The Thursday Show: Are four out of five designers using AI? Plus: The state of home retail

25:13Well, it was interesting because they were talking about how some of their clients had like very ornate, complicated, antique, dark design, you know, probably something you maybe associate more with the 80s and 90s. And they were talking about, yeah, you know, people really want minimalism right now, which is sort of interesting how the kind of the signature aesthetic of the affluent really shifts over time. And, you know, it was it was funny. One of the real estate agents was talking about a client who had all this great, really old Renaissance era or great master paintings. And he was trying to get her to pull them down.

25:43And the quote in the article is that she said, there has been an epidemic of puerility in the art world, and I will not allow it in my home. I just I just love that. So, yeah, I mean, I don't know. There's a lot to pull away from this article. But I think, as you pointed out, this is this is the triumph of the stager. Staging is really it's a real thing. It is, and this article certainly drives it home. Finally, sadly, we have to move on to remember Robert A.M. Stern, the acclaimed New York architect passed away at the age of 86 last week. Stern founded his eponymous firm in 1977, leading the 300-person team through projects ranging from museums and schools to homes and libraries.

26:25In 2008, Stern debuted his most iconic work, a pre-war style building at 15 Central Park West, which became a magnet to high end buyers and architectural enthusiasts. I'm not considered avant garde because I'm not avant garde, Stern told The New York Times in 2007. But there's a parallel world out there of excellence. Yeah, a great architect, great man, great talent. We've had several people on the show who worked at his firm who learned a lot from him. I think, you know, the rare example of someone who's incredibly talented and sort of indelibly changed the industry, but also was really seen as like a kind teacher who somebody who brought other people up to the industry.

27:06So he certainly has been celebrated over the past week and he'll be missed. Indeed. His son, Nick, was a longtime schoolmate of mine, and we were in touch over the weekend. I send all of my sincere condolences to him and his family. All right. That's it for the news, but there's plenty more to check out on businessofhome.com, including the latest industry new hires and a guide to Miami Art and Design Week. We'll be back in a minute, but first, a quick break.

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28:49And we're back. I'm joined now by BOH's retail columnist Warren Schulberg. Warren, welcome back to the show. Always nice to be here, Dennis. Well, I'm so eager to get your perspective on everything that's happening in retail and what an interesting and challenging year this has been. Black Friday just passed us by. Were you out doing some shopping? What can you tell us? I have to admit that I played hooky this Black Friday weekend. But obviously, I've talked to a lot of people and checked out a lot of the reports. It was a curious weekend. I think Black Friday is not what it used to be because retailers just are promoting all the time now.

29:40And also e-commerce means that people lining up to get a cheap toaster oven at 6 a.m. in the morning at Kmart just isn't there anymore. And yet I see that Black Friday as a single day will probably still hold on to its place as the biggest single shopping day. So for some people who thought it would be a disaster is too strong a word, but for those who thought it would be soft, it seemed okay. You know, there were low single digit increases in traffic and in volume and just about any place that you saw anybody that was tracking it. Again, I think you got to put that in perspective that a lot of this is because prices are higher, whether it was tariffs or inflation or just greed.

30:40People were paying higher prices for stuff. So when you look at unit sales, they were probably flat or maybe even a little off. So take those three to five percent increases in context that a lot of this is just higher prices. Right. So so unit sales probably were flat to down a little bit. That seems to be the case. Yeah. And it certainly seems, as you say, as if Black Friday, which was always figuratively, at least the time that all the retailers would break even for the for the year. and this was their big time, it certainly, to your point, seems like that is no longer the big focus. It's still important, and many retailers still hope that it gets cold in December so they can sell outerwear and all of that.

31:31But I definitely got the sense that they weren't counting on it in the way that they have in years past. Yeah, I think that's a fair read on things, yep. But to your earlier point as well, it seems like the the terribly pessimistic predictions about what this retail season was going to look like, which many earlier in the year when tariffs and all of that were first rolled out, thought, well, this will be disastrous. There goes Christmas. There were only going to be two dolls available and seven boxes of crayons. Now, it seems like it hasn't been as bad as all of that. I was out shopping on Friday just to do a little research myself.

32:07Pretty darn crowded at Saks Fifth Avenue. And Fifth Avenue was pretty jam packed. So, I mean, there were a lot of people out and stores seemed busy. So, I mean, again, the doom and gloom predictors, once again, it all might have been a little exaggerated. Yeah. People who were trying to stuff coal into the forecast, I think, got got a reality check. Absolutely. It seems like there are a lot of different retailers that are in different positions or conditions, depending on who you refer to. Walmart just seems to be winning on every channel. I feel like they've moved a little bit higher, and they've got some Veuf Clicquot on the site that's available now.

32:54It seems there's$146 ,000 gold bar you can buy on the Walmart site. But they also and they're moving to the Nasdaq and talking about themselves as a technology company. And they seem to be, as you and I were discussing just before we came on air, they seem to be front and center with embracing AI in a big way. Tell me tell me about that. Well, I think Walmart is is is the best retailer in America right now. I don't think there's any dispute about that. They're just doing so many things right. And for somebody to say this, you know, a couple of years ago, you would not have thought this at all.

33:37So the stores look better. The products look better. They're doing a lot of creative things in merchandising. Their TV ad campaign is very clever. but they're doing something this year that I think is just a game changer. So they've hooked up with the chat GBT people and they've always used, or not always, but the last couple of years have used AI. And you could go on AI and said, hey, I need a$10 gift from my uncle Leo. And they would give you suggestions. And then you'd have to go back to the Walmart site and actually buy it. And now you can make that purchase directly in the ChatGPT app and just hit buy.

34:23And this has the opportunity to really change the way people shop. I think it's going to be big. Target is apparently doing it as well. I haven't seen it, but I understand they are. REI is doing it. by this time next year, every big box retail of America will be doing this. And so for shoppers, it's a great tool. And for stores, it's good, but there is a downside we have to think about, which is if that Uncle Leo present and you have to go back to the Walmart site, who knows what else you'll find there? When Walmart is saying, well, you bought this or you're buying this, Would you also like something for Aunt Emily?

35:12And God, these names are old. But they offer lots of ad-on sales. And also, there are ads on that Walmart site that Walmart is paid for based on views. So there is a downside for retailers, and we're going to have to see how that plays out. But in the meantime, big change. And I think you need to understand that this is just the beginning of how we're going to see AI really change the shopping process. No, I think you're absolutely right. Agentic AI is here and it's just going to get bigger. And as you say, Walmart leading the way, they've been investing heavily in AI for years and have been talking about it well before everybody else was really talking about it.

36:04And they just invest very heavily in retail. I don't know if that's going to be enough to help our friends at Target turn some things around. This has been a challenging year for them. And unfortunately, when things aren't going well, everything seems to be going wrong. And that, unfortunately, is the case at Target. And they've already announced that the current CEO is going to be leaving and the next fellow is going to take a swing at it. But what's going on there, first of all? Let's tell people what's been happening at Target, and then we can get into what do we think needs to happen in the future.

36:39So something to put into context about just Walmart versus Target. A lot of Walmart's gains are also coming at the expense of Target. They are gaining market share because things that people used to go to Target for, you know, a little more fashionable apparel, a little more stylish product. they are now getting that at Walmart. So Walmart's definitely getting market share. But Target just continues to make colossal mistakes. And I'm sure by the time people are watching this, they will have read about the swag bag debacle that Target offered a goodie bag to the first hundred people in line in their stores on Black Friday morning.

37:30And it turned out to be, you know, a couple of sticks of gum and some playing cards and some jujubes. And it was terrible. And so this is another example of folks back at Target HQ in Minneapolis saying, here's a great idea. And everybody going, yeah, this is a great idea. And then the store is being unable to execute it. So we're seeing a lot of that. Target just continues to make mistakes. And we'll see what the change at the corner office does. Let's remember the guy that they have brought in or promoted to run it is the guy who was in charge of logistics and operations for the last two or three years.

38:13And that's not exactly something to be proud of. That's been one of their biggest problems, out of stocks and the inability to execute. And in the meantime, the outgoing CEO, Brian Cornell, has been promoted to chairman of the board. So don't we all love when we get a new job when our predecessor is looking over our shoulder saying, no, don't do that. Don't do that. So Target needs some big changes. And the best example is Cornell himself. When he came in, what is it, 11 years ago, he came in from the outside. He was the first outsider ever to run Target. And he came in and said, hey, listen, we're going to be a mess for two years.

39:05Our stock's going to be terrible. We're not going to make a lot of money, but we're going to fix a lot of stuff. And he had the opportunity to do that. This new guy, I just don't know if he's going to have that opportunity. Plus, he's competing against a much better Walmart. Ten years ago, Walmart was almost as screwed up as target. So, well, which shows that it can be done. Absolutely. I mean, the turnaround at Walmart is is remarkable in case studies written. And I mean, the fact that and now that they're taking so much market share, as you say, away, I don't know what the Walmart equivalent of the Target nickname would be for Walmart, but they have they have definitely taken a lot of that a lot of that customer base.

39:50I feel like Target needs a great merchant. Yeah. Right. I feel like they need someone who really understands product. I feel they need to put a lot of the political missteps that they made behind them. And then they need to get those stores looking good again. Those stores just reportedly look terrible all around the country. I mean, people put up photographs of empty shelves and horrible. Dreadful. Yeah. Yeah. And it's sort of heartbreaking because, I mean, we all remember a time when there were these fun home collections that would sell out, you know, really quickly. And they still have some great home partners, but it feels like they'll need to do a lot more than that.

40:30Let's shift gears and talk about a similar brand, TJX, which also seems to be executing really well with HomeSense and HomeGoods. And they seem to have really tapped into a consumer that feels very stretched. They seem to be servicing that consumer very well. Yeah, the shopper just loves to get a deal. and whether they're actually getting one at TJX or not, that's to be debated at some other time, but the perception is there. And TJX executes to their plan, which is lots of stuff, and it looks like it's a great price, and it's working. And it's not just the off-price channel. The other big players there, Burlington and Ross, are doing well, but not as well as TJX.

41:24So you can't just say it's the off price model that is responsible for TJX's success. It's them. They're doing a great job. And it's interesting to see, and we should talk about Costco as well, because they're another one that has really effectively straddled the value customer, but also this higher end customer. And And I feel like Walmart and Costco both have just moved higher and higher in their offerings, and it has suited them well. Yeah, Costco also do a great job. We all know about the gold bars and the things that they're selling. But the best way to look at Costco is to look at the parking lot.

42:10There's a whole lot more Lexus and BMWs there than there are Toyotas and Hyundais. So that's their customer. And if you want a 55-gallon drum of mayonnaise, that's Costco. And what red-blooded American does it? Yes, come on. Right? Come on. Yep, yep. We were talking recently about William Sonoma Group. They came out with their earnings, and it seemed like they're another retailer that's being very efficient and trying to use technology. and trying to control costs. I couldn't help but listen to that call. And I know you referenced this in one of your recent columns. I couldn't help but feel like maybe RH wishes they had some holiday merchandise or some cash and carry merchandise after I listened to Laura Albert talk about some of the brands getting ready for the holidays.

43:08What's your sense there? Well, I think Williams-Sonoma's kind of hidden secret is that they've got this fabulous balance. I mean, first off, they're very balanced on in-store versus online. If you remember, as a catalog seller, they got direct-to-consumer before just about anybody else. So they had the systems in place. They knew how to do that. But they've also got this great balance in merchandise. So in the Williamson Omer kitchen stores, that business is still pretty good. People are cooking more at home and they're entertaining. And so people are buying blenders and they're buying spatulas.

43:52And so when the furniture business is a little soft, they've got the kitchen side. And when the kitchen side gets a little soft and furniture starts to pick up, it goes back the other way. So they've got this great balance and nobody else has that. you know, certainly RH doesn't, but Crate and Barrel does have some kitchen and some housewares, but it's nowhere near what Sonoma has. So they do a good job. Yeah. I mean, it's obviously been a challenging time in furniture land, as we know, and we've talked about consistently. And so I feel that to your point, their mix has really helped soften some of the volatility of some of those numbers.

44:41And if things only get a little bit better, which you keep saying is just around the corner, Warren, we just don't know what corner that is. Yeah, I have 100 % track record of being wrong for when this turnaround is going to come. I kept thinking the housing market would turn around. And certainly, none of us could have predicted some of the insanity of the past year. housing is still not coming around the the no the new york times had a great graph uh that basically showed the number of uh homes built in america in the last 20 years and you look at it and there it is there just not enough houses being built and so that flow of people to new homes and other people moving into old homes, it's not happening.

45:35And that's still a big factor in the home furnishings business. So yeah, that corner's out there, but I'm not seeing which one it is anymore. Well, I mean, it's hard to feel terribly optimistic after all that we've seen this year. We've had some companies come out of bankruptcy recently and are trying to bring themselves back at home, which was a company I never really fully understood, to be honest, is back at it. And Bed Bath & Beyond is trying to bring itself back in a meaningful way. Is there anything that we should be paying attention to there? So at home ended up closing only, I don't know, 25, 30 stores out of 300.

46:20So about 10 % of their stores, but they've still got a lot of stores that are in the wrong locations that are too big. And the bankruptcy proceedings wiped out most of their debt. What it didn't do was change their business model. And so I'm with you. I don't quite understand how they're going to make this work when they still haven't changed what's in the stores and how they go to market. They have no e-commerce at all, and I mean none. And yeah, if I want to buy a rug, they've got 6 ,000 of them on display, and that's great. But when I'm done buying a rug, I don't know when I'm going back there.

47:06So at home, I'm still not optimistic about. Bed Bath & Beyond and its new partnership, which is now ownership of what was kirklands you know i guess the skeptic in me says i don't see it adding up but full disclosure i've not been to any of the new stores that have opened but i've seen pictures of a bunch of them and i have to say i'm impressed the pictures look good but they're talking about opening 300 bed bath and beyond stores by next summer oh dear that's the mistake they made last time that's tough to do So, you know, the dollar stores are the only guys that can pull that off. Yeah. And we know what those stores look like.

47:55Exactly. I just don't know if this is going to work. And now there's speculation. I'm hearing speculation that Bed Bath & Beyond is buying up some container store bonds. And again, this is not confirmed. Nobody has said, yeah, this is happening. but it wouldn't be a surprise. You know, they snooped around them once before and they may still be interested in it. So you put together Bed Bath & Beyond, Overstock, Kirkland's, and Container Store and you tell me what you got. And you've got something really special in there. Yeah, that is a jambalaya of great former great retail brands that I don't know that you can really make that work.

48:41And I say that having loved the container store and was always wanting it to succeed. And truthfully, back in its heyday, Bed Bath & Beyond was an incredible retailer. And I'm just sad that it overstored back in the day and didn't embrace technology as you and I have talked about. Well, and there is a place for a retailer in that category. You know, how many friends do you have who say, I wanted to go out and buy a new toaster oven. and I didn't know where to go. I wanted to see it in a store and Macy's has four of them and Walmart has six, but they're not the premium brands. So where do you go to buy those kind of products?

49:26There's nobody out there that's doing it. So there's a place for that. Whether they're the place, I don't know. Well, it's interesting that you say that because I mean, and again, to your point, Back in the day, it used to be Macy's Cellar, right? Which was, I mean, we don't want to date ourselves waxing lyrical about that great special floor. But department stores played such a huge role. I feel like anyone who talks optimistically about them making a big comeback is not seeing what's happening. I just don't see the big department stores coming back in a meaningful way. But there does need to be that sort of superstore of sorts that Bed Bath & Beyond and some of these others represent.

50:07Yeah, I agree. And I don't know who takes that role. Yeah. No, no, it's challenging. I don't know if one of the retailers we haven't talked about, because I'm still wrapping my head around thinking them as a retailer, is Wayfair and Paragold. And they seem to have gotten a pretty good reception from their store openings. What's your sense? So there's still only one full-scale Wayfair store, and that was outside of Chicago. And it's a great store. I saw it when it opened. One of the best stores in America that I've seen in years. But the second one is not opening until, I think, spring of 26, and that's here in Atlanta.

50:55And there'll be two more in the pipeline after that. So this is still just a couple of stores. They've got some small format stores for their sub-brands, Joss & Main, all modern. And as you mentioned, first Perigold store opened in Houston, and it was impressive. It looked nice. But again, that's one store. So when you have Wayfair going on analyst calls and saying, our stores are doing great and this is making a big difference. This is an$11 billion company. So 20 stores, even counting all the sub-brands, they're not going to move the needle a lot. So I hope that these new stores work, but the closest retailer to Wayfair, believe it or not, is Ikea in terms of the product mix and the scale.

51:51So Ikea has 50 stores in America, 50 full-size stores. And to me, that's what Wayfair is going to need to be effective in in-store retailing. So they've announced four and that's 46 more to come. Well, so do you think so do you think that one of the big surprises out there might be that suddenly they hire a whole bunch of teams to to open stores around the country that they embrace this? Or do you imagine that this very conservative snail like pace that they've been going at will continue because they did open another pair of gold in Florida and that seemed to have been well attended. And I've heard good, good things about that as well.

52:37I mean, it does seem like they're serious about this, just not moving as quickly as as it sounds like you and I might might want them to. Yeah, they just don't have the money to do it. I mean, opening these stores takes a lot of money. And Wayfair is just starting to show a profit for, you know, essentially the first non pandemic time that they've done that in the history of Wayfair as a public company. So for them to take whatever money they've got and make that kind of investment in opening 10, 20 stores a year, unrealistic, not going to happen. And so it's a slow, painful build out. And I don't know how long it will take.

53:24But stores are not going to be a significant part of their business for at least a few more years. In wrapping things up, it seems as though a surprisingly strong consumer, given everything that's been going on, right, is certainly a takeaway? Yes, absolutely. I am surprised, shocked might be a better word, that this consumer's resilient. And what do you think that's about? Why is that? Well, I think they've still got jobs. Unemployment is still not creeping up to any great degree. Some of these jobs are paying more than they used to. uh people who are current homeowners are are seeing the value of their homes go up and that's making them feel good and it's it's christmas god damn it and uh you know and we need a little christmas yes and uh yes people are always gonna are always gonna shop for christmas so it's a very resilient consumer and uh i guess that's you can't deny that shopping is the national pastime.

54:41And clearly that is right. That is still the case here in good old America, even with all the consumer has had to deal with. Well, I'm so glad to get this opportunity to talk with you. I know we're going to be talking with you in the coming weeks about the year in review. And I look forward to that. But I really appreciate getting your perspective today. Thanks, Dennis. Bye.

55:05And 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. Fred, what caught your eye? First of all, did you buy anything for Black Friday or Cyber Monday, Dennis? What did you buy for me, I guess is what I should say. Quite a few things for you, Fred, but I don't want to give it away here on the show. But I want you to be surprised, okay? All right. Well, I'm excited to see what you put on the company credit card for me. But it is gifting season, and I want to just quickly call out our own market editor, Caroline And Biggs did a number of gift guides for our website that are online right now at businessofhome.com.

55:41Caroline is a great market editor. She always does a really good job on these gift guides. And normally she does a big omnibus one, but this time she sort of broke it down into individual guides for different types of clients, which I thought was a really fun way to buy holiday gifts for your clients chosen by other designers. So really fun concept, really good gift guides. I love gift guides. I know we're a little bit saturated in the marketplace, but I will always click on a gift guide. So we've got them at businessofhome.com, so check them out. What about you, Dennis? What caught your eye? Well, one of the early Christmas gifts that came along for us, Fred, is the new AD100 list, which I feel perhaps came a little bit earlier than we're used to seeing it, but always excited when that hits to see who's been naughty, who's been nice, right?

56:28Who's made the cut and who didn't. I was delighted to see a debutante, Jessica Helgerson, made the list. A big fan, hoping to actually talk to her very soon for the show. And I saw that both Andre Malone and Nicole Hollis made the list as well. I'll be talking with Andre Malone Thursday evening at NYCID, and December 11th I'll be talking with Nicole Hollis at NYCID. So congratulations to the two of them and everyone who made the list. It's a big feather in everyone's cap. All right, that's all the time we have today. Thanks so much for listening. If you want to keep up with the latest news, browse job listings, or take a workshop, visit us online at businessofhome.com.

57:10If you want to get in touch with the show, write to us at podcast at businessofhome.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.