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Business of Home Podcast
The Thursday Show: Will AI put renderers out of business? Plus: Takeaways from Las Vegas Market
00:54:23
Host Dennis Scully and BOH executive editor Fred Nicolaus discuss the biggest news in the design world. Later, M&A consultant Tim Stump joins the show to share takeaways from Las Vegas market.
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- [00:08]
A
This is Business of Home. I'm Dennis Scully, and welcome to the Thursday Show. Later on, I'll be speaking with M and a consultant Tim Stump about what happened at Las Vegas Market. But first, we're going to catch up on the news, including California's ban on digitally altered real estate listings, a look at how AI might threaten the rendering business and why Cherish's owner keeps rejecting takeover. To do all that, I'm joined by Business of Homes executive editor Fred Nikolaus. Hi, Fred.
- [00:38]
B
Hi, Dennis. How's it going?
- [00:39]
A
Great to be back with you, Fred.
- [00:42]
B
Missed you, Dennis. And I will say, if you're in, Caitlin's goal was to make me feel better about not getting to go to Paris and London. Mission not accomplished.
- [00:53]
A
That was our goal.
- [00:55]
B
Sounded like an amazing trip, but we're glad to have you back stateside.
- [00:59]
A
Well, it's great to be back with you and I'm so glad to have made it back safely and I wish you had been with us, Fred. So many people were talking about meeting you in Madrid and the lucky opportunity they had. So.
- [01:11]
B
Yes. Well, we'll meet next year at the 18th floor of RH Paris for that cappuccino. In the meantime, let's look back on Monday's episode, a conversation with interior designer Yeung. He Great conversation with someone who's been a longtime friend of BOH and apparently helped launch the BOH podcast. This was news to me. I wasn't there for you. What's this all about, Dennis?
- [01:36]
A
That's right, Fred. Before there was a BOH podcast, you know, with real microphones and all, there was an early version of the show done with a gooseneck kitchen faucet that apparently sounded pretty darn good and had them rolling in the aisles at Holiday House. I just want to make that clear.
- [01:55]
B
Yeah, no, I can't believe I wasn't there. Anyway, what'd you make of the chat with Young? I always love hearing from her.
- [02:02]
A
Always, always great to chat with Young. And I realized afterwards that so many people didn't know her her story and didn't realize that she very dutifully went all the way through law school, passed the bar exam in multiple states, and then told her family, no, no, but really, I'm actually not going to be a lawyer. I'm going to be an interior designer. And that in and of itself is just such a great story and shows the honor and respect that she showed her parents sticking that out, but then pursued interior design and has never looked back.
- [02:35]
B
Yeah, I think a lot of designers maybe kind of Start going down that road. But there's like a quick left turn. Once they actually get into law school, they're like, nope, my skills lie elsewhere. But that was interesting to hear. I also just, you know, it's funny, like, the show is in some ways kind of a love letter to Kips Bay and how much of a difference it's made in her career. I mean, it's not that she was already a successful designer and, you know, she would have been fine without Kips bay, but that 2019 room really helped like launch her nationally. It was everywhere. You know, she joked that, you know, the next day she was in Sweden and people like, where are you? Get back here and soak up this attention, you know, because it was, it really caught everyone's eye. It was an incredible. I was there. I remember the buzz in the show house about this room and I congratulate her for that. And what a cool story.
- [03:20]
A
Yeah. And I think also it's a story, as she pointed out repeatedly during the conversation, not an overnight success.
- [03:28]
B
That it actually another decade long overnight success. Yeah, exactly.
- [03:33]
A
And so persistence and patience and just staying with it is clearly the lesson. And I think Kips Bay, two different rooms in different times, played a huge role. And I think also that lesson of even though the room might be not the ideal room that you want at Kips Bay, take it anyway. Even if Tony Ingrow is throwing his garbage in your room.
- [04:01]
B
Tony Ingrow's trash room is no one's idea of an ideal assignment, but she made it work.
- [04:07]
A
She made it work and it really helped to get her going. So a lot of good lessons and just a really enjoyable conversation. She's a delightful human and I'm so glad that so many people have enjoyed the conversation and sent nice notes about it. I appreciate it. All right, we're going to take a quick break and then we'll get into the news. This podcast is sponsored by laloy. Behind every laloy rug is a web of people woven together. What began as a small family business in Dallas, Texas in 2004 has grown to a family of over 750 employees who help bring their rugs, pillows and wall art to life. Their work is inspired by the quiet conviction that things made well have the power to provide comfort for generations. Learn more@laloirugs.com that's L O L O I rugs.com and follow laloyloy rugs on Instagram and TikTok. And we're back. Fred, guess what? The tariffs are off.
- [05:20]
B
What a surprise. Last Week, President Trump threatened higher levies against a group of European countries if the US Was not allowed to acquire Greenland. Now, following a new deal, the increase is called off. As you were.
- [05:33]
A
Stand down. We're not attacking Greenland. Good news. Yeah.
- [05:37]
B
What'd you make of all this?
- [05:38]
A
Well, it was so dramatic and as we talked about on last week's show, to be there while all of this was playing out and then to see it rolled back so quickly, it has fed this whole conversation, which we'll get into about how seriously we should take all of this. But let's recap some of the drama that's happened in the last week, shall we?
- [06:02]
B
It was over in 48 hours.
- [06:04]
A
I mean, it seems it was over before it began.
- [06:06]
B
Yeah. I mean, we talked about this last year, the idea that the tariffs were more than just sort of trade policy. They were kind of like a cudgel that the president can use on the international stage. If a country doesn't does something he doesn't like, he can say, well, we're going to drop a tariff on you. And that's kind of exactly what happened is there was this long running drive to acquire Greenland and it kind of came to a head and several European countries didn't support it sufficiently. And so this list of companies, Denmark, Finland, France, all were threatened with a 10% tariff increase going up to 25 on June 1. Of course, none of it happened because it was over almost as quickly as it started. But definitely during that 48 hours, I was, I'm not going to send an email to my friends at Fritz Hansen right now because, yeah, I mean, I don't know, it's tough. These things seem to happen and come and go and the industry moves on. What do you think?
- [06:59]
A
Well, I think first I wish I hadn't had to get schooled by London taxicab drivers right, left and center over the whole thing. And then it all went away. But I do think that in this case, it really has given people pause. And I think people are becoming very hardened or numb in some way to the tariff issue in general. I don't want to take anything away from my conversation with Tim Stump later, but he definitely got the sense that it wasn't the hot topic that it once was because people are just getting a little beaten down by it. But to your point, it certainly hasn't made anybody feel more confident about building that new factory or investing based on plans or what they're seeing in the tariff situation at the moment. And it all could change and it changes constantly. So it's hard to know where to go.
- [07:55]
B
Yeah, I don't know. It's possible that really no one reacted to this at all or changed their plans whatsoever, because people have just gotten wise to the fact that this stuff kind of comes and goes. And so maybe that's the lesson here, is that you can kind of ignore this and carry on. As you mentioned, there hasn't been a lot of. The other reason behind the tariffs is to inspire US Manufacturing. I did a story a few weeks ago for Business of Home that looked at various sort of numbers in the design industry, and one of the numbers I jumped on was the fact that, you know, we've actually lost 4,100 furniture factory jobs since, you know, Liberation Day. So, yeah, I wouldn't necessarily blame the president for those jobs going away, but, you know, the tariffs thus far have not led to, you know, a renaissance in American manufacturing. So, you know, no one is betting on that. I'm sure some European companies just hit pause for a couple of days on their expansion plans in the US but maybe they're picking them right back up, you know, until the next tariff crisis. But this was certainly kind of a. Certainly a very, very strong tempest and a very big teapot for 48 hours.
- [08:52]
A
Moving on, we're going to talk about Cherish. Glad we get to talk about this one again. Earlier this month, the owner of Live Auctioneers and Cherish rejected a $660 million buyout offer from its largest shareholder, private equity firm Fitzwalter Capital. The twist? This is the 12th offer the firm has made in the space of four months.
- [09:13]
B
What if at first you don't succeed? Try, try 12 times.
- [09:18]
A
Hang in there.
- [09:20]
B
Yes, this is a very weird situation. So, you know, we talked about this at the time, but, you know, early last year, Cherish was acquired by this group, this group called Auction Technology Group, which is the owner of, among other things, Live Auctioneers, a site that, you know, beloved by a lot of interior designers. They also own a lot of, like, industrial machinery auction sites as well, too. And at the time, apparently their biggest shareholder, FitzWalter Capital, this PE firm, was not too happy about the acquisition. And ever since September, Fitzwalter has been quietly trying to acquire. They're a PE firm, so that's what they do. They take businesses over. They've been trying to take over ATG with these buyout offers that they are sending at this incredible cadence. They had made how many? It was like six or seven before it even went public. And then it was public in January, and there's sort of like a war of words happening back and forth in the British press about this, because these are both British companies. So there's a lot of angrily worded, very British statements going back and forth about this acquisition. What do you make of all this?
- [10:21]
A
It's interesting that this Cherish acquisition, and whether or not it was a good strategic purchase, whether or not they're feeling that the company overpaid or there wasn't enough value there, or perhaps there was too much goodwill built into the deal and lots of hidden costs in sort of executing the whole thing. Clearly there's lots for them to jump on here. I don't know if that's really what they're trying to do here or just take advantage of a much lower stock price and a valuation at present that's actually much lower than this offer that they're making. So this offer looks pretty rich based on the current valuation, but it's an interesting drama and one that you don't often get to see played out in newspapers and filings like this.
- [11:08]
B
Yeah, I mean, it's high drama. High British drama. Yeah, it's interesting. There's a lot of threads to pull on here. One thing is that as soon as Auction Technology Group acquired Cherish, the stock dropped precipitous. It dropped something like 20% or something like the day after the acquisition went through. So certainly not everyone was happy about this Cherish acquisition. And as you mentioned, the stock has been kind of flatlining or going down since then. So that's why they're making this offer, is because they can make an offer that's higher than the stock price and it looks pretty good, at least to some shareholders. So there's an element of this is an opportunistic buy. Whether this was a good move for them to acquire Cherish is complicated. Like, I can see the logic behind the deal, of course, because they own a lot of auction sites. They have, you know, live auctioneers. They don't have sort of a direct sale site, like a listing site, where people can put up vintage stuff and people buy it right away. So if you have both of those things, you know, whoever wants to list something can do. If I want an auction, I'll do live auctioneers. If I want to do direct sale, I'll do Cherish. You can sort of cross between the two of them. You immediately acquire a lot of customers and a lot of inventory. And so it's not a crazy deal, but, you know, it was costly. It was, I think, $85 million for Cherish. And then $15 million to get the transaction done. So a very big transaction. And what this investor is arguing is essentially that this Cherish was not a profitable company when they were bought, and it's going to drag the whole enterprise down. And so it's just really early, though. I mean, Cherish hasn't even been part of ATG for a year. So I kind of feel like this is a little premature to throw the baby out with the bathwater, but I don't know. These are tough businesses.
- [12:43]
A
No, exactly. It's a tough industry to be in. Clearly, they wanted the Cherish name. And often when you acquire a brand like that, you're paying a lot more in goodwill. And then the execution costs, as you say, are quite high. Clearly there were a lot of advisors and people getting paid on this deal, it sounds like, but that's often the case. But I think they're making the argument this is going to pay off over time, but it's always easy to take the other side, so it'll be interesting to see how it plays out. We've talked about First Dibs and others in this space for a long time that have just had a hard time getting back to previous valuation levels. And I think it's a competitive space. We thought all of this was going online and then it didn't. Right.
- [13:33]
B
That's what's so interesting about this whole thing, is that in the early 2000s, when Amazon was taking off and all these companies were going online and E commerce was the future, it was really compelling to believe that just the future is everything's going to be online and every transaction is going to be done through the website. There's no point in fighting it. You're naive if you do. And I think that there is some truth to that because of course, every consumer wants the convenience of being able to look up a price, click to buy. People love that. But that doesn't necessarily mean that the economic incentives are a place to make a huge business out of an online antique site. I think there's a reason why companies that sell software can grow and go crazy and get 100 million x valuations. Cherish and First Dibs, they have to help move armoires around the country. There's a lot of risk. There's a lot of complexity, like a ton of margin. You know, I don't know whether this acquisition was smart or not, but I have a lot of sympathy for the people trying to kind of figure it out because it's. It's not just snap your fingers and get it done. It's a tough business, no?
- [14:31]
A
Exactly. There's a lot going on here. It's just an interesting drama and it'll be really interesting to see how it, how it plays out and how it ultimately affects the auction space because there clearly is a lot of interest and demand. Ask any designer about that.
- [14:48]
B
Right. So yeah, these are popular sites.
- [14:51]
A
No, no, no. To be sure, we're going to move on and we're going to talk about AI, specifically AI versus renderers.
- [14:58]
B
FRED this week boh's Jen Fernandez wrote about how AI tools may pose a threat to the rendering agencies that designers have come to rely on. Or have they? Dennis, this was a good story. Hot button issue. I love this topic. I think renderings are a fascinating, maybe underexplored issue in the design industry. What'd you make of this story?
- [15:19]
A
I agree. I think, think anytime designers see an AI related story, they tend to sort of pick sides pretty quickly, right?
- [15:28]
B
Yeah. There's an immediate good, bad type reaction. Yeah. I mean, I think when AI first came around, one of the most obvious uses you could think of was this is going to be used to make digital renderings. It's so quick. You can just tell Nanobanana, chatgpt, whatever midjourney is one people use a lot, hey, change this room to have this sofa here and this drapery there. And you know, it was clunky at first and was prone to moving windows around, but it's gotten a lot better. And I do think that there's no question that designers are using the technology to make renderings for their clients. It's quick. It's fast. So the question that Jen went looking after is, is that going to put all these rendering agencies out of business? Because there's been this like, cottage industry of making these types of images for clients and for designers. And good renders can charge a pretty penny. And what happens if that completely goes away? What are those dynamics like? And that's kind of what she went looking for and sort of found sort of a mixed picture. Sort of a mixed. Was not really a clear answer yet anyway.
- [16:28]
A
Yeah, I don't think there is a clear answer, but I think as you and I were discussing a little bit before we came on air, I think there's just as much chance that a lot more people start to use renderings that weren't using renderings before and then say, oh gee, you know, these are okay, but I wonder what actually better renderings would look like from a professional and perhaps the pool of demand expands. Even if Ultimately, the price of the services might have to come down because of what AI is capable of doing.
- [17:01]
B
Yeah, I mean, there's again a lot of threads to pull on here. I mean, I think that one thing is for sure, the fact that it's so incredibly easy to make a relatively good looking rendering is going to make things like hand painted renders all the more valuable because they'll be rare and people will be sort of sick of seeing a million digital images and having something that a nice beautiful watercolor you can frame. I think has always been valuable and I think will feel even more special in the future. So I'm not really worried about those people necessarily. It's more the agencies that specialize in digital rendering. And it's complicated because I thought, oh, these people are going to go away right away because this is technology, you can do it for free, you can do it yourself, it's quick, it's easy. Why would you ever pay someone to do this for you? In fact, what has actually happened is that AI's crucial weakness is that you can generate a beautiful image. But making very small, fine tuned details is still not great at that. It's still hard. There's also a learning curve. You have to figure out exactly what to tell ChatGPT to get the image you want. Some designers just simply can't be bothered. They're too busy talking to their clients and figuring out sourcing, so they'd rather pay somebody else to do it for them. So there's still plenty of room for rendering agencies to do what they do. And I think what's interesting is that what Jen found is that I think people who had never done renderings before, Dennis, as you mentioned, are now using AI, but people who used to pay for renders are still finding value and paying for them. So it's interesting. Whether that will continue as this technology improves, I don't know. But the dynamic is not exactly what I thought it was going to be.
- [18:30]
A
No. And I think as we were saying at the beginning of the conversation, I think many people hear AI and they immediately think job destruction or something horrible is coming. And I don't necessarily think that that will be the case. Coming up. In the early days of my career in advertising, we used to send things out to typesetters and we used to send things out to have stats or images made. And all of that, guess what? Did go away? Because new technologies came along and the computer just changed all of that. But I don't think this is necessarily the same comparison. I think the industry could evolve a lot of. Listen to your point. Many of these firms, perhaps at the lower end, may well go away because they just can't compete. But I think a lot could evolve around this.
- [19:23]
B
And as you said, I think some designers don't even like renders to begin with, because I think we've talked about on the show is that your client falls in love with a digital image. Guess what? The real room is not going to look like that. And it becomes a sticking point. So what does it mean if clients are expecting them and they're free? Does that kind of put you in a box of feeling like you're designing around something that ChatGPT spat out like three months ago? So, I don't know. It's a complicated issue, and I'm sure we're going to be covering it more, but there's definitely a lot going on there.
- [19:49]
A
Yeah. We got to move on to talk about the great state of California, though. Fred. Thanks to a new bill introduced in the Golden State this year, real estate brokers in California must now disclose if images in a listing have been digitally altered. Here comes AI again.
- [20:05]
B
Fred, it was just two weeks ago we were talking about these real estate brokers who made a video with dragons.
- [20:11]
A
Yes.
- [20:11]
B
Do you think that has to be disclosed as a digital alteration?
- [20:16]
A
I think they did disclose it very dutifully. I think they said, yes, this isn't real.
- [20:20]
B
All these nights in the pool house are not, in fact, real. I mean, I think this just makes sense. I mean, anyone who's looked at a house or an apartment or just kind of Zillow doom scrolled over the past year has noticed that virtual staging has gotten, you know, out of control. You're looking at an apartment. Sometimes people aren't even good at it. So you're looking at an apartment that's like, very clearly real, that's just full of like 3D Mario furniture, you know, and it's annoying. And, you know, I think. I think there was actually a story about how a lawmaker or someone in California actually went and drove out to, you know, a proposed house and that didn't even have the kitchen at all that was in the listing. And, you know, I think it makes sense to have some kind of legislation around this. It's just sort of interesting because. Because I think it has become. We've become so used to expecting real estate listings to be digitally judged. You know, where do you draw the line? Like, what counts as just tweaking the colors and what counts as alteration? It's a fascinating little Wrinkle of the real estate world.
- [21:17]
A
Well, and do we feel that this legislation clarifies all of that? And what are the lines being drawn in this legislation?
- [21:25]
B
To be fair to the lawmakers, I think they break it out and they. I don't want to, like, sit here and read California law. The show's boring enough. We can't go down that rabbit hole. But I think things like, they even spell out you can affect the white balance of the image or the saturation. I think that's okay. I think it's about removing or adding physical objects. I think you're still allowed to do that. You just have to provide a photo that shows the property without that digital alteration. It's just that I think this kind of thing has become so common, and I wonder how it's going to change how people approach these listings. Will people just kind of on. Think they can get away with it? I don't know that there's jail time around, you know, putting. Putting in some. Some plants in an apartment. Will. Will they provide some sort of, like, hidden link to the original image? It's interesting. The law also talks about it's not just real estate brokers, but it's anyone who's sort of representing a property. So that could be a, you know, a listing service. Now, I don't think any interior designer who digitally replaced their clients ugly art with cool art should worry about a lawsuit. I don't think that's. I think that you're. You're. You're okay, but it's part of this conversation.
- [22:33]
A
No. To be sure, and to your earlier point, Fred, I'd hate to think of anyone doing jail time for Photoshopping some real estate images. You know, what are you in for? Photoshop. Oh, man, I'm sorry.
- [22:44]
B
Three strikes.
- [22:46]
A
That is tough. That is tough. But we'll see where it goes. I mean, as I say, there is going to be a lot of conversation around this because images are images. People are taking a lot of liberties with images these days.
- [22:58]
B
As anyone who's looked at my profile picture would know, 20 years and 30 years, 30 pounds ago is that picture. But anyway, let's keep going.
- [23:05]
A
Moving on. Fred, we gotta talk about friction Maxing.
- [23:09]
B
That's the name of a new trend that involves taking an analog approach to daily life. For Architectural Digest, Elizabeth Keefer explored what that could mean for the design process. Friction maxing. Are you doing it, Dennis? I know you love your trends.
- [23:24]
A
You know, I am so moving in the other direction on this. I am all about minimizing. Friction. I am all about reducing friction, especially in the home. I want to reduce as much as possible. But tell me I got the wrong idea about this, Fred, go ahead.
- [23:39]
B
I will. Well, this started in the cut. New York magazine's Sub Publications, a writer named Hannah Buchman wrote an article. I think the title was something like, in 2026, we're friction maxing. And it sounds silly, and I think part of the reason why this is caught on is because it's just funny to say Friction Maxing. But I think the article is actually kind of brilliant because it talk how so much of modern life is designed to minimize friction. You can sit there on your phone just having TikTok blast content at you while you order Uber Eats and you sort of get a date through Hinge without ever getting up from your chair. And I think it's just so much of contemporary technological life is around minimizing friction. And I think it's kind of like a cri de corps. As much as we try to avoid friction, it's what gives our life meaning. It's what makes us feel mindful and like we're doing something and kind of shapes our daily existence. So, you know, I think Friction Maxing is kind of a funny name, but I think the idea behind it is it's got some. Got some substance to it.
- [24:45]
A
It's interesting because I feel like it wasn't that long ago we were chatting with Christiane Lemieux about her book entitled Frictionless and how the future was all about how there won't be friction. And we were embracing that. We were saying, yeah, yes, that's a good thing. Now. Has the pendulum just swung too far? Is that what it is? We need to move it back and we need more friction. Have we lost touch with our souls, Fred? Is that what's going on here?
- [25:10]
B
Yeah, I mean, I think you're kind of. I can sense some skepticism in your voice around the concept of friction Maxing. I kind of relate to it. I don't know, it's like I sometimes just fall into a hole of sitting there on my phone and trying to make everything easy and clicking to buy on Amazon. And, you know, then you actually step outside of your house and go down to a store or you actually actually cook instead of ordering Uber Eats. You really enjoy it. It makes you feel like you actually did something. I don't know that it maps onto interior design as cleanly as all that, but I think the underlying idea is one that a lot of people can relate to and to tie it to design. I do think that the idea of creating spaces in a home where people can be mindful as opposed to just taken care of by gizmos, I think is a valid concept for designers to think about. But maybe, maybe I'm full of it. What do you think?
- [25:56]
A
No, no, no, no, no. And I listen and I think one of the things that, that I, and I've spoken to a lot of people about this is that many people have gotten away from their, from their flow activity or things that they once did with their hands and gave much more concentration and thought to. I think a lot of people have gotten away from real books versus digital and all of that. And many people sort of miss. I thought it was sort of amusing and sweet that our friend Sophie Donaldson rode her bike around Paris to many of the events that she attended, including a lengthy dinner that she attended with me where I think in the end she might have regretted having to take the bike home after the several bottles of champagne and the late hour that she might have left that event. But I think she is one of those people who very much wanted to be more in touch with making a little bit of a different experience, maybe a little bit harder versus getting an Uber and just having an easier experience. So I'm joking about this because I think all these conversations are sort of amusing to opine on, but I do think that everyone has gotten a little removed from things that used to perhaps feel differently or matter more to them. And I think that this article, and I noticed in looking at this article and then been doing a search for who else has picked up on this. The Guardian in the UK had written an article about it. This article has gone sort of all over the world. But people sort of talking about this because we are in a time where technology is making people feel a little uncomfortable in some ways. And are there things that we miss about how we used to do things? And cooking comes up a lot and reading and as I say, just other activities that we used to do. Just have to really focus on and think about much more than many people do with their scrolling. And they're using ChatGPT to just write everything for them.
- [27:53]
B
Well, not me, Dennis. I write every last One of those 3,000 word articles, I'm thinking, and I think I mentioned him on a relatively recent show. But there's this guy, Neil Steuer Kristofferson, who runs a Danish design company called Frama. And I interviewed him recently and he lives in a home home apartment in Copenhagen. That's almost kind of like a monastery. And when I was interviewing him, he was talking about how like he wanted to have hardships at home, you know, and as someone who has two young children, I was like, why? But I do. The more I talk to him, I sort of understood. He's like, he doesn't want to get an automatic coffee maker. He wants to have the ritual of, you know, making the coffee on the stove every morning. He, like, didn't have a shower, he likes to take a bath, likes the ritual of that, you know. And so I think there's something to this now, you know, I think not everyone's client is going to be asking for more friction at home. But I think the overall idea is a good one and I think it was probably showing up in conversations for designers. So you don't have to call it friction maxing, but I think it's something to think about.
- [28:49]
A
I agree and I'm glad we got to talk about it. And again, I hope it's one of these things that people will reach out and share some of their thoughts about because I'll be curious as to how this shows up with designers and with clients. All right. Alright, that's it for the news. But there's plenty more to check out on businessofhome.com including February's Can't Miss Design events and what recent home shows revealed about consumer spending. We'll be back in a minute, but first a quick break. We're taking a quick break from the show to remind you about laloy. Vegas market is just around the corner, so don't wait another minute to make your appointment to stop by the laloy's show showroom. It's the best way to experience a personalized tour of everything new from Leloy and their partners, including Leanne Ford, Amber Lewis and Bridget Romanik, plus all of their new one of a kind vintage collections. Open a trade account and make an appointment@loloirugs.com that's l o l o I rugs.com and don't forget to follow laloyloyrugs on Instagram and TikTok. And we're back. I'm joined now by mergers and acquisitions specialist Tim Stump of Stump and Company. Regular on the show. Tim, welcome back.
- [30:13]
C
Hey, glad to be here.
- [30:14]
A
Dennis, I so appreciate you being here. I know you had a little bit of a flight delay coming back from Vegas winter market.
- [30:21]
C
Yes, we went a day early to beat the storm.
- [30:25]
A
You were smart.
- [30:26]
C
And then we got to the airport yesterday morning, had a six hour delay. There were about 20 of us in the furniture industry just sitting around waiting to go. But we got home and slept in our own bed.
- [30:38]
A
Well, you're very kind to make the time the next morning to chat with me. So I really appreciate it and I'm eager to hear. I'm sure the storms reduced attendance. Of course, lots of people couldn't get there. I know, but what was the mood on the ground? What did you, what did you see? What did you hear?
- [30:57]
C
Certainly attendance was off. Most people were saying 50 ish percent but the people that were there were mostly West Coasters and those are customers that the east coast folks don't normally see. So I think everybody basically just made the best of it.
- [31:16]
A
Sure, what else can you do? Right, we're here. Here we go.
- [31:19]
C
Yeah. The bottom floors are active with the designer trade. We talked to many of the exhibitors that saying that the bottom floors are generating good business year round and that it's disappointing that the January show was poorly attended because that's usually the better of the two, you know, January, July shows. But if you can be on the bottom two, three floors, it's a good place to be. Unfortunately there's low density on the upper floors, no density on many floors and more's doing the best they can. But something needs to be done to create more vibrancy and density to keep everybody together, I think.
- [32:07]
A
Well, and help us understand. So the lower floors and what goes on there. And you were just making the point that that tends to be the more designer driven companies that are, that are there. So who's, who's on the lower floors and what's that all about?
- [32:20]
C
So for instance, Century and the Rock House brands are on the first floor of the A building open year round. And A three was discussing that it's, it is generating good business, incremental business. People are coming from the local Las Vegas market and even from the LA market. But that's the first, second, third floor. You know, Bernhardt's there, forehands is there, dovetails there. So they're all enjoying good business. But if you go up to the fourth or fifth floor, it's slim pickings.
- [32:51]
A
But to your point, the hope with Vegas was always that it would draw this west coast client that wasn't making the trip to high point and that these companies weren't getting in front of in a meaningful way. And you mentioned A three. And for listeners that don't know a three is Alex Schufert from Century and he made the big move to finally put, put the, the brands there in a meaningful way in. In the hopes that they would have this west coast exposure. And, and that showroom can be open year round to your. To your point. So perhaps.
- [33:25]
B
Right.
- [33:25]
A
Perhaps that's a winning long term strategy.
- [33:28]
C
I think so. You walk into a building and right there is Vanguard, a beautiful showroom.
- [33:34]
A
Yeah.
- [33:34]
C
To the left is Century. Straight ahead is Theodore Alexander. So any design center can get a full dose of broad offerings and a lot of really nice names that you can furnish the whole home with those providers. But how many people really can be there to pay full freight year round? And that becomes the question for the broader industry, but for the higher end, the design trade, I think it's a wonderful destination.
- [34:10]
A
You bring to mind this constant conversation about these shows in general. And whenever I'm there, there's always the conversation about do we really need to be at all of these different shows? Do we really need to be Vegas, High Point, Atlanta? I mean, you can rattle them all off. And I think that conversation's been going on for a long time. Many thought that coming out of COVID we wouldn't have nearly as many shows. And then everyone sort of got right back on the cycle because of course, if you own a bunch of buildings, you need a bunch of people coming to them. So I get it. But I wonder if coming off of this show, there'll be more conversations in the executive suites at and Moore.
- [34:54]
C
Well, And Moore has 12 million square feet in High Point, probably needs five. They've got 6 million square feet in Vegas, probably need two. But these are big permanent buildings, single purpose. What do you do? I know they're trying the ex. The Expo building was full with, you know, gifts and candles and. But does that affect the home furnishings industry? You know, it's. I'm sure they're trying.
- [35:23]
A
Let's come back to what was top of mind for the people that you did see there. So, I mean, there was a lot of talk about tariffs. I feel like we're not talking about tariffs as much. What has taken the place of that conversation? What is top of mind for people?
- [35:40]
C
Two or three things. Everybody is hoping. 26 is the year of the lift. We've had a little bit of interest rate drop, maybe some green shoots that housing is going to pick up. But 25 was going to be the lift year. It didn't happen. And not to be too political, the tariffs kind of were created. Some pause in 2025. I think most people are learning to live with it. I think the geopolitical noise and the ice noise I think there's fatigue with just noise. So I sense some frustration generally with, with can we just giddy up and go and get our economy really going. I think it's pretty clear that the K curve is real. And the K curve as I understand it the upward leg is the more wealthy folks that are generating over half of the GDP and the bottom leg or the more promotional end of the world and the least of these. And and one economist said that the higher end folks 20% of the economy is generating 60ish percent of the GDP and the bottom 80% is generating 40. And that imbalance is not healthy for our economy and our country.
- [37:06]
A
Yeah.
- [37:06]
C
Some reports are saying that the big beautiful bill will create quite a bit of tax refunds and lower tax burden on the bottom half. And that might be the juice that gets our economy going a little bit better. The Fed is meeting today on interest rates. Probably not going to change. Most people are hoping for a rate cut or two. But that saga will play itself out.
- [37:34]
A
Over the next few months and perhaps those struggles are part of why. And we're going to going to move into the mergers and acquisition activity that you and others are suggesting might pick up in a meaningful way in 26 is part of the reason that mergers need to happen is because there are still so many companies that are struggling on their own.
- [37:57]
C
Correct. So when I think about mergers and acquisitions we put it into basic buckets. Good companies selling at healthy margins and multiples. And then the distress side and we went through to a series of distress sales with the Mitchell Golds and and the others several years ago. I think there's going to continue to be the fallout as retail struggles American signature big lots that has downward pressure back on their vendors, the manufacturers and the wholesale distributors. So we're gonna, we're gonna have a 30, 40% of our business will be distressed. And then there are plenty of really good companies owned by baby boomers that want to exit. The other big trend we're seeing are larger companies exiting non core businesses in challenging business times. And really should be all the time boards of directors should be asking themselves what are we good at? What's our core business? Why are we in some of these non core businesses? And if they're not core, either move them into the core or let's divest them. And that's what happened with hooker. Hookers made it very clear they're moving upscale designers more higher end goods. They had some terrific brands in the promotional world. They made a decision to exit that the Samuel Lawrence And Pulaski Brands. They hired us and off we went and we sold it to Magnuson, Hunter Home and Magazine. Home is a champion in that more middle promotional world and it's a win win deal. You'll see more of that kind of core non core thinking.
- [39:46]
A
Well and to that point do you think you're likely to see more companies like Hooker recognize that the opportunity is on the higher end, whatever that means in Hooker's world or whatever their perception is of that. And do you think you'll see more companies try and and climb that luxury mountain as Gary Friedman from RH likes to say?
- [40:09]
C
Well, that's where the money is. Also there are more and more designers and decorators because there are fewer and fewer stores. So those talented people are going to go off and join others or create their own new business. And how do you go do business with those? It's 110,000 plus people and it's a huge cohort that is doing business. So yes, I, I think you're seeing even people in the more middle price world say how can I do business and bring value to that designer cohort? And there's several, there's several technology kind of companies that are using AI and other tech stack world to connect vendors to designers and make it a more seamless. I mean you can't have a personal calling on 110,000 designers. You have to do it through technology. And we're seeing some real successes with some of our clients doing that.
- [41:12]
A
That's interesting. So another use for AI is going after designers for some of these big companies.
- [41:18]
C
Yeah, AI was talked about a lot at Vegas really both in product development, in just ease of creating documents, how to receive information and you know, just automatically get back to people, customer service kind of comments. So we're, we're trying to deploy that here at Stumpin company every day. You know what can we do to use AI other than create menus or shopping lists.
- [41:50]
A
Right. Other than just helping with those emails. I wonder to that point we've got talked so often about high point being 60% designer driven. Now I wondered did Vegas feel as if it was a lot more designers coming versus what used to to your point, be the big retailers?
- [42:09]
C
I think so. The first of all the big. You talk about the top 100 retailers. The top hundred retailers is really becoming a top 40 or 50 retailers. So there was a consolidation of the business big retailers. So yes, they're more and more designers. I think the Vegas and High Point trade is attracting. We talked about the lower floors in Vegas, you did see certainly more density on the bottom two, three floors than you did up upstairs. So I think you got to go to the design world some way. And yeah, yes, people are, are using technology, AI, high touch, but also high automation to find a way to get there.
- [42:56]
A
That's interesting. And I wonder who's likely to be the big acquirers and is this going to be a big year for private equity? Is this going to be a big year for some Asian countries to come into the U.S. i know you have some thoughts about that as well, but who's going to be the big buyer?
- [43:16]
C
So I wrote a blog called China 3.0 and we've already seen evidence of that with Manhwa acquiring Southern Motion. Southern Motion was owned by a private equity group. Southern Motion was sold. Manwha comes to buy domestic upholstery production. They're one of eight or ten major Chinese firms. I tend to follow history, and if one does something, probably several of the other ones are, I think that will happen. And we've seen that already. So we have one example with manma, we have Giga cloud technology at the more promotional world, they've already bought New Classic and Noble House. So, yes, I think China 3.0, you're going to see boots on the ground, Asian companies buying, you know, domestic assets. This is somewhat of a reaction to the tariff policy, which I'm not sure was the intended consequence, but maybe it was. Private equity certainly is looking, but there's been a lot of carnage in the furniture industry with American Signature and Big Lots and, you know, Clauster and Mitchell Gold. So private equity is treading lightly, I think, until we see the true uptick in the housing market.
- [44:39]
A
The China story is interesting. And in the piece that you wrote, which I encourage people to read because it's a great history lesson. And so China 1.0 was the whole beginning of the offshoring process that happened in this country and had such a huge impact on the labor force and what was manufactured here in the US and what went abroad. But take me through 1.0 and 2.0 and sort of what you're imagining this next evolution is because it seems quite significant.
- [45:12]
C
Well, China 1.0 was just what you said they were the manufacturers for. Well, Thomasville and Bernhardt and everybody had a hooker, had factories. Everybody had factories and they made it here. And then early adopters started bringing in components from Asia and then they started bringing in finished goods, or maybe they brought in the case goods in the white and did the finishing here and slowly but Surely almost all of our case good business was shut down here and moved to Asia. And they were wholesale manufacturers for our big brands along the way. China 2.0 was what I considered. Many of the Asians came over here and established US Brands with US Faces. Now we're seeing Chinese and other Asian firms buy domestic brands that are manufactured here. And I think there are three things that are trying to be happening in this movement. Movement. One, most of the big brands in China who are now in Vietnam are shipping container direct to the large customers. I think if they have boots on the ground in the U.S. they can then sell those same customers less than container load less than truckload goods and do their own distribution instead of selling to distributors. And then also if you have boots on the ground and warehouses for your distribution to your retail customers, you can then also do E commerce. You can't do E commerce from Asia. Warehouses. You have to have warehouses and inventory in the US to fulfill that prompt delivery. So I can see that happening several times over and, and again, I think the big are going to get bigger and the small are going to struggle. I think we're at a fork in the road.
- [47:18]
A
It's interesting, as you said earlier, about the unintended consequences and obviously part of this China move is related to tariffs and okay, if you're going to hit us this hard with the tariffs, I guess we'll have to come in and just buy up some of your American brands and have the manufacturing capacity here. It'll be interesting to see how that plays out out and whether there will be some political reaction to that once it gets to some level of scale. I don't know if there has already been a reaction.
- [47:49]
C
I've had several clients say, I don't want to talk to the Chinese, not going to do it, don't want to face the possible political pressure. The superstar in this story is Samuel Kuo. I mean, he's been here now for many, many years. He's bought some of the wonderful companies, Craft master master Robin Stuckey Baker and his work. That's the story I tell my clients that it, it can work. You know, it's work. They're nice people. I mean, that's, you know, let's, let's all get in a big tent here and sing Kumbaya. It doesn't, it doesn't have to be. The stereotype probably is wrong. And so our job is to, to help educate our clients on what the options are. It's obviously their decision, how they want to play the cards. But you Know, our advice always is to look globally, universally at what the options are and then help advise the client on what we think they should do.
- [48:52]
A
I don't think Vegas can tell us much about what High Point might look like in the spring because it was battling the weather and all of that, but do you get a sense of how people are starting to feel? Obviously, lots of plans and purchase orders have already been made for floors at High Point in the spring.
- [49:11]
C
I get a sense when I go to see clients and you go in the war rooms and the new product development, there is some excitement that really cool new stuff is coming out. We're seeing a lot of digital printing of products. We're seeing AI generated pictures, and we've seen two companies that are now using robots to create prototypes. So there are enough people on the move that I think we can be hopeful for High Point.
- [49:46]
A
Good. Okay. Well, I'm glad to hear that. And I'm. And I have been curious. I'm hoping to talk to one of these companies that's working on the robots coming into the upholstery facilities and elsewhere to help.
- [49:58]
C
They're probably not going to let you know in. Dennis. I had to sign an NDA to get in.
- [50:05]
A
Well, I'm eager to see. Listen, I love, as I say, I love the thought of this industry embracing technology. And clearly that is the way forward in all of this. So I'm eager to see the industry get back to feeling optimistic and expansive and seeing where we go. And hopefully Anne Moore can figure out what to do with all that extra square footage that they've got. Put it to good use. But in the meantime, I'm eager to hear the next big M and A activity coming from you. So you'll keep me posted?
- [50:41]
C
Yeah. Keep your eyes open. Friday, we'll be making our announcement.
- [50:45]
A
Oh, is that right? Okay. Well, look at you bearing the lead right there. So, big announcement coming Friday. Okay. Way to wait till after the Thursday show is done. Tim, I want you to sort of move those announcement cycles.
- [50:57]
C
There's a lot to be announced here in Q1. Our industry is really in good shape. We're attracting smart people, ambitious people. I left Vegas feeling upbeat that we're in good hands going forward.
- [51:12]
A
Good. Okay. I listened to you with that optimistic ending on that one. Good. I'm glad to hear that because I want people to feel more optimistic. I know it's a challenging time to feel. Feel optimistic. So I'm hopeful that the industry has things to feel good about. Thank you again, Tim, for your time. Always A pleasure.
- [51:31]
C
Sure. All the best. Take care.
- [51:37]
A
And we're back. We're getting to the end of the show here, but before we go, we'd like to take a second to highlight anything going on in the industry that might have caught our eye. Caught your eye, Fred?
- [51:45]
B
Wall Street Journal caught my eye right when I first started a business of home. Long ago I wrote an article where I was sort of opining on the fact that the Journal does really good interior design coverage. And it was led by Catherine Romano, a great editor who actually came from Maxim, which is kind of funny, but she actually recently retired, retired from the Journal. And I just wanted to take a minute to appreciate all she's done for their design coverage because they do a good job over there. A lot of great writing by our friend Catherine o' Shea Evans as well. So. Indeed so shouts to Catherine Romano. The other thing is that, you know, we talked recently about sort of the Sad situation at food52/schoolhouse/ Dansk. And you know, the, the bankruptcy auction is on Monday. And you know, a few weeks ago we talked about how, you know, America's test kitchen might buy the whole kit and caboodle for 6.5 million. I'm gonna make a quick prediction. I don't think that's gonna happen. There's, everyone I talked to is like, oh, I'm putting together a bid or these people are putting together a bid. I think there's going to be some interesting people who come in to make offers for some or all of it. And I'm looking forward to seeing what happens and talking about it next week with you, Dennis Scully. What caught your eye, Dennis?
- [52:54]
A
What caught my eye was I saw that the winners were announced in the Stark Lux Magazine Rising Star Awards. And, and the national winner was a design firm that I, that I know well, Studio ak And I wanted to give them a shout out to two women who left the firm of Victoria Hagen and went out on their own. So Anna and Kristen, congratulations to you both. I think they get a nice cash prize. I might be hitting them up for a loan sometime soon, but, but, but, but good for them and well deserved. So I'm, I'm always excited to see a spotlight shown on rising talent and they are nice enough to, to come to some of my talks at Nice It. So I got to spend some time with them and, and they're always in touch about the show. So congrats to you both.
- [53:46]
B
And I'm just looking at their Instagram right now and they have a nice hand drawn rendering on their site. So there we go.
- [53:52]
A
Well, there you go bringing it home. Exactly. All right, that's all the time we have today. Thanks so much for, for listening. If you want to keep up with the latest news, browse job listings or take a workshop, visit us online@businessofhome.com if you want to get in touch with the show, write to us@podcastusinessofhome.com this episode was produced by Fred Nikolaus and Caroline Burke and edited by Michael Castaneda. I'm Dennis Scully. Have a great weekend, and we'll be back with you on Monday.