Wallpaper goes in and out of style. Gracie endures

0:03This is Business of Home. I'm your host, Dennis Scully. Every week I'll be speaking with leaders and innovators from all corners of the home industry. My guests this week are Mike and Jennifer Gracie, a brother and sister team that makes up the fifth generation of family leadership behind Gracie. Founded in New York in 1898, Gracie hit its stride in the 1920s when it began importing hand-painted wallpapers. Over the decades, it built a relationship with a studio in China to produce exquisite custom work. Along the way, servicing the iconic decorators of the past century, from Elsie DeWolf to Mario Balwada to Alexa Hampton.

0:50I spoke with Mike and Jennifer about riding the ups and downs of the trade war with China, the unique charms and challenges of hand-painted silk, and why, even as wallpaper goes in and out of style, Gracie endures.

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2:46Yes. Spirits were a lot lower the last time I was here. There was a sense of real despair and for legitimate reasons. It was grim. It was grim. It was grim. But now, and we should say, Mike, as you talked about, as we do on the show lately, we have to timestamp. Yes. Right? So it's Monday, May 12th. Big news this morning. Exactly. Big news this morning. So what was the news that you heard, Jen? So the news this morning, I woke up to the headline on my phone that negotiations had gone well in Switzerland and that tariffs are being reduced to 30%. Shock. Yeah, from$145 plus. We were at$7.5 on inauguration day.

3:29So the additional$145 had us at that net of 152.5%. So if we bought$100 worth of hand-painted wallpaper from our China studio, we'd pay$152.50 tariffs to U.S. Customs and Border Protection. And we actually did that for about six weeks or so for several shipments. So it was very expensive. Okay, so you actually experienced the tariffs. Immediately. You paid them? Okay. We did. Yeah. There was no stopping because we were fulfilling client orders that had been placed, being produced on a two-order basis and had to be delivered to meet their deadlines. Right. And you had sent out, if I recall, a communication saying, well, tell me exactly what you communicated to clients about what your short-term plans were, at least.

4:17Well, we spoke as a family and Mike and our dad and my son, Zach, and I and decided that we would not raise our prices and not put in a tariff clause and hold out for as long as possible because things have seemed so tumultuous. And we wanted to try to be relative calm in a sea of uncertainty. So that was our plan. And we hoped that it would only be a couple of weeks, hopefully, before the tariffs were reduced. And it wasn't a couple of weeks. And then we hoped it would only be a couple more weeks. And they didn't come down. So it was a nail-biter, and it's definitely been longer than we had hoped.

5:02But we're delighted, obviously, that we didn't have to put in those extra fees for our clients, and now will not have to, it seems. So this is for 90 days. We will see what happens after this. We were quite clear that we were going to continue to eat a significant amount of it, even if we had to pass it on at some point. So now that we're down to 30 % plus the 7.5, you know, it's, yes, I agree. I think it's quite likely that we're going to ride this out for 90 days, not affect our pricing, and see what happens next. Yeah, I did say that without consulting Mike first, and he didn't kick me under the table.

5:38So I'm glad about that. I wondered how those communications work, how one cuts the other off. Yeah. Well, I mean, it's interesting because so many designers have been sending me emails and DMs about what different vendors have been doing. And people sent me your letter that you had sent and said, oh, this was so nice that they were, at least for now, not raising prices, even though people were imagining that the tariffs were hitting you quite hard. because everyone who knows of you certainly knows that the product is coming from China and that you were most directly impacted. That's great. I hadn't heard that you'd heard directly from our clients with regard to that note.

6:22I was really proud of it. I think we put a really great message together and I think we got in early and made a decision about where we wanted to stand on this. And it was quite well received. I had a number of positive responses and actually zero negative responses to, you know, having sent it out to tens of thousands of contacts. We have no choice. This is a Chinese art. It's like saying, let's, you know, let's make Italian shoes in Iowa. It isn't an option for it to be made anywhere else. It's a Chinese craft that was invented there. It will continue to be made there. And, you know, we have a very strong relationship with our artist family who we love over there.

7:05And so it's very important to us to support them. Well, and I want to talk about that in more detail. What I want to do initially is talk about this moment in the context of your business because it's sixth generation, right, with the people that are outside and your fifth generation with the family business. This is a business that has been through multiple world wars and the Great Depression. So it's seen its share of challenges in the past. And Mike, I wonder if you can give a little bit of the history of the company for listeners who might not know the whole story. Sure, yeah. Well, I'll go all the way back.

7:49It was established by our great-great-grandfather, James Gracie, in 1898. He was probably a furniture refinisher type of a shop. And we unfortunately don't know a ton about him and his business. We know a lot more about our great-grandfather, Charles R. Gracie, which continues to be our legal name, Charles R. Gracie and Sons Incorporated. Which is a mouthful, which is why we go by Gracie. DBA Gracie. So Charles R., we know, really built the business into more of what we recognize today as an interior furnishings operation. and he was into hand-carved architectural moldings mostly. So he had an amazing shop with Italian craftspeople right here in New York City and dealt with the carriage trade in New York, some of the earliest interior designers like Elsie DeWolf and Macmillan.

8:42And so he had a business that he built up to really be something in the 20s, the roaring 20s, I guess. So we're probably talking about good times, right? Filling up all those beautiful rooms with ornate carved moldings. And then he had a personal interest in miniature Chinese porcelain that he collected through a dealer in Beijing, a gentleman by the name of Ed Barrett, who I actually found his ancestry page, and there's a great picture of him, a real dandy and man of the world, born in San Francisco and made his way all around the world and became a dealer in antiques out of Mongolia and Beijing back in the 20s.

9:24So he was introduced, Charles R. was introduced to a hand-painted wallpaper studio in 1927, and that's how we got into, that studio was in Beijing. And Charles R. felt he could sell anything that wasn't nailed down. So he had a new product that he couldn't wait to sell in New York, and that was quickly followed by the Depression. So first roadblock to the development of a hand-painted wallpaper business. Anyway, so then World War II, of course, comes along and there's embargoes and nothing can be imported. And they sort of get through that and recover a little bit. And then the communist revolution took place in 1949.

10:01And our studio was run by nationalists. So they had to flee to Taiwan. And that was a whole shakeup as well. So it was a rough start. Well, you mentioned Elsie DeWolf and I mean you did – and Macmillan. I mean you did have these great designers of the day. and there was a wonderful picture that I saw of a receipt from, was it the Condé Nast penthouse apartment or something? Oh, the purchase order from Elsie DeWolf? Yes. Yeah, that lists hundreds of panels of wallpaper and a grand total of$200 at the bottom. I wonder what the profit margins were for this business. I can just see Charles R getting to the bottom of the list.

10:39He's like, well, we've got a couple of dozen rolls here and a couple of panels, 12 panels. Call it 200 even. Well, but it seems, I mean, despite all of the many challenges, it seems like no matter what period in history you look back in, the big designers of the day were customers of the business. Is that fair to say? Very fair to say, yes. Seems so, yeah. People do sometimes say, oh, you're so lucky wallpaper's having a real moment right now. But luckily for us, there's always been enough of a moment for a very niche business that is our sort of hand-painted wallpaper. Enough people have always been very interested in having a unique room that will never be a repeat of anyone else's room.

11:26So we're fortunate to do what we do. There's an enduring appeal for hand-painted Chinese wallpaper. It's clear for so long now. that sort of opulence that it brings to a room and this beauty and specialness. Looking back through the decades, the antique wallpapers that we were involved in, Blair House and Winfield House, going back to the 50s and 60s and the interest in these wallpapers as they were introduced, it really endures. Well, and we joke about wallpaper going in and out of fashion. And certainly, I mean, it sounds like it's been a fairly constant and steady demand. It has been. We don't feel the ebb and flow of wallpaper popularity in the way that I hear people often bring up to me.

12:14It does knock on wood. It does sort of, again, sort of endure. But yes, wallpaper is having a moment. How many times have I heard that in my 30 years? Well, and so to that point, what is it that Gracie wallpaper represents beyond what a typical wallpaper might deliver that has created this consistency? Or it seems to be so much more than just wallpaper, right? You tell me. Well, I think when you look around this office, you can see the level of detail, which certainly is unique to ours. And people really do love the fact that they can customize absolutely anything, you know, not just the background color.

13:00To answer your question, I think it's the exclusivity of it, isn't it? It's this personal aspect of it. They feel it's their wallpaper. You know, it's their – they've personalized their room. No two rooms are alike. Even if they order the same SKU, no two rooms are alike because we hand sketch it to the architecture. and the flow of the trees and the flowers and the birds and everything is unique with that same feeling of that particular design. So yeah, I think there is a feeling of it being something that is their own. And when something is done by hand, it's, you know, I say to people sometimes that this may not be the product for you because it's not made with machine-made precision.

13:38So sometimes people will look at our silk wallpapers and say, oh, I can see the seam. And I will say, silk is not for you then because you will always if that bothers you this is you will always see the seam yes we just can't get that darn silk to line up those seams um so i actually i love seeing those those little things that some people might call imperfections but that i see as being able to see where where that artist touched that paper and um i can look around my own home and and see things. But I love being able to see that handmade quality. So our dad says, you know, that we haven't really learned to do anything the easy way.

14:18And that's true. Things haven't really progressed all that much when it comes to the production of the wallpaper. Well, and I want to talk about that because this does seem to be such a complex sale and it's a lengthy process, even just someone considering and really understanding what's involved and then the time going back and forth and often many iterations along the way. So tell me, without getting too granular, I mean, take me through the sales process and what goes into it because there's quite a bit. Sure. Yeah. The development of a custom hand-painted wallpaper involves a lot of back and forth, a tremendous amount of detail, attention to detail.

15:05And they all do it. And of course, we expect that with a great degree of customer service and friendliness and accommodating approach to it. Because another Brian Gracie quote, me and Jen's dad, we never sold anybody something that they needed, right? They're buying a luxury product. They're buying something that's special. They better have a special experience working with Gracie as well. So our salespeople really do that. And I give them tremendous credit for the job that they do. But we love our interior designer clients. They are so essential. Homeowners get overwhelmed. They start to worry about the turn of every butterfly wing, you know, and the direction of every leaf.

15:50And they do tend to get bogged down in the details. And so designers are so important in helping homeowners see the big picture. And we couldn't live without them. Well, so help me understand. So I'm Alexa Hampton, who I understand is quite a good customer. She is quite a good customer. And we adore her. Alexa Hampton shows up and she has a client of hers that she wants to have Gracie wallpaper. Do you come on site? Do you look at plans? I mean, tell me a little bit of the discussion and the process. I love visiting homes, but it's rare. We usually do not. Usually, Alexa would come in with the elevations of a room, and it's lovely if she brings her client in.

16:36That doesn't always happen. Sometimes she will borrow several different designs, fully hand-painted panels, and bring those to the home to present to the client. And then we will take those elevations and do a design sketch for the room to show her how the entire design will look in the space. And we can do many iterations of that until she absolutely loves it. Well, and tell me, I mean, to that point, tell me some challenges that you've been presented with to the point of personalization or people wanting things. I mean, Mike's family is here playing a board game in this wallpaper. But I mean, tell me.

17:12We did actually have, we had one order where I think it was someone wanted a fox that they would see as they walked into a room. And they were concerned that the fox would not be making direct eye contact with them as they walked into the room. and we explained that since the fox was going to be painted in one place, it wouldn't be possible for the fox to be making eye contact from different entrances. So they wanted the fox to be able to look at them from wherever they came in. We don't do animatronic foxes. Sorry. We had a salesperson named Jay years ago and he was working on an extensive custom hand-painted wallpaper that was a landscape and figure scene.

17:53So it's like a lovely little Chinese village kind of a scene with mountains and people working in the tea trade or something like that. And the homeowner wanted to have their, like, I don't know, 84 Buick painted in the driving through the 17th century Chinese town. And I remember Jay's quote was, that's where Brian Gracie put his foot down.

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19:07To learn more, visit thibodesign.com slash boh. And now, back to the show.

19:18so alexa will have will have plans and and she'll take samples and and then the client agrees on some some color schemes and what they want yes tell me tell me what happens next and when because you've got this team in in china yes that as you were saying so this is late 1600s this art form comes to be. It did. This family that you've been working with for, it sounds like a couple of generations. Since 1960, three generations. Okay. So once Alexa loves the custom sample, loves the design sketch, the order goes into production. Right now, custom orders are being produced in about 14 to 16 weeks from start to finish.

20:01So each panel takes, depending on the design and the background material, about 80 to 120 hours. We don't put little orders before big orders. We don't feel it's fair. So we actually just do things in chronological order from the date we receive it. And I don't think that's terribly long. I think a lot of people are waiting for a custom sofa. For a hand-painted wallpaper from China? Yeah, I think people are waiting longer for some other things. There are some showrooms in this building that can't turn around a piece of furniture that quickly. We're not only artistic, but efficient. We always want it to be the last thing to go in anyway, because we have had some crying phone calls where our wallpaper has gone in first, and then they've moved in the furniture, and the leg of a sofa has been dragged across the wall, and then we've had to send an artist to touch something up.

20:48So we want it to be the last thing to go in anyway. Yes, I would think. Show houses are the scariest. Yes, when everything's being installed in two days, and everything's going up the staircase where our wallpaper has already been installed. It's going to be scary. Yeah. So tell me about what has created this efficiency in China. I would think even the transportation alone back and forth would require so much time. Well, we did far fewer custom orders back then. In most cases, we were just buying the wallpaper that they painted, and it was beautiful. And even when Mike and I were kids, we sold a lot more panels that were just in stock.

21:27Mario Boata would walk in and say, I need 25 panels to fit this dining room and we would just sell the next 25 panels in stock. So as our lead times got faster, we started doing many, many more custom orders. And eventually we stopped stocking any designs at all. It was only about 12 years ago or so that we decided to start stocking some designs again, thinking that people would like to just maybe buy a couple of panels to frame. We were surprised by the fact that we sold quite a lot of full rooms on an emergency basis. I'm hosting an emergency wedding this weekend, and I need to immediately install a dining room.

22:08So we were surprised by the popularity of the designs in stock again. So now we stock 12 designs, and we're about to add a few more. But still, the majority of the orders we do now are custom. People are willing to wait a few months to have exactly what they want. To have exactly what they want because that's part of the lure of all of this. And as far as the evolution of efficiency at our China studio, with all due respect to previous generations, it was a bit of a cottage industry type of approach in previous decades. And our current leadership at our China studio, they have like business degrees and all those things.

22:43I see. And so they think about things like running like a business and running things as efficiently as possible. So, yeah, I like to have us on the same page with regard to all those good things. And, yeah, that's a big part of it now. How big a team is it that works on the product? There's about 150 on staff there right now. So the vast majority of which are artists and then some managerial and then our owners that we work with on a regular basis. And are they solely producing for you? Yes. Or are they? Okay. Yeah. Hence the lead times. Wow. Okay. But now I understand a lot better. All those panels.

23:18Yes. Yeah. That's really tremendous. And did that grow and evolve over time? Were you always able to sort of feed them that level of business where they could build out to that scale? It's the biggest it's ever been. Is that right? Yeah. Yeah. Pretty much. I remember in fairly recent history, it was about half the size of the staff was about half the size, maybe 10 years ago, something like that. So was there a moment in time or was there something that led to this tremendous growth in that 10-year period? We've gotten busier and we've asked them to grow. Yeah, and we've doubled down on hand-painted wallpaper.

23:54It's our signature product. We do it well. The demand is there. So, of course, as a business, it makes sense to focus on that. We weren't thinking that on Liberation Day quite as much. We were like, what have we gotten ourselves into for a minute there? Why have we put all of our eggs in that? When will antiques come back into popularity? Wait a second. But, yeah, so. I do love antiques. I am waiting for them to come back into favor because I'm constantly looking for and buying antiques, but they do seem to have fallen out of favor. We used to have a much bigger showroom in the D &D building, about 10 ,000 or 12 ,000 square feet.

24:30It was the entire side of the building where we had a room just for rose, mendali, and porcelain. We had a room just for blue and white porcelain. We had a locked room for real treasures that were incredibly valuable. We had a room that was reserved just for incoming shipments of antiques because our parents used to go over to London every couple of months to fill a container of antiques. We had a room that was just lacquer. And as a little kid, you know, five, six, seven years old, I just used to love to walk around and read all the tags and look at everything. And I just always loved it. Always loved the antiques business.

25:08Yeah, I'm sure. And so can you pinpoint when the business started to transition? Because, I mean, to your point about antiques, there was this notion that this current generation wasn't going to be as interested in antiques. Your father, my father, obsessed with antiques. Brian Gracie would tell you that mid-century modern is a four-letter word. I think there was – I definitely heard him express that sentiment in the early 2000s when the antiques business seemed to really slow down. And it was all about mid-century modern. And I agree. And we can't shake that off. I mean there really was this sort of rage for it.

25:47And we did see that that was all first dibs kind of seemed to have, as I recall, kind of in the beginning. And, of course, now they're much more diverse. So, yeah, it was a shift, I think. I had a lovely chat last week in L.A. with Tony Freund of First Dibs, and he did say they seem to be making a comeback. I mean, it's certainly, I think mid-century modern has - Antiques making a comeback. Yes, yes. Did he take responsibility for killing off the antique business with all the mid-century modern? No, just like us, they went where the money was. Tony loves antiques, too, and I had a lovely, lovely chat with Tony.

26:26He's very nice. Yes. So, yes, I have hope. And I think everything is cyclical, right? Everything really is. Everything that goes away does come back again. I think Antis will come back because I do think people appreciate a layered look. And the way I live at home, I love living among things that I have collected over the years because everything has a story. And I walk around my house and it brings back fond memories. I don't want to live in a home that was put together in a day. And I think I was listening to one of your recent podcasts talking about designers. Slow design. Exactly. Exactly.