The Thursday Show: What can designers do when showrooms go dark? Plus: Trump's new tariffs target Europe

0:07This is Business of Home. I'm Dennis Scully and welcome to the Thursday show. Today we're going to catch up on the news, including the latest on tariffs, an update on Charles Cohen's legal drama, and what designers can do when showrooms go dark. To do all that, I'm joined by Business of Home's executive editor, Fred Nikolaus. Hi, Fred. Welcome back. Hi, Dennis. Good to be back. How are you doing? Great to have you back. I'm doing well. Missed you while you were away on vacay. Tell me you had a wonderful time. I definitely had a wonderful time. I really enjoyed Caitlin's fill-in spot. You guys did a wonderful job and it was very necessary for me to listen to it because i spent two weeks very far away from the design industry like remember at the beginning of covid there were all these people who had gone on like river rafting trips and came back a month later and were shocked to find out what had happened that's kind of me it's a copper terrace wandering blindly through the world trying to figure it all out but it's good to be back well i'm glad you got away and you could clear your head and that you are ready for an exciting show today.

1:12Ready would be an exaggeration. I hope listeners will forgive a little fogginess, but it's great to be back. And let's look back on Monday's episode, a conversation with Krista Nye, Nicholas, and Tammy Ramsey of, I know them as Cloth and Kind, but they've also recently rebranded their design firm to be Ramsey Nye. So good conversation. A lot of topics very in the weeds on a lot of trade stuff. I thought it was a good one. A lot of fun conversations. And we actually got to do something that we love when we can connect a conversation we've had on the Thursday show and bring it to the Monday show.

1:43We did that with this great article that our producer Caroline Burke had written about markups, and we got into that conversation in a meaningful way, which was very fun and felt very of the moment, but also got to hear about this really interesting business that they have built in the Midwest, a design firm in two different locations. One of them is in Ann Arbor and one of them is in Athens, Georgia. And those places are by no means close to each other. And so they've been working remotely since before it was cool and making it work. And they also have a multi-line showroom with now multiple locations.

2:26So we got to talk about some boutique textile lines and some other issues that we enjoy. It was a really good conversation. I always say, oh, it was a wide-ranging conversation. It really was a wide-ranging conversation. It was. You didn't even mention that they'd met on Pinterest, which I really loved. Yes. That was really fun. Yeah, just a lot of fun topics. And it's always interesting to hear from people who have seen both sides of the industry, both on, you know, they know what it's like to be a showroom and interacting with designers. They know what it's like to be a designer interacting with showrooms.

2:58People who have that 360 view are always really worth listening to. So I love that component of it. But I also just love their, they just have a good energy. You know, I think at one point they said, we're both a lot, but are a lot like each other. But in all seriousness, like a lot of business relationships are like, they're emotional, they're friendships. One of them was talking about how like it was almost like she didn't want to tell her husband about this business partner she met because it was so intimate. You know, and I do think there's, you know, their chemistry really comes through on the show in a great way.

3:25Yeah, it was fun to hear how quickly they hit it off with one another and then decided to go into business after knowing each other for really just a few months. And so it's a fun story. They are both just smart and full of energy and insight. So I was really glad to finally get them on the show. You and I have known them for a while, but I was glad to get them on and have, as I say, quite a fun conversation. I hope people will enjoy it. We're going to take a quick break, and then we'll get into the news.

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5:01And we're back. First up, Fred, I'm so sorry to hit you with this on your first day back from vacation, but we're going to talk about tariffs. Rough re-entry. The past week has seen a barrage of trade news, with President Trump threatening to impose a 50 % tariff on copper, 30 % on goods from the European Union and Mexico, and 50 % on Brazil, all slated to go into effect August 1st. In addition to all the stuff you talked about last week with Caitlin, what's going on here, Dennis? Well, he's added Europe to the mix in a big way. And I think those who were not concerned when it was Vietnam that we were talking about, they said, oh, who cares?

5:41Vietnam, who cares about all that furniture being made over there? But suddenly Europe, they thought, wait a sec, what about all of my international fabrics? So the design industry woke up, I feel. But what's your what's your sense? Yeah, I don't know. This is just to step back and have a meta conversation about tariffs here. I think this is so complicated because these are a really big deal if they go into effect. I mean, 30 percent on the European Union, as you said, you know, think about 30 percent on top of what you already pay for Pierre Frey. Not that it's not worth it. It is. But you add 30 percent on top of that and suddenly it's a different proposition.

6:17It will have a huge effect on the design industry. The problem, as is always the case with these tariff stories, is that there's such big news. They get us talking. We spend 20 minutes at the top of the show talking about them. But are they really going to happen? It seems like Wall Street doesn't think so. What do you think? You're right that the market seems remarkably complacent about all of this. We're at all-time highs. Not all-time highs for home-related stocks, we should point out, because they have taken a meaningful hit, and many of them did not bounce back since the big tariffs were announced back on Liberation Day back in April.

6:56But I think people have begun to detach themselves from this. But nonetheless, it's creating enough confusion where it seems a lot isn't moving forward. One of the complicated pieces of this is that there was much more of a run-up to the tariffs on China. And so I think all the people in our industry who manufacture furniture in China and import it did a huge order in January, brought over as much as they could, which is allowing them to keep prices relatively low right now, although maybe not much for longer. But let's keep that aside for now. With Europe, the idea that we're going to see a 30 % tariff in two weeks, I don't think there's anyone in the industry who can suddenly bring over tons and tons of fabric to make up for that.

7:37I don't think people are really going to do anything around this. They're just going to wait and hope that it blows over. And, you know, I hesitate to say this is a tempest in a teapot, because if it happens, it is certainly not that. But I doubt that there's many people in the industry who are reacting quickly and suddenly and decisively to this news. But maybe you've heard differently. I don't know. What are your French friends saying, Dennis? Well, I mean, I think the European Union, let me just speak for the whole European Union, and tell you how they're all feeling. You know, I think that everybody feels much the same way that you just outlined.

8:10What's interesting, though, is that despite everyone not believing it's really going to happen, you have seen both meaningful money coming into the Treasury from the tariffs already that are in place. Billions and billions of dollars has actually been collected. And you have seen in the recent and I don't want to get too wonky here, But in the recent CPI inflation numbers, we have seen inflation tick up when it comes to guess what? Furniture ticked up actually in a meaningful way and some other areas as well. And so it's not as though it's not having an impact. It is. I was hoping to wait at least a week being back from vacation to hear CPI.

8:53But indeed, the latest CPI print did, as you pointed out, show some inflation in furniture. And, you know, anecdotal evidence like shows that that's obviously the case. People are raising prices. Every designer listening to this has gotten some kind of notification from a vendor over the past couple of months saying that they are considering raising prices. They had already raised prices. I saw an article saying that Jonathan Charles had raised its prices even more after the news about Vietnam, maybe possibly being 20 percent. So, you know, prices are coming up. And I think that, as I said earlier, people brought over so much stuff at the beginning of the year that they were able to keep prices down.

9:27That stuff is running out. And now we're going to see if it really is going to send inflation running up. And that's going to have all kinds of knock on effects. So, you know, I hope you're not too bored of hearing us talk about this because I suspect it will come back next week and maybe the week after that. Well, exactly. I mean, and unfortunately, we're playing all sorts of games with what the word inflation really means. It's undeniable. Things are getting more expensive. If there's anything we can say decisively, it's this just in. Things are more expensive. That's what we can say for now.

9:58More on that later, because we've got to move on to talk about Charles Cohen, a perennial topic here on the show. The design center landlord Charles Cohen's troubles are mounting. Last week, his super yacht was seized by an Italian court and a new ruling cleared the way for foreclosure of his tower at 750 Lexington Avenue. I think it's the super yacht part, though, Fred, that hits me especially hard. I understand you've been doing some reporting on the super yacht. What can you bring back from your. Well, the Sea Sense, Fred, the Sea Sense, the beautiful 220 foot yacht. She's got an elevator. She's got a pool.

10:35She's got a pizza oven. She's, you know, I didn't get to spend any time on her myself, but she sure does look like a boat that I would hate to lose to an Italian court, Fred. Yes, me too. That's the kind of problem I want to have. This is an interesting one. You know, we've been talking about Charles Cohen for a while now. Of course, if, you know, just to get people up to speed, he's the landlord who owns the D &D building here in New York, the PDC. For now, he owns the Decorative Center Houston in Houston, although there's been some speculation that it'll get foreclosed on. And he recently lost the Dakota in Florida.

11:09So he's a big landlord in the design industry. And there's all kinds of lawsuits going. There was an article in The Real Deal that explained all the various problems he's got with all his lenders. Fortress, one of the big ones, is after him for umpteen million dollars. And as part of it, they've seized the super yacht in Italy. But, you know, just as importantly, they're going after 750 Lexington, which is, you know, a tower that he owns, which is, you know, the headquarters of his company, Cohen Brothers Realty. So, you know, we've talked about Charles Cohen being in trouble before, but this seems very real to me.

11:40I don't know. What's your reading of the tea leaves, Dennis? Well, exactly, Fred. I think we used to tiptoe around these issues in the past saying, no, no, this can't really happen to Charles Cohen. He'll find a way out of this. No. And it was interesting to see he had transferred the super yacht and the house in Greenwich to his wife. And he argued in some court documents that it was in recognition of a nearly 20-year marriage. She deserved the yacht and the house in Greenwich. And I don't know why you think I'm trying to move those around so you can't seize those assets. But the court wasn't going for it.

12:18What's interesting is the armor has really been peeled away, and they are going after him on multiple fronts. And interestingly, as I was processing this and thinking about what we could say about all of this on the show today, looking at all of the troubles that Charles Cohen is having, They are so clearly tied to the COVID impact and what it has done to his business. Yes, he clearly turned out to have been wildly overextended and placed personal guarantees on all sorts of loans that we didn't know about before. But all of this is happening because COVID emptied out those buildings of his. COVID wiped out WeWork, which was such a huge tenant in his own headquarters building.

13:10And this is so much a COVID-related story. Well, first of all, I'm extremely surprised that you're skeptical of his explanation about the superyacht, because everyone knows that the 20th anniversary is the superyacht anniversary. Absolutely. I hope my wife is not expecting a superyacht or a mansion in Greenwich. You know, my question is kind of what happens next here. You know, the DCH in Houston has been on or has been headed for the foreclosure auction block twice now. You know, if he loses it, my question is, who steps in? And if he loses the D &D building and the PDC, who steps in there? You know, it's interesting because the Dakota, the building in Florida, has actually had what appears to be a happy ending.

13:51You know, Jamestown has taken over management of it. And they, you know, according to the tenants there that I speak to, they appear to be doing things. and there's toilet paper and music and flowers and all the things that you need in the design center. But I hope that if indeed Cohen maybe does lose control of these design centers, that there's an equally happy fate in the other buildings because I don't think it's as much of a guarantee. Each building is different. Each one has its own set of pressures and strength. So I don't know. I'm really curious to see what happens next because things are happening.

14:21I agree. And I think to your point, Fred, I think this dramatically increases the likelihood of there being a change of landlord for the D &D building for the PDC in the future. He's been given permission to sell off three of his buildings himself, and he's going to be doing that. And we'll see and we'll see what his balance sheet looks like after all of that happens. But you have to imagine with with traffic levels being down as dramatically as they are in in these buildings over the over the years, that that's seems a logical move. And I'm beginning to believe in that transfer of ownership much more than I than I ever did before.

15:03So we will definitely have to stay tuned because I would be surprised if we were not reporting on that in the next year or two. But in the meantime, we've got another showroom related story, Fred. Yes. Designer David Netto, a friend of the show, recently shared on Instagram an issue he was having with the showroom in L.A. He paid for his order, but never received it. The response to his post revealed a broader problem in the industry, and our producer Caroline Burke and Aidan Taylor wrote a great feature about it. It's online at businessofhome.com right now. Check it out, read it, hit pause, and come back and press play.

15:35And we're back. A great story, Dennis. What did you think of it? Yeah, a great story. And, you know, I have to say shout out to David Netto, who texted me and said, I've got a story for you. And I love the fact that he went on Instagram and said, hey, this is happening. Guess what? Are any of you having this problem, too? because I think so often designers don't hear about problems or issues. And I'm thrilled that Caroline and Aiden got as deeply into it as they did in this article because what this piece really talks about is how vulnerable everybody is in these situations. And there was a great deal of detail about some other related stories and what can happen.

16:22And it's an important conversation for us to have. Yeah, for sure. So just to break it down a little bit, so David placed this order with this company called Diva in Los Angeles, which is a dealer for a lot of the floss B &B Italia group brands like Casina. That was who David bought a Casina piece and it didn't arrive. Communication with the showroom got kind of fewer and far between. And then he eventually found out that the showroom had not even passed on the deposit to Casina. So they had taken his money and not even given it to the company who was manufacturing it. So Diva didn't really respond to a request for comment.

16:57It's not totally clear to me what's going on there. But Caroline and Aiden's piece really gets into is this broader phenomenon that keeps happening. I'm curious, have you seen examples? You know, you're a little bit longer in the tooth than I am in the industry. Dennis has always been a—not to come out swinging. Okay. But has this been a perennial problem? Do you feel like it's getting worse? Do you feel like it's getting better? What's your take on that? I think it is a perennial problem. There used to be, you'd show up at a design center sometimes and there'd be a padlock on the door, right?

17:29I've seen a few of those. Yeah. And I have to say, the D &D building and the Cohen brothers, they were pretty strict about it. You started to fall behind on your rent and they weren't taking much time before they took action. So you usually found out pretty quickly from that perspective. But this has always been a problem, and part of it is that these aren't often big corporations that are behind these showrooms. They are entrepreneurs, and many of them run their business as though it's their own personal checking account. And so I think that's one of the things that we often lose sight of is that there is much more of a mom-and-pop element to our business than often I think people realize.

18:21And with that comes the need to figure out how do we get a better sense of what is really going on for some of these businesses. Yeah, I mean, I think it's more mom and pop than some people realize. And that gets clouded because it's very luxurious and high end. So people have the sense that there's big infrastructure behind things. But in reality, it's not necessarily. And I think also like one of the thing is like these situations always get framed as, oh, it's a scam. You know, I think much more common is the fact that the showroom or the vendor just gets into financial trouble and they get into a tight spot and all they can do is delay the order because they're having issues with cash flow.

18:59It just looks like a scam because, of course, they're not being honest about it. But I think another big problem here is just the lead times in the industry are so long. You give some money six months later. Six months is a long time in a business. A lot can happen in that six months. And a company can hit really dire straits. And as you pointed out, people don't like to talk about issues, things going wrong. There's kind of like an unofficial code of silence to some degree in the industry because everyone wants to talk about the good things and put on a front. And so, you know, it's a combination of long lead times, which increase the risk of something going wrong.

19:33And also that people don't talk, I think, as as openly as people like David Netto do. So these these stories don't always get reported in terms of what to do about it. It's very difficult. You know, every time we talk about one of these issues, I always say pay by credit card. And I think that that's still good advice. But as Caroline's piece really points out, it's not a it's not a quick fix. It doesn't that doesn't always work. Well, exactly. And as Caroline's piece and Aiden's piece points out is that some showrooms, first of all, they don't want you to pay by credit card. And often if you're in a little bit of a financial pinch, you start asking people to not pay by credit card so that you can get your hands on some greater cash without having to pay that fee.

20:13And again, this goes back to the, listen, you're having some cash flow issues. You start to create a strategy for what do I do? How do I delay the issues? And so showrooms start asking you to wire transfer or they start asking you for ACH deposits. And often these are quite large sums of money that are moving around in our industry, as you well know. And again, I touched on this a little bit last week, interestingly enough, because our industry hasn't always been known for such great service in the first place. Often it's not unusual to not hear anything about your order for several weeks or for quite some time.

20:47Right. Right. If you've got something with an especially long lead time, your sales rep might not be checking in with you regularly. And you might not have any idea that weeks have gone by and your order hasn't even been placed, despite the fact that you wire transferred$30 ,000, as the case in Caroline's piece. What is interesting, Fred, that I was thinking about, and you talk about how long I've been in this industry, Fred. Back in the day, we all used to talk about Dun & Bradstreet. We used to talk about credit reports. Back in the day, if you were some new designer showing up in some highfalutin showroom, they wanted bank references.

21:25They wanted, where's your credit report? Where are some references? And the same thing went for the showrooms. Show me your most recent financial statement. Give me some indication that you're paying your bills and I'll show you that I'm paying my bills. And you don't hear about that as much today. People used to subscribe to Dun & Bradstreet and used to give regular updates about your business so that everyone knew you were on the up and up. And that doesn't come up today as much. Yeah, that's really interesting. Well, maybe that's another story to report on. I mean, I think as you pointed out, like, you know, and Caroline's piece has some good advice about looking for red flags.

22:03And I think every designer should do that. And, you know, communication is getting spotty. That's a red flag. If you get to feel pressured into doing an ACH transfer, that's a red flag. Part of the problem, though, is that you, you know, it's not so uncommon to have a vendor, you know, be a little bit uncommunicative. And most people don't immediately halt the project just because, you know, the vendor doesn't return an email overnight. So I think no matter what, you're always going to be a little bit vulnerable in this business. You know, the point about credit reports is an interesting one. And I think that the kind of reality is the industry has gotten a lot more.

22:33It's gotten bigger and there's more people in it. And I also think that like more transacting is done online. And I often hear from designers, even really established ones that, you know, they just kind of they see the other people like are doing business with this other company on Instagram. Like that's that's that is kind of the vetting process for a lot of vendors. And, you know, it's tough. I don't want to say that you should mistrust your vendors because I think the vast majority of them are doing a great job. And I think not wanting to pay credit card fees is totally relevant. It just adds to the cost of doing business.

23:02And certainly asking for an ACH or wire transfer is not automatically a bad thing. But I do think this is getting more prevalent. And it's something that hopefully we can come up with as an industry to fix because it's really too bad. And it really puts designers in such a tight spot. No, I agree. Not that we want to make everyone be on high alert about every vendor that they're working with. But I think this story makes it clear that there are just a lot of things that designers need to be paying attention to. And again, particularly because such large sums of money are changing hands. You can imagine how much David Netto was putting down to order to place that order.

23:39And just try and front load the community, like try and communicate as much as possible early on, because, you know, the problem is you get the red flag too late to do anything about it. But if you if you really, you know, dot all your I's and cross your T's in the beginning of the transaction, you're more likely, hopefully, to catch a red flag. I just think, you know, it's one of the sad realities of this business that there is always going to be the vulnerability given the lead times. But we will stay on top of it. We will report on this stuff as soon as we see it. So my very last tip is readbusinessofhome.com.

24:09Always and everywhere. And thanks again to David Netto for giving us a heads up on that one. Moving on, we're going to talk about, wait a sec, we're going to talk about podcasting, Fred? That's right. In El Decor, Andrew Zucker explored the phenomena of interior designers creating bespoke podcasting studios for popular shows. And I hope that they're coming to us soon, Fred. Are we popular enough to get – I don't know many interior designers, so it's going to be hard for me to get someone to come in and redo my studio. But yeah, this was just a fun piece because, you know, one thing that has happened recently in the world of podcasting is that it's become less and less of an audio medium and more and more of something that you see on YouTube.