact that interior designers are now playing a larger role in terms of the overall attendance and customer base at market. It's roughly around 60, 40, 60 designers, 40 retailers. And I wonder what your perception is of that. And if you think, because we've tried to spin that as, oh, that's great news, all these designers are coming. But many of the companies that I talk to feel that those designers can't possibly represent the same kind of volume that the retailers once did. And that's the concern they have. What's your perspective on that?
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A
Well, from day one, the history of our company and of our family business is that we started in interior design. So my father started this hosting as one interior designer solo show. So we've always embraced interior designers, and we find that a lot of times it doesn't matter the volume that you do. So for us, our best customer is. Isn't necessarily the one that gives us the most volume. It's the one that resonates with the brand and represents the brand well and spread the brand awareness. In the past, we've. We've been blessed with both retailers, E Commerce Partners and interior designers that have done that for us. But in speaking of volume, we've had our largest interior designer accounts outperform some of our retail accounts. So the landscape has definitely shifted. In the beginning, it's, you know, we were also very heavy retailers with some of our brands, but now we're definitely seeing the pendulum shifting.
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B
Interesting. And a great segue, as you say, to talk about your father and the starting of the business, because he, as you say, an artist and a designer and really sort of a revolutionary businessman on a lot of levels. So let's tell people a little bit of the history of the company.
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A
Sure. And Dennis, I can go on and on, so I'll try to make it short.
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I know, I know. Well, and there are so many great stories to tell. I mean, and it really is remarkable. But I'll try and guide you.
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Sure.
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As we go.
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A
Yeah, cut me off if you need to. So my father was born in the most landlocked city in the world, which is Gurum Chi, China. And our family was sent there by the army. And my grandfather was one of the first movie actors of China in the army. And my grandmother, his makeup artist. So from early age, my father grew up on the movie sets. And between, you know, filming, he would help with grandfather with set design. So from an early age, he made fake furniture out of paper boucher, and he learned the craft. So as he grew up, unfortunately, there was a period in Chinese history called the Cultural Revolution. And my grandmother got imprisoned for 10 years. And because she was a makeup artist, she had a lot of access to Japanese badges and uniforms. So she got labeled as a Japanese spy, a presidential spy, which was obviously false.
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B
Right.
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A
But she. She was stuck in prison for 10 years, and Grandpa obviously lost his mind, was mentally ill. So my dad, starting from the age six, had to provide for the entire family. Two little sisters. He painted propaganda posters and he took on different jobs. So as he graduated from art school, he got into interior design, because that was the thing as China opened up, that was a white space. Nobody was doing design for the new nightclubs or the hotels that are showing up. So he quickly rose to fame because he's been doing design and art all his life. He got on national television, but the problem is, back then, there was no LinkedIn or Facebook. So all of his classmates starts to show up on job sites pretending to be Richard Fong and took a lot of business away from him. So he had to look for something that's higher barriers to entry. So in the late 80s, he had heard of something called exporting. So he started to come to High Point, and he found, oh, wow, there is an international market for furniture. The funny story was that the first person in our family who went to Highpoint was my mother, who obviously is a Chinese lady. She wasn't allowed into any showrooms. She had to take photos through the window because it was a predominantly white male industry back then. But she took photos of these white males in suit and tie and wrote on the back of these photos and mailed them back to my father that said, hey, these people look professional. We should probably get into this. So he set up his first furniture factory in the most landlocked city in China with the worst wood possible. All we had was pine. And as we know, it's a soft kind of wood. It's undesirable. One thing was in his advantage. He was a painter. So he taught all of his workers color theory. So our finishes were impeccable. We were able to mask the soft pine with beautiful finishes. So sooner than we know it, we became just a large manufacturing operation in Asia. We were doing business with everybody. But then he got bored because deep down he's a designer. He said, now I want my own brand. Now I want my own stores. So we took the company public. Back in 2000, he started his retail operation with one store. He built a store. He also had the Ethan Allen license in China. That store in the first six months was a disaster because nobody came into that store. Finally, we had somebody coming into the store, but they showed up with suitcases because they thought it was a hotel.
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B
Oh, yes, I love this story. So it's this furniture store window and people think, oh, this must be a place to stay.
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A
And so they showed up because it was big and it was lifestyle presentation. It was so out of this world in his artistic lens. But that model helped us build our brand. So now we're a household brand in China. You can kind of think of us as the RH or the wooden Sonoma of China.
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B
Well, and go back and just explain to people the Ethan Allen partnership because Farooq Kothwari and family, right, developed this partnership. And you were helping them to get exposure.
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A
Right. So 20 years ago, as my father became the source for furniture for all of the majors in the States, he had thought, okay, I want to go into retail in China, but I can't do it alone. He was self aware that we need to learn from the greats. Back then, 20 years ago, it was Ethan Allen, Thomasville and La Z Boy. So he met with all of them, but for some reason he just connected with Farouk. Farouk took his plane to the most landlocked city in China and they talked through the night for 12 hours. You know, Farouk has a very inspirational immigrant story as well. So that's basically the story of my father. So they really connected and shook hands and a deal was made. And 20 years later, we're Githana Island's largest international distributor. And from retail, we went into wholesale internationally. So now we have four brands. Art, Caracol, Jonathan, Charles and Ro. And we distribute across 100 countries around the world. The US market is the largest market that we operate in.
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B
So the US is the largest market for you?
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A
Yeah. So China and the US and then the rest of the world. We also have a lot of business in The Middle East, Europe, South America, Southeast Asia. So it's very much a global operation. And what's unique about us is we are vertical. So all the way from wholesale retail to design to manufacturing to sourcing. So we own the factory that we produce our products from. So we also have a healthy amount of hospitality contract as well as OEM business where we produce for your commercial designers that's working on those projects.
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B
Well, so you mentioned, so you mentioned the various brands that you, that you have. And so you acquired Row Furniture, you acquired Jonathan Charles Fine Furniture and Caracol as well. I mean, tell me how you think about those brands and how you differentiate between those brands and what you're hoping to have people know about them.
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A
Yeah, we really think about the consumer very similar to how the fashion world, if you think of lvmh, how they think about this problem. So we don't differentiate our brands by price point necessarily. We differentiate them kind of by point of view, by their brand ethos. So, for example, Caracol is elegant, is sensory, is hopeful, whereas Art is kind of the opposite to the yin and the yang. It's more architectural, it's more casual. It's taking your vintage inspired trends and modernizing them. Caracal is actually an operation that's started in the 1930s. It used to be called Pullman Furniture. And under Lawrence Schnatic, it used to be called Schnatic Corporation. And you know, well, after we acquired them, the company was in trouble. So we turned the company around. We rebranded the company. Art was a similar story as well. So Rowan John and Charles Rowe is also a very storied company with more than 80 years of history. They were also kind of in trouble on their private equity ownership. So we took over. And a lot of these private equity guys, they are in it for a number of years. You can't blame them because they have LPs that want to cash out. So they don't have this long term view. But we treat these brands as really lifetime assets. Our dream is to turn all of our brands into 100-year-old brands. So we focus on branding, we focus on building the ethos. And a key part of what I do is I have to steer the lanes. I have to kind of draw the map for them. Hey, you know, you go this way, you go that way, right? And don't step on each other's toes. When it's not done well, you start to cannibalize each other. You get to hear the old tales of furniture brands and hhg.
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B
Right. Well, I know Any company that has multiple brands under their name, there tends to be. I don't want to say there's infighting, but everyone is trying to get your attention. Everyone wants to be the primary focus. Everybody feels that their sister or brother brand is taking a little bit of their business. Right. Or stepping on their toes. So, I mean, it's a. I know it's probably a lot to manage, and we should tell people your story and how you went to Harvard Business School. Went to Harvard undergrad as well, which is often, I think, even more impressive, Mark, that to go to Harvard undergrad than to. Than to go to Harvard Business School. But you come over, if I recall, at the age of 14, not even speaking English, really. So, I mean, let's tell that story.
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Oh, you know, look, I'm just a very lucky child.
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Here he is. Here's the humble. Here's the humble mark coming forward.
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Well, so the truth is, I have the privilege of coming to the States, but I came to, you know, I was able to have a western education. I came at the age of 14 to California.
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And how did that first come about. How did you first come to the States?
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What was bringing you here? Well, because art was set up as a west coast company, so my mother had moved here. We had a warehouse at art. So from a young age, I knew that I would be going. But it wasn't until the age of 14, for whatever reason, I finally got the opportunity to. To immigrate. So I got here. I didn't speak a word of English. I was a big nerd. Got my fair share of bullying in middle school. I can only imagine kids must have been funny cuts. You know, I didn't dress the part, but I quickly learned, look, you know, grades don't matter here. You gotta. You gotta play a sport, right? So. So. And luckily, you know, I was a good runner. I was captain of the track team. But I did work very hard in high school and so got into Harvard. And I'm an only child. And I joke, look, that the company Markor isn't named after me. I'm named after the company. Really. The name came from the marker that my dad used to design with. So the intention was always having me work in the family business. So after Harvard, in which I majored in economics and visual studies, which is art, he wanted me to jump in right away. But I just said, you know, dad, like, I've lived in your shadow all your life. I don't want to. I want to kind of prove myself to myself. So I convinced him that I would work another job for a few years. So I did investment banking in Hong Kong for a few years. Absolutely hated that job. You did? You hated it? Absolutely.
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B
Well, so what didn't, what didn't you like?
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A
Well, I mean, it's just, it's the opposite of what we do in the furniture industry. Right. We're creative, we're innovative, we don't make as much money, but it's not the thing that's on the top of our mind. There's joy and there's just freedom in everything we do. And there's great relationships in the finance industry. It's very much driven by the number. And you're almost burning your relationship for the number sometimes. And as a junior analyst, what I learned is how to work really hard and pull consecutive all nighters. But other than that, just how to format a PowerPoint presentation, Excel Shortcuts. So after a few years I said, I'm done with this. And so I went to get an MBA because hey, if I'm going to run a business one day, I actually want to know how to run a business. So I went back to Harvard and that was actually a fantastic experience. Just the case studies that we read every day in every class. You're in a seat of whatever CEO at whatever key juncture of a business trying to role play that. So that's benefited me tremendously. And just the resource. The reason why I got into AI was because I went to HBS and had this relationship with this professor who pulled me in as ChatGPT first came out with Dall E. So that was a great experience. So after my MBA program, I ran off, ran out of excuses and my father.
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B
Well, I know, I know that you were tempted to go off and start some tech company or do something on your own, but you, but you were a good son and you came back.
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A
Yeah. And honestly, you know, that was absolutely the right decision. I absolutely love what I do now.
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B
Well, so you mentioned earlier the company going public years ago and tell me about the impact that that has had. And does it create restrictions for you in some areas or does it perhaps create discipline that might not otherwise be there? How do you think about it? What's the impact that it's had?
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A
Yeah. So one thing, if you meet my father one day you will know that he's the classic artist interior designer. He does not how to know how to read any financials. The P and L doesn't mean anything to him. He's all visual. Right. So as you can imagine, it was A big change when we first went public because all of a sudden you have a quarterly earnings release and all these rules from the sec. But luckily it's worked out, but not without trouble because my father and how we run our business, we're so kind of long term thinking that the Wall street or that equivalent in China doesn't understand on a quarterly basis. Why build a 300,000 sq ft furniture store in the middle of Beijing that looks like a cave? Makes no financial sense. Right. But to build a brand, sometimes you have to, to make these investments and do these crazy things that doesn't make sense to Wall Street.
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B
Yeah, no, no, no, that makes sense. And speaking of buildings. So we should give. For the many people listening to this who haven't been to High Point and who have a little understanding of it, but don't know, sort of the enormity of some of the, I mean, so you've got, what is it, 187,000 square foot building that you built a few years back. Tell me about leading up to that process and what your thinking was of having presence in High Point.
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A
Yeah, you know, the High Point story is my father came to High Point in the early 90s with a huge messenger bag. You know, every year when I was a little kid, I really, I would remember him coming back from High Point and just the bruises on his shoulders. You know, my mom would, you know, cup him, you know, cupping, like it's popular. You know, it's a Chinese thing. It's been going on for like decades, right? So we would cut him and we would massage him. So I'm not, I'm like, wow, what is my dad doing in High Points? Heavy neighbor, right? But he's literally going from showroom, showroom, carrying his photos around. So everything that we built is, comes back to High Point. Like we owe High Point everything that we have now and the opportunity that is created for us. So, you know, we used to be in these giant buildings and when the opportunity came, obviously by that point we were a big global operation and we had a lot of retail stores. My father was like, renew the lease or the chance for me to design something. He's like, let me design something. So I remember he drew on a back of napkin the current design and then he handed to me, he's like, son, find me some architects and don't spend too much money on it. You know, some amounts of money later we have the building. And he was, he was not very happy. He's like, hey, this is not what I desire.
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B
Is that Right.
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A
So he wasn't pleased, you know, as a, as a, you know, a perfectionist, you're never happy. He's like, I'll give you a B. I'll give you a B plus in true Asian dad fashion. Right. But the spirit is, you know, if you look at our building, it's contextualism and he's, he doesn't believe in fancy materials and he's against that. So he believes and blending in with the environment, environmental friendly. But also he's like, if you're a good designer, you turn dirt into gold. So it reflects that in the materiality of the building. It's his hope for the industry is, you know, high point. The furniture industry, as you know. Right. There's a lot of copying, there's a lot of stealing back and forth. And, you know, we're a company that's never done that and we've been on the receiving end of that for years. And he's, he's like, I want to send a message to the industry that. But we are about pushing creativity, pushing innovation, rather than getting into price wars, getting into sourcing wars. So that's been kind of in our ethos as well. We're a company that's about innovation and pushing the boundaries of creativity.
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B
Well, and you are a company that both, I mean, we've mentioned the various brands that you own, but you also white label a lot of products for RH and lots of other big retailers that people will be familiar with. And I would imagine that it gives you a pretty good overall sort of global view of how the industry is doing and how things are feeling. And everyone knew coming into this market what the challenges were as we were talking about earlier. But what's your sense of where we are at the moment and how the industry is doing as a whole?
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A
That's a loaded question, Dennis, and a very complex question.
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B
It is, it is a very complex question. Thank God you went to Harvard and you can sift through all of that.
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A
Well, I think it's a fascinating point of time in history that we're in, I think we're in sort of depressed geopolitical economical state. Right. So we're seeing consumer confidence around the world going down. So I think industry wise, what we observe is that it's hard to get that PO anywhere, it's hard to get conversion anywhere. And especially when you're in the high end segment, that old customers of yours that have millions to spend, they still have money, but they're watching the budget now. So I'm sure you See that too. And obviously everywhere you look, it's a different story geographically, even within the US So as you can imagine, there's hotspots here and there. Even within the Middle east, there's countries that are doing better. There are countries that are in trouble within South America. And then the other force that we have going on is we're also going through another industrial revolution with the power of AI and how people, you know, find things, find information in, in general. So we're seeing retailers starting to think that way, we're seeing designers starting to think that way. But I would say the consumer is ahead of everybody else. So how the consumers find information is changing and how they shape their decisions are changing. So with that comes challenges, but also tremendous opportunities. I would say that this year the US Market has been a highlight across the globe. The Middle Eastern market continued to be strong. We're seeing great opportunities in the European market. The Asian market has been a lagger for us. But yeah, it's a very complex picture.
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B
It is a very complex picture. And the issue with the tariffs, I mean, yes, as we said earlier, there's the tariff exhaustion. And part of the exhaustion is just designers who are just every day getting 10, 15 emails from vendors saying, here's how we're raising prices or here's how we're going to. Some vendors have decided we're just going to spell out exactly what the tariff is and we're going to call that whatever, we're calling that some kind of additional tax or markup or whatever you have. And everyone who, from the makers side who has had an Asian supply chain has tried to shift things. Turns out it didn't help to shift things to India. It didn't help to shift things to Vietnam because Vietnam got hit with the tariffs. So for the massive amount of product that you're bringing into the States, how have you navigated the price increases, the decisions you've made about how much you can swallow as the manufacturer versus how much you have to pass along?
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A
So when the first wave of tariffs started to happen, a lot of our peers started to move out of China. But we've been kind of holding on for two reasons. One is we invest into technology. So our factories are a lot more automated than your average factory. So labor isn't as much of an issue. We also have a higher end product, so that requires that more technical production process and that craftsmanship. And also we have the Chinese domestic stores that we supply with. So our Chinese facilities had always been critical for our brands and our stores in China. But when the tariffs, right before the tariffs happened, we actually started acquiring our own factories in Vietnam. So we kind of anticipated this happening, so we merely shifted production. Now, even that is hard. Every time you give the same finished panel to two different factories, it's different colors, as you know, but at least it's our own production facilities and we're able to have superior quality control. But, yeah, it's definitely being a very complex problem to solve.
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B
This month, I'm catching up with Amber Lewis about her new rug collection for Laloy. So when you first started working with Laloy, was there a learning curve, an educational process that went on?
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C
So the construction of rugs is a language I don't speak, no matter what. Still to this day, they're. They're like, this is a hand. I'm like, where? What's now? I don't care. I want it to look like this. Get me to. You guys are at A. I'm at Z. Just tell me how to get to Z. I think now, with all these years under our belt, it's easier for me to say, yes, yes, no, no, absolutely no. Let's do this. The language is very easy to speak. Now, I also, too, have so many rugs that we've designed into that I love now filling the voids. So where's the gap in the market? Where are we feeling like we don't have something that already looks like a version of this? How do we do this better now? It's nice to have all those rugs under our belt to say like, oh, yeah, this really works. This is strong. Let's do this, but do it it a little bit different and better.
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B
And now back to the show. And are you imagining that? I mean, the president is over in Japan right now and is ultimately, we think, going to meet with President Xi.
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A
And.
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B
We seem to be thinking that there's going to be some great deal ironed out and that that much of this might go away or that relations will at least improve. Is that what you are imagining? And are we just going to see some much higher level of tariffs just be the norm going forward?
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A
I can't predict what's going to happen with the tariffs, but one thing I would say this market. We had the honor of hosting a delegation from China, and he's a district secretary from the capital of furniture industry in China. And it was a delegation of about seven government officials. So we hosted them. And the mayor of High Point, the CEO of High Point Market Authority, we all sat together and we had one of These signing of the Friendship Certificate. So obviously we had speeches. Now, the Chinese secretary, he's very first time in the us, first time in High Point, he was blown away and he says, wow, we have so much to learn and we would love to have a greater partnership. But he didn't know what the mayor of High Point would say in response in light of all these geopolitical tension. So Mayor Jefferson, when it was his turn to speak, he said, look, our countries are fighting over this tariff stuff. This is me paraphrasing, not a direct quote, but the second thing that he said. But we don't care. Our cities, our people have always loved each other and our industry has always been a global industry. The High Point market is over 100 years old and High Point wouldn't exist without international participation. However, this tariff thing would go. I'm sure our industry and the people in our industry, our two cities will find a way to work together. And that was. Honestly, I became a little emotional too. We're worrying about the terrorists and what. But what we're forgetting is the people that actually work in our industry, that we're all connected and it's impossible to just sever the ties with a single stroke.
- [36:07]
B
Are you hoping or looking to do more manufacturing in the U.S. i mean, part of the tariff, the whole idea of it is to try out, push more business back to the U.S. can you imagine doing more production here in.
- [36:19]
A
The U.S. yes, that's definitely a possibility. We're talking to a lot of industry partners and we've always had partners here in the US as well. RO is just a fantastic asset that we have. So, yeah, we're not only looking in the US but we're looking in Europe. Right. We're looking at South America. But we do have a pretty high standards in our partners because we also have our own factories. So that process for us sometimes is a little more demanding because our quality standards are high and our designs sometimes are hard to replicate.
- [37:02]
B
Speaking of Europe, you mentioned earlier showing in Milan and many people who have gone to Milan for Salone can't imagine a world that feels more different to them than coming to High Point. So those are almost like two different planets to some people, I think. And not too many High Point companies are also showing at Salone. But you are, and I'm curious. Tell me about the thought behind that. Tell me how you're received and how it's gone for you. You.
- [37:34]
A
Yeah, it's, you know, it's been a dream since day one, actually, you know, because we are Kind of like this centaur, you know, half bread, you know, half east, half west, Global, right? And even the like, okay, so you call it the most landlocked city in China, but it's right in the middle of the Silk Road. And my father, when he was growing up, he was learning Russian and he was, you know, we were eating kebabs, right? So it's this fusion and this global fusion kind of culture that we've always had. So at the beginning of Caracol, we've always had a global vision in mind. So the hopes was, hey, we're going to do High Point, we're going to do Maison Object, we're going to do so. But as you know, priorities and investments, it never happened that way. So when it happened, we had a lot of traffic and it was a hit. And most people came in and said, oh, my God, you guys are finally here. Because they are already customers. They're coming in from Europe. Okay, now we don't have to come to High Point anymore. Now we can just see you guys there.
- [38:37]
B
Years ago, at High Point, you would come and a new introduction would be 6, 700 SKUs, and there'd be all sorts of furniture pieces that you couldn't imagine were ever really going to go into production.
- [38:51]
A
But.
- [38:52]
B
But it was just so much throwing it all up against the wall and seeing what people responded to. And I wonder. This market felt much more contained. I didn't feel like there were huge introductions really anywhere that I saw in part because surely that reflects the economic environment that we're in, but also perhaps a much greater discipline that companies are showing about what they really imagine making. Do you make a lot of prototypes that you aren't sure are really going to go into production? Or how do you think about it?
- [39:25]
A
So it differs from brand to brand, but the short answer is we don't anymore. We used to absolutely do that, right? Whatever. It's like, oh, travel around the world. Take your inspiration from this country, that country, that veneer, that architecture element, my God, like this a hit, right? And then you do that as like crickets. Or the worst thing is you do that, you win a Pinnacle award and then a cricket moment, right? So nowadays our approach is we have data on these market, we have knowledge. I mean, we have these merchandising teams that gather, hey, very much the CPG approach, right? Like, what's selling? Okay, what's selling in that market? What does the consumers want? What. What attribute about that product is selling? Because something a white sofa may be selling, but is it because of the hardware, is it because of this or that? So we gain that insight first, and then we draw a line for our designers. You can still travel, you can still get inspired and do your mood boards, but when you do that, you know what price point to hit, you know what trends there are. So we're putting them in a box, and we're finding that they're as creative, if not more creative, because if you give them an empty canvas versus giving them restrictions, we find that human creativity actually spikes when there's restrictions. So now we're able to have our cake and get it too. Our intros are probably 20% as much as we were before. Things are turning, and our market waters are more. And it's also comforting to people to say, hey, whatever you see here is going to get made. There's nothing more frustrating than seeing something at market and then, oh, it's dropped. Oh, it didn't get attention. So, yeah, we've come a long way in that regard. Yeah. Well.
- [41:10]
B
And I think that's all for the best. I mean, I think, you know, even though it was fun to see all of these pieces, to your point, nothing is more frustrating for a designer to leave market and then find out, oh, no, you can't get that. Or the item gets discontinued just a few months after market. Because, of course, it didn't. It didn't sell. And that's.
- [41:27]
A
And it's like it. I don't want people to feel. Because when I say this to, you know, people that I talk about this topic with. Oh, so that means your line is getting boring. No. And the top seller of this market for Caracool is a sofa called Chrysalis. It's modeled after a cocoon that. A butterfly. It looks outworldly. How we got there wasn't just because we stumbled upon a butterfly. Right. It was through research, it was through data. So it does work. And it does promote pushing the boundary of the design, too.
- [42:00]
B
And is that part of what you learned in Harvard Business School, Mark? Is that education paying off for you in a big way or.
- [42:08]
A
That specifically, I actually learned from my dad. The dad. I didn't learn from school. He's.
- [42:12]
B
Well, and that's what I'm wondering. So, like, I'm wondering what you learned in school versus what you learned from your father and how. How you brought those two schools of thought to. Together.
- [42:22]
A
Yeah. So I think I'm just a weird person, as, you know, as you get to know me. Right. I'm extremely nerdy, but I'm extremely artsy. As well. Sometimes in a good way, sometimes in a bad way. So my father is my greatest mentor, but he would tell me, from a design point of view, we need to be maya most advanced yet acceptable. All of these great designers. Design principles from a young age. And from Harvard Business School, it's kind of filling the gaps. Finance, corporate strategy. But I would say the biggest thing that I've Learned is leadership. 50% or 60% of my work is all people problems. As you know, it's all about the people that you have in the organization. I give my people a ton of autonomy and I let them fail. I let them challenge me. When I go into a meeting, I don't want to be the person that provides the answer. I want people to prove me wrong. So I just had privilege of learning that from the books. And also I had great professors like Clay Christensen, you know, who wrote the Innovators Dilemma, who pinpoint disrupted innovation. I used to go to his office hours and, you know, yeah, that's such a seminal work.
- [43:45]
B
I mean, yeah.
- [43:46]
A
And he's. He's a giant. He's 6, 4, and he's just the most gentle. And that's. I go in one time and he goes, mark, you have a brilliant mind. I said, oh, my goodness. Coming from you. And then I was thinking, wait, does that tell that to all the students? He probably does. But it made me feel really good. But from that, right, like, you know, now I also have a startup called Decor X. So I'm thinking about disruption. I'm thinking about, you know, pushing the industry. So, yeah, definitely a lot of benefits from that. And I find myself very lucky in that regard.
- [44:19]
B
So let's talk about Decor X and your startup that you have.
- [44:23]
A
Have. Yeah, yeah. Long story short, you know, I was back at campus for a reunion. A professor pulled me aside. He's like, mark, check out Dolly. Right? Here's a cat in space wearing space suits. I'm like, that's cool. And he's like, it's going to change your industry, Mark. And I said, okay, can you help me and tell me what to do? He's like, take my course online for $5,000. Great salesperson. So I did that.
- [44:51]
B
So you took his course online?
- [44:53]
A
I took his course. He gave me a discount, but I took his course and I read a ton of books. I learned Python. I was in nerd mode. And I befriended a AI professor from Duke, and we started this project in our stores in China. It was basically, take a photo of your room because we all have the. The CAD drawings, the 3D modelings, the rendering that takes two weeks and the consumers wait. So through that project we were in the early days, this was before nanobanana, we were able to train these AI models, fine tune the Loras. Even earlier in the days we used something called Dream Booth. We trained these models on what our furniture looked like. So we were able to take a photo and replace it with Markor Furniture Caracol Artl ro And it was, was working really well for our designers who worked in the stores. And I showed it at high point and a lot of our retailers, industry peers saw and they're like, hey, can we license it? And our interior designer clients saw it and be like mark, can I use your tool? So that's turned from this internal project into an actual company and now we have products for retailers, whether you're e commerce retailer or you have physical stores. And we're also going to be launching a product for interior designers early next year. So currently what we do is in twofold for retailers. We kind of, you know, as we try to build these agents and do these visualizations, we're finding that the fundamental problem isn't that you don't know how to build AI because that's actually easy. You know, a little secret. It's very easy to build something that works, works 80% of the time, but it's that 20% in the end that hallucinates. That's really the problem. And the other thing is your data pipeline is everything. So all these retailers, they have a thousand vendors and the data they get from these vendors is crap, right? You have one silo and you have no product description. So we've trained an AI model to do that for you. You give us whatever you get from the vendors, we'll just do your product page for you with beautiful copy, all the right SEO geo tags, but also other lifestyle photography. We'll take your brand standards, take your art direction deck and we'll train the AI model on how you want your walls to look like, how you want your lighting to look like in batches. So that's been great. And then the product that we're designing for interior designers is everybody's using ChatGPT, using Nano Banana, but these are kind of imperfect vehicles for the interior designer workflow. And what about my product library? What about pricing? What about this or that? Mood boards and colors. So we're building something that connects everything and our image models actually work a little better in Nano Banana in preserving multiple skus the details in the furniture. So yeah, I mean Full nerd mode. And it's been very fun.
- [47:57]
B
Well, and with the idea that ultimately you want to build this tool that designers will use to help save them time, save them all of the rendering work, as you were saying earlier, that they used to have to do.
- [48:11]
A
For sure. For sure. I was on an AI panel yesterday and I talked about this kind of like the 80, 20 rule. 80% of the work that we all do, whether you're a designer or just any job, is annoying, is time consuming, is manual. So we're not going to try to replace your 20%, because I know people enjoy that. But that 80% can be gone, especially with the help of AI. And what we've also found is that if you truly have a great interior design tool or a visualization tool, it's not going to help your best interior designers. Like, the best ones don't even need help. Like, they probably don't even need a rendering. Right. They'll just sell their project, sell furniture left and right. But it's really the ones that, you know, your average ones or your young ones, you're able to lift them up and get them 80%, 70% there. So that's what we've seen in all of our hundreds of in store design associates. Like, we can't make them all A's, but we've turned Cs into Bs, and that creates a big difference.
- [49:21]
B
Well, and for the companies that want to tie an AI, a generative AI model to their furniture business so that they can generate images of the furniture in situ so that people can go, great, I love that room. Can I just order all the pieces from you? How close are we to that model really working for you? And is that part of the end the goal?
- [49:49]
A
Yeah. So the short answer is we're there. So for a lot of. Yeah, we're already there. So for our own brands, a lot of our catalogs now, and for some brands in particular, they're 100% AI and you cannot tell the difference. We used to spend huge amounts of money renting out these houses. Right. Shipping them there and setting them up. But now we can do it with AI. And it's not like, I know there's things out there in the marketplace, but they're kind of hard to use. Right. And if the first version doesn't work out, you got to make the adjustments, but every time you adjust it, it changes the whole thing. So our model kind of takes the opposite approach. We actually start by training the world, if you will. So we train the AI on the brand. And then we also have, you know, AI model that handles all of your skews. So we would ingest all of your skews and train the AI models on not only how it looked like, but the attribution, the material, the dimension. And then we just let AI do its work and we're finding that it's working so much better.
- [50:57]
B
So do you find that to that point, if you. So if you train it very specifically on the product line, to your point, here are all the finishes, here are all the dimensions. Does it no longer hallucinate in the same way and create pieces of furniture that aren't real or part of the line?
- [51:14]
A
No. Yeah. So it doesn't do that. Now, there will still be 5% of the time that it would hallucinate here and there. But we also have. So this is. Sorry if I'm getting too nerdy, but we also have a gan. So it stands for like generative Adversarial Network. So basically it's two AI models competing. One is generating, one is evaluating. Right. So after everything is generated, we have this quality control model that's like, is this good or is this bad? So as they compete, they get better and better. So one thing that's unique to our AI workflow is the QC pipeline, if you will, so that we're able to do things in batches and try to avoid touch up the next step as much as possible. Because as soon as you start editing AI, it just never goes well.
- [52:05]
B
So you're hoping to take this to lots of other companies beyond your own and say, look, look, look at all these different things that we can do for you. To your point, forget all those photo shoots, forget all those renting houses and staging them and all of that for your catalog work.
- [52:19]
A
Yeah. So, you know, we're. This is not just for my own brands, obviously. You know, we use our own brands to test and to train these models. But we're working with international e commerce companies or retail companies that also sell the products of our competitors. And the beauty of that is now they're able to. For example, they used to only have three lifestyle photography per sku, Right. But now they can thinking about doing it for different geographies that they're in. It can be a catered lifestyle photography for Florida versus Aspen. It could be a whole new set of lifestyle photography for Christmas. It could be catered to the point that we can measure the IP address of your people and cater the lifestyle photography to that person. So sky is the limit and a lot of big brands are thinking this way and we're working closely with our CMOs and CTOs.
- [53:16]
B
So who's going to be most disrupted by all of that?
- [53:20]
A
It's a hard question to ask. I think AI is on most people's minds that we talk to. So I think it's a good thing that we're democratizing creativity. But I do think the people who do not embrace this tool are going to be left behind. Now, these tools are not perfect. If we think about the last industrial revolution when the internal combustion engine was first invented, these engines were not that great. And these cars, more importantly the tools that connected the technology and the users were also not that great. So people still rode horses for decades and they were able to perform the same job better on horses, but as these cars got better, horses had no chance at the end of the day. So we do not know how fast this process will take. I'm sure your best horse riders in that way will still outperform your AI workflows in the short term, but just the ease, the expense, and the speed, I predict it'll happen much faster than the last industrial revolution. Yeah, yeah.
- [54:27]
B
No, I, I still prefer all of my telegrams to be hand delivered on, on horseback. That's, that's just how I prefer to keep.
- [54:35]
A
Oh, that's the ultimate right now.
- [54:36]
B
Well, that's the thing.
- [54:37]
C
Yeah.
- [54:37]
B
I mean, you know, but, but, but that's a great point though. I mean, it, it was remarkable to your point about the automobile, how long people resisted the automobile when it, when it first came around and it was noisy and it was spitting out smoke and a lot of people were leery. But AI, to your earlier point about how the consumer driven market seems to be way ahead of where companies are with AI, and the furniture industry and the interiors industry in general tends to have a bit of a lag when it comes to technology, in part because they don't have the budgets to update their technology all the time. And it's understandable. And again, their focus is on creativity and design. They're not focused on the technology.
- [55:25]
A
Dennis, this is another thing that we covered on the panel yesterday. The question was, do you think AI will be good for creativity or bad for creativity? And the moderator was like, hey, look at our industry right now. Everybody's turning on the same thing. So my answer was, well, it's not, not AI's fault, right? It's the algorithm's fault is, you know, the, the TikToks and the IGs, you know, they're creating these Echo chambers where you're only seeing what you like to see. So that's why we have 50 shades of ivory blue clay and all of that.
- [56:02]
B
And you know how I feel about that clearly.
- [56:05]
A
Right. But the beauty of AI is like young people nowadays, Google isn't the first thing that they go to anymore. More right. And the way that GEO is done is different from SEO. So AI is able to cut through algorithm and find using. So I actually think this is great hopes for kind of our industry that's through AI will become more creative. And then the other question was, do you think AI was more creative than the human mind? And my answer is no. Because if you look at how these models work, they're copied on how the human brain work, for example ChatGPT, they're transformers. It's not logic. How they come up with the sentence is they have enough data on what the next word will be. It's math in a way. And then these diffusion models, they control the noise. So it's similar to how humans dream. So that's how they were able to create these outputs. But everything that these AI models do is backward looking. AI would never experience in real time replicate the human experience. And how we get creative at the end of the day is as we go through life, the curves we see, the magazines we read, the places. So I'm of the belief that we're never going to be truly creative because we're just remixing what we've ingested. I think biologically it's impossible for us to come up with a truly innovative or non existent idea, but AI will get us to do it faster, to do it more. But it's not going to be at the tip of the spear. It's always going to be a human that starts with the idea.
- [57:58]
B
Well, that is certainly my hope. And we talk about AI often in the context of this fear of human replacement and all of that. But I wonder, Marc, as we wrap up, when you talk to your fellow high point Furniture Company CEOs and you talk to the high point market authority and you share and you and I have been on a panel together where we talked about AI and people were sort of wondering what it was all about, but what do they make of it all and how much do you get a sense that they are eagerly getting on board with what AI can do to help their business in many of the ways that you've just described?
- [58:42]
A
You can say that maybe we're in a little bit of an AI bubble or whatever, but the C suite people that I talk to, it's on everybody's mind. Everybody's looking at Nvidia OpenAI just driven by the incentive of money. You have to think about it and in that bracket and then you start to quickly see, okay, who really knows their stuff or who really wants to do it not just for the investors, not just for optics, but actually wants to change the organization. In the early days, most of them wanted to do it just to do it. But now you'd be surprised. Your high point CEO, most of them is on their radar and they actually are thinking about layers, the work chart, different functions in their organization, how to change or how do you improve efficiency. It can be a back office kind of thing or a front office kind of thing. So it's changed over the past year very rapidly as we're just bombarded with AI every day. I think it's on most people's minds now.
- [59:50]
B
It is, it's on most people's minds. Whether or not I'm getting a sense of everyone to your point, really folding it into their operations, I can't really tell. But I think it is remarkable to have the leader of such a huge set of furniture brands as yours also running an AI startup company and being as knowledgeable as you are about it. And so I wonder if a lot of people hearing this conversation will think, gee, I better hurry up and get on board because it is, it is here. And you definitely see it in such a huge way. And sure, we probably are in a little bit of an AI bubble and we probably have all gotten a little carried away. And when you hear OpenAI sort of doing all these cross deals with companies, you wonder if it's gotten a little long in the tooth. But it is a revolutionary technology that is going to transform, as you were saying it, it really is another industrial revolution.
- [60:53]
A
It's a lot of noise out there. I would just caution there's a lot of companies out there too because we currently compete with a lot of VC backed startup from Silicon Valley doing kind of similar thing that we do. We're just puzzled by the amount of money that they've raised and the quality of their product. What have you built with $50 million? So there's a lot of that because the whole, frankly, I do believe it's a little bit of the bubble because most AI companies, they're building solutions first without knowing what the problem is. So how we've been able to scale with just a lean team is we're in it, right? We know what problems to solve. So it's a crazy world.
- [61:40]
B
Well, as you say, people have gotten a little carried away, but there are genuine uses for this technology in our industry and you're putting many of them to work. And so we'll have to check back in with you and see the adoption rate after people get to hear this conversation. And hopefully some people will reach out.
- [62:02]
A
To you wanting to know more.
- [62:05]
B
But I'm thrilled to get to talk to you. You're so kind. I know you must be running on fumes at this point, at High Point. But you're so nice to take the time and I'm always glad to talk with you. So I thank you very much.
- [62:18]
A
Thank you so much, Dennis. Always a pleasure.
- [62:22]
B
Thanks for listening. If you'd like to keep up with the latest design industry news, visit us online@businessofhome.com where you can sign up for our newsletter, browse job listings, and join our BOH Insider community for access to online workshops, a free print subscription, and much more. If you have a note for the podcast, drop us a line@podcastusinessofhome.com if you're enjoying these conversations, please leave us a review on Apple Podcasts. It helps others to discover the show. This show was produced by Fred Nicholaus and edited by Michael Castaneda. I'm Dennis Scully. Thanks again for listening and I'll see you next week.