Valdese Weavers CEO Blake Millinor can see the future of fabric

31:12Job two, let's make sure that we tell the story, whichever story it is, performance, brands, sustainability. that we tell that story consistently, professionally, whether it's to a retailer or whether it's to a designer, a furniture manufacturer, it doesn't matter. And just, you've got to be so disciplined in those areas. So part of developing your own line was to assist in the storytelling of who you are and what you are and what you offer? Maybe that's going a little far, but certainly it does. Because I was appreciating that spin. I was liking how you were. Well, thank you for picking up on that.

31:55Thank you for picking up on that. It certainly is something to point to. Just in our showroom and we're telling, let's just say, the inside out story. The first thing that this front and center is, as anyone comes in, is here are all of our partners where you can find this product. And yes, we have an offering that might be appropriate for some people. but it is a drop in the ocean to what our furniture manufacturers have to offer and certainly what the distributors have to offer. So it is a conversation point. I'll say it's probably a little more than that, but it is an aid to tell the story.

32:35So that's actually a good way to bring it up. Exactly. Feel free to use that with your other partners. You mentioned about the inside-out story. And so, A, let's just explain quickly to people what Inside Out is, and then let's have a performance fabric conversation. Okay. And it's kind of a funny story. You know, we made an acquisition of a company called Dicey Fabrics. I guess this was 10 years ago. And went down there, maybe not with the best attitude. I was like, really, what are they going to have? And when we got down there, they had some yarn manufacturing that was interesting. is something we didn't have.

33:14And that became kind of the focal point. It's like, wow, we can make these boucle yarns and these other novelty yarns. And so that was kind of the primary strategy. It was a very small acquisition. Probably six months after the acquisition, I got a phone call from a rather large distributor. And they said they had an order for, I don't know, three or 4 ,000 yards of our outdoor fabric. and we didn't have an outdoor fabric that I was aware of. Well, it was one of these Dicey fabrics, and Dicey had used this name inside out. I got off the phone quickly. We started scrambling and confirmed that part of this acquisition included some high UV products, and this job was a pool in Las Vegas in one of the hotels.

34:07And so that was our jumping off point. And yeah, Inside Out became a big deal. And as we sold that product to our distributors, and that's another thing, there's nothing more gratifying than when you see your customers have success, right? When we started seeing that, we knew that we were on to something. Yeah, that you really had something. And I'm curious, Blake, we have for hundreds of years lived with our small children and dogs and we've consumed wine. And I wonder, when did we start in this country to panic about the dog and the wine spilling? When did you start to see just this spike in demand for all of this?

34:57and all these huge companies now that do nothing but make all of this? You know, this is a great question. It was an opportunity to market one of the value adds of a fabric or of a piece of furniture. And I think that's what our industry has always struggled with, right? Is how do you get to the consumer and represent or tell this story? Other than aesthetic and price, how do you get the conversation on something else? And so I think performance fabrics became a good example of how you can do that. I think that sustainable fabrics might be next. I think that one's a little more tricky. But certainly performance fabrics.

35:37Do people live with a lifestyle now where they're eating on their sofa more? I don't know. I don't know if that's what it is. Yeah. I mean, I just don't see what's so different. And yet their expectation of what these fabrics are going to do. Well, that's the mistake I think the industry made. And we knew it when we were talking about it is we cannot oversell the features and benefits. And I don't think anyone did it better or worse than anyone else. But when we came out with these performance fabrics, I think the consumer heard that they were bulletproof and that they were self-cleaning. Yes, exactly.

36:20To your point, they heard that they cleaned themselves. That's right. And so we all could have done a better job of that. And I think since we have, I tell you what, we have done more training on how to clean fabric. It's amazing. And I guess we'll always do that. But so many people do it wrong. But back to the whole point of the value of it, I do think that it is an opportunity for us, the fabric manufacturer, the furniture manufacturer, the retailer, the designer, to communicate and spend time and explain this value add to the end user. And so there's a deeper lesson there, I think. How do we expand that beyond performance fabrics?

37:00Well, exactly. And you just raised the sustainability question as well. And we're told that we are on the precipice of this market wanting so much more in terms of a sustainability, not just a story, but real evidence that this is meaningly sustainable. And often the contrast between performance and sustainability is real and extreme. And again, I don't think people quite understand that. And so threading that needle is quite challenging. No, you're absolutely right. It's more difficult. I mean, in some cases, you need a chemistry degree to understand sustainability and performance fabrics, how they go together.

37:51Certainly, the changes with PFAS chemistry has been a topic, and I'm not even going to attempt to go into that. But the fact that the dangerous chemicals have been taken off, and I say taken off, we don't know for a fact how dangerous they were, but the C6 chemistry has been eliminated, which is great. But the truth is, and this is an important story that the retailers had to understand, that fabric's not going to perform as well as a non-C6. And that's really, there's not much debate there. And explain to listeners what that means. I mean, not without going into all of the detail. Yeah, it basically is about oil repellency.

38:33You can still get water repellency, but oil repellency is very, very, it's impossible or close to impossible. So, again, it goes back to the storytelling. It goes back to the training. It's just critical, critical for our industry. And I think sustainability is similar. Much like performance, everyone has a different definition in their mind of what sustainability means. Is it about the materials that you use? Is it about chemistry? Is it about energy consumption? Is it about pollution? So everyone's got a different spin and a priority of what's more important than something else. So we don't presume to be the expert in that.

39:15And really our strategy has been to offer a range of sustainable options. If you want to go chemical free, go this direction. if you want something that uses recycled materials, go this direction. If you want natural materials, because there's no chance you're going to convince the end users that they need to use recycled polyester instead of organic cotton. If that designer wants to use the cotton, she's going to use the cotton. And so rather than trying to have that argument, why don't you just offer those alternatives? And you can't offer all of them. One company is difficult to offer all of them, but certainly that's kind of the angle we're taking.

39:58And then, as much as I hate to say this, I think third-party certification also can become important there because there's so much grain washing going on. And that's not good. That erodes trust. And so I typically don't like the cost that's involved with a third-party certification. But if that's what it takes to get a consistent product out that doesn't undermine or compromise the trust with the customer. And again, whether it's a retailer, designer, or the end user is equally important. Well, so many of the veterans of the textile industry bemoan that we moved on from wool and silk and these great materials that have been with us for so long and that seemed to perform just fine until we got so worried about the wine and the golden retrievers.

40:55And I don't want to see all of that go away. But it does seem to be going away in a huge way. You walk into these showrooms today and it's just not a huge part of what they're showing. And don't even get people started on viscose and they've read something about water stains or all of that, right? Yeah. Yeah. Rayon took a hit years back and I don't know that it'll ever recover. And look, I love natural fibers. Wool in particular. Cotton is great. But just like anything, there are pros and cons. And even organic cotton, there's a lot of marketing in organic cotton. And it's not nearly as sustainable as I think sometimes the end user or consumer thinks that it is.

41:43And that's too bad. So, Dennis, I think that the only option is to provide a range of options and let the consumer decide. I think that with cotton as an example, I think it's maybe underrepresented. Certainly, there's some challenges there as a performance fabric, but it's got a lot of great traits. Of course, there, you've got to worry about the origin of the cotton. There are a lot of regulations in place, and there are a lot of our customers, our large furniture manufacturers, that have a lot of strict guidelines where we have to account for the origin of the cotton to make sure that it's not coming from the weaker region in China.

42:33I am sure that there's plenty of fabric and furniture coming in containing that cotton, which is too bad. But certainly the customers we work with, they take it seriously, and there is extensive documentation that you have to do. And that actually, it's so extensive, it makes using cotton a little more difficult, particularly if you're talking about making a fabric in Asia from cotton. That becomes a lot trickier. Making the cotton here, we'll use domestic cotton. That's what we'd rather use anyhow. That's easier to prove and to show. But for us to have fabric made in Asia, it gets more complicated because offering a lot number on a spreadsheet, that doesn't get it.

43:25It's much more extensive than that. And there's a lot of fraud that's going on.

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44:15I want to come back to something you were just talking about earlier, which is, and we've talked about this in the context of high point markets so much, for example, the rise of designers. and the shift from not even letting them into a high point years ago to suddenly they are the highly exalted customer base that so many companies are eager to service. And with good reason, the lifetime value and the multiple projects and all of that, it's understandable. I wonder how it has changed parts of your business and how you think about it. Well, certainly we've been a spectator like you watching this transformation, most visible at market, and how our furniture manufacturing customers have changed their strategy or amended their strategy.

45:10And there's nothing wrong with it. As a matter of fact, I see a positive in it that those designers, they bring a creative element that I see as always is good. And so for us, a designer comes in and asks for something or is working on a project. Anytime there's any sort of a discussion or collaboration on a project where we can pick up design input or market input, if you want to call it that, I think that aids the design process or the creative process. I think I'm sure the same holds true for the furniture manufacturers. Now, it's also difficult because there's thousands of designers where maybe they were just working with hundreds of retailers.

45:57So now you're playing a numbers game. And I think for the furniture manufacturers to figure out how do we touch all these designers, it's a different kind of challenge. But I see upside to that. I think you get much better information about what the market's looking for as opposed to only hearing from a retailer. I'm so curious. The landscape just seems so different than even 10 years ago. We talked about the lifestyle retailers. and at Business of Home, we spent a lot of time years ago talking about various disruptors that tried to come into our industry and thought it looked so easy to come in and make a great big statement.

46:48It turns out it's not that easy. One company we have talked about in the past, you and I, is Maiden Home, which surprisingly to some came in and really found a niche. and so many different manufacturers and suppliers mentioned that company to me as one that really figured it out. I wonder what your sense of what they figured out or what they've been able to do that helped them sort of break through a very complex and highly competitive market. My two cents is they had a very specific and disciplined point of view. I think maybe with e-com, because you're not dealing with square footage and brick and mortar, you can do anything.

47:35There isn't a restriction. So the tendency is probably to offer more that makes sense. Clearly it worked for Maiden Home. I think at the same time, they partnered with some great manufacturers, made good choices there. I don't know if that was luck or a matter of just a lot a good due diligence, but I think that was a big part of their success as well. So I think a couple of those things, and as much e-commerce that you see out there, you certainly see just as many losers as winners, people who have not done it well and have gone by the wayside. And you've seen a few that seem to be doing it well.

48:17The other thing is you chase with e-commerce this breadth of choice. Not always a good thing. I think the paradox of choice holds true there. I think it's the same thing with pricing. You don't necessarily, just because your business model may allow you to hit lower price points you think, I don't know that's necessarily the right strategy. I mean, certainly the returns and so forth that the e-commerce retailers deal with is a completely different ballgame than the traditional markets. And e-commerce, as you say, has been a very challenging market, certainly, especially in the past few years, as the cost to market to those customers has just risen so dramatically.

49:08and the ease, the days of simply putting some ads up on Facebook and elsewhere have just gone away, sadly. And so have so many of these e-commerce businesses, which is why it's sort of particularly impressive that Nidhi Kapoor has found the success that she has and has been able to navigate a very, very challenging landscape. Yeah. And, you know, from our perspective, the challenge is that when an e-commerce company like that is starting up, they don't – usually the first part of their business plan is not, okay, who's our fabric supplier going to be? That's not the first question they're trying to figure out.

49:55So for us to try to make that initial connection, if it's warranted, I'll say that also, is a challenge. You know, it's easy to see the brick and mortar guys and to walk a floor and get a sense of aesthetic and price point, et cetera. It's more difficult on e-commerce. And, you know, every time you turn around, one pops up. And as a fabric manufacturer, the first thing I think about is, well, how did they decide to choose their fabrics? You know, and I get immediately my knee jerk reactions to get critical of our sales team. How come you guys aren't out there chasing these people down? And it's a different animal.

50:36And so I think that goes back to our relationship with our furniture manufacturers. It's critical because we want to be a part of that conversation when it's appropriate and not be a part of the conversation when it's warranted. So, yeah, e-commerce is going to be interesting to see how it continues to evolve. We talked about the Wayfair Paragold with their brick and mortar that's coming up. We'll see what happens there if they do anything this meaningfully different. And then how traditional retail is going to have to evolve, right? I mean, they're on their heels a little bit, so they're going to evolve.

51:16It'll happen. Yeah, no, no, no. Much to be seen there. Let's shift gears and talk about the always interesting, always popular subject of employee stock ownership plans or ESOPs because who doesn't want to delve in to ESOPs, right? Yeah, that's right. And ESOPs play a big role in your world, as you suggested earlier, at a time when you were struggling with the whole Robert Allen challenge, right? you were also so so so tell us that story yeah it's um it was it was a couple of years after um century split from valdez weavers and that was an amicable split it was just you know a generational thing and um a couple of years later the the shuford family um wanted to divest and like any company they had several options then the way it works without getting this it is really complicated, but basically the company takes out a loan to buy out the shareholders.

52:20And so the first two, three years of ESOP ownership is you're highly leveraged or you've got a lot of debt. And then as we've paid down that debt, you're now in a position or we're now in a position to where acquisitions or significant CapEx projects, all those things are on the table. But the big deal is to now be able to tell our associates that you own part of the company and the profit that the company makes stays in the company. And it allows us to make long-term decisions. Most companies, if they're owned by private equity, they're sweating every month or every quarter trying to get those double-digit returns.

53:08and not that we're not chasing the same thing, but we don't have a gun to our head to do that. Rather, we can focus on making good long-term decisions. And so I think that's a huge advantage for us as we go forward. I'm a big fan of it. I'm certainly versus the alternative of private equity. Certainly, there are many, many companies that have done well with private equity, But we've also seen many, many examples of otherwise. Many, many examples of it not going well. That's kind of heartbreaking to see. So I'm thrilled to not be a part of that. And so that would be a big reason. You know, I was just recently up at Room and Board, and you have probably read that they recently went.

53:57Well, it was interesting. And John Gabbert reached out to me when he finally made the decision. Because like you were suggesting, he was weighing, oh, how do I get out of the company? And is it private equity or is it the ESOP? And yes, he was excited. Yeah, for a lot of the same reasons. It's a commitment to the associates. It's a commitment to the community. And so in talking with them, they're going to do great with it because they've already got a great culture. And so, yeah, I know why you don't see more of them because they are complicated and they can be a little expensive to manage, I think.

54:38To me, it beats the alternative, and particularly if as a selling shareholder you have a priority on making sure the company stays local or maintains some of the same culture that it's had. I want to shift gears, Blake, as we get ready to wrap up. I want to talk about a couple of different things that are in the news and just kind of get your perspective on them. The first being interest rates. So we're finally in a place, you and I are speaking just a few days after the Fed chairman gave his riveting speech in Jackson Hole and talked about how inflation happened and the great job that they did in dealing with it.

55:26Right. And now has suggested that they're moving in the other direction and that they will be lowering rates. We don't know by how much yet, but we sense that it will be meaningful. Is that going to have a big impact on your business? And do you think your partner's business in the short term, long term? Yeah, I think so. I think the question is how fast does it happen? And then to what extent? listening to some of your previous shows? Is it something that maybe as soon as Q1, Q2 of next year? It'd be great to see a lift. And maybe we're due, right? I mean, everyone's talked about the pull-up of orders and of demand because of COVID.

56:14And I agree that that definitely happened. But it sure feels like we're past that now. And could there actually be some pent-up demand? And do you get a sense of that? Do you get a sense that there might well be some pent-up demand? Well, maybe it's me being an optimist, right? I want to believe that it's there. But I think that you've got people that may be delayed moving because they're sitting on a really low mortgage and they didn't want to jump onto a really high one. Are you going to see an increase in those transactions? And then, of course, the new homebuyers. I've got three kids all at the age where they're ready to buy their first house and bemoaning the cost and the interest rates.

57:04And they're navigating that. So I have that conversation with them all the time. So I think so, Dennis. I just think that how fast and how long does it happen? And I think that we get through this year, we see some lift, much needed for a lot of us. But yeah, to answer your question, yeah, I don't know how it doesn't help. I wonder, Blake, have we focused too much attention on interest rates? And are there other important factors or things that are going on in the marketplace that are just as important and that will have just as big an impact on business going forward? Yeah, I think that the housing shortage, and I'm not an expert in this market, but I feel like you hear more and more of that.

57:51And certainly in our area, in Hickory, there's a housing shortage, which is causing labor problems for us. I thought some of the economic development people in Hickory, and they're like, well, it's not going to get better because our population is not going to grow because we don't have the housing to support them. The other thing, and not to get off on a tangent, but one other area or channel, I might say, is the big box retailers. What impact are they going to have? I think that that might be an underreported area. Even though they may only sell items, they're not a furniture store, obviously, and they're not going to offer the breadth of product.

58:32But is there a possibility of a shift there? I don't know. No, no, no. It's so interesting that you say that because a couple of designers have sent me recently images that Walmart has been putting out of some nice looking furniture pieces that you wonder, right? They've been so aggressive. That's right. And Costco as well. I mean, so I do think that we've certainly heard that so much more shopping in other areas is going on in those places. And whatever stigma might have been attached to going to Walmart or going to Costco seems to have in this economic cycle been somewhat removed. And so what else are they finding there when they go there?

59:19Yeah, and you look at the recent closure of Kahn's and Bacock. Do you blame that on e-commerce, or do you blame it on big box, or maybe something else? But it's hard to think that there wasn't some impact there. No, I think you're absolutely right. And underreported is a great way to put it. We'll have to get on that here at Business of Home. We'll have to dive deep into the impact of the big box retailers because I am certain that they are gaining market share in ways that we haven't even really been measuring yet. I wonder all of the things that are so challenging in your world and in your side of the business, if there was one thing that you could change, if there was one thing that you could make better, easier, what would it be?

1:00:13What would you most want to change? It's a long list, Dennis. I don't know if I could say one thing. The thing right now for us is labor because it's not a part of our strategy to go source cheap fabrics from overseas. But it's just so hard to attract the labor. The cost is high. If you ask the question, is there something I could change? Could we do something about that? And I'm not going to look to the government for any help on that. But, you know, we've got to look from within. We've got to be better. Because you've got to remember, you know, we're working with the stigma that was developed over hundreds of years.

1:01:01And a young person coming out of high school, their dream to work in a textile factory, that's probably not something they're thinking about. So we have this stigma that we have to overcome. I wonder in wrapping up, Blake. So we talked about, and I really do think that we need to pay more attention to the big box, and I'm so glad you pointed that out. I'm fascinated with the horse race with our house and RH and how that's going to play out in the coming months. I wonder, though, what you're most watching right now, what you're paying the most attention to and what you see changing or evolving or what you think is an indicator of things to come.

1:01:40Because you see you have this broad view of what's going on for so many companies. I wonder what you're paying the most and closest attention to. Well, you know, it's a good point, Dennis, and it's something we have to remind ourselves that our customer base is so diverse from opening price point up that we have to be careful what we see, what we hear, what we experience may only apply to a certain channel or a certain part of the market. So, you know, on the commercial level, we certainly try to pay attention, but this limited, our impact there is limited and its impact on us is limited. The lifestyle channel I find fascinating.

1:02:23Like you said, the horse race between RH and R house. So certainly we pay a lot of attention to that. And then with the traditional retailer, watching how that evolves. And the biggest part of that is what can we do to aid and assist that channel? That's what this industry was built on. So, you know, how do we find examples of retailers that are doing it right, the traditional retailers that are doing it right and having success? E-com is something that I think the rules are still being written, so to speak, for our industry about what can be successful and not. And I think there's a lot of furniture being sold there, and I won't say underreported, but it's probably having more of an impact than we realize, that a company like us realizes.

1:03:13Then on the, I guess, the higher end, you know, with the distributors is making sure that we are hand in hand with our distributor partners. At the same time, learning more and more about how the interior designers, how they operate, what's important to them. And that's a tough one because they're thousands, right? And so it'll be interesting to see how that works. And we watch the furniture manufacturers, you know. We kind of just take a step back and watch and observe. And did I say everything's important? Well, I mean, it's so interesting because the designer, the rise of the designer and the importance of the designer in our industry is such a huge force.

1:03:58And I'm going to be so curious how you navigate that part of the business and find different ways to service them over time. Mixed in with all of the rise of these specialty retailers and the lifestyle retailers. And also e-commerce showing up in more physical brick and mortar stores. I mean, even if Wayfair does only do one or two a year, I think it will have a big impact. And I think we've been so wrong in many cases about how we thought this would play out. We thought coming out of COVID, it would all be about digital and everything would be remote. And it's gone a completely different direction.

1:04:44No, you're right. You're right about that. And it's, yeah, and again, it's not just the role that we play, but watching our furniture manufacturing partners and see how they are adjusting their strategies has been fascinating to watch. And on the design side, you know, we love it because designers, just by the nature of what they do, they love breadth of product. And that plays to what we do. I don't want to make just white boucle. And so the fact that we can do different patterns and designs and colors, that's perfect. Now, that takes a lot of complexity and there's a lot of work that goes with that.

1:05:25But just generally speaking, that's fantastic. The more of that, I think, is better. So I'm rooting for all of them to win. Well, that's you, Mr. Diplomat. But no question. I know you're rooting for all your partners to win. And and you but you are you are rooting for the downfall of white blue clay. So you have my support there. And so on that on that, we are we are one. Blake, I'm so glad to get to talk to you. And I so appreciate you making the time. Thank you. And I look forward to talking to you again soon. Thanks for listening. If you'd like to keep up with the latest design industry news, visit us online at businessofhome.com, where you can sign up for our newsletter, browse job listings, and join our BOH Insider community for access to online workshops, a free print subscription, and much more.

1:06:23If you have a note for the podcast, drop us a line at podcast at businessofhome.com. If you're enjoying these conversations, please leave us a review on Apple Podcasts. It helps others to discover the show. This show was produced by Fred Nikolaus and edited by Michael Castaneda I'm Dennis Scully Thanks again for listening And I'll see you next week