What an Alaskan Furniture Company Tells Us About Tariffs

0:00Your best restaurant location gets 5 star reviews. How do you make every location like your best location? Your best paper mill has been operating at peak productivity. How do you make every mill like your best mill? Your best data center has optimized every drop of water. How do you make every data center like your best data center? The answer is Ecolab. Better performance, better outcomes, better impact. Ecolab. Now every location is your best location. How many vendors does it take to meet all your organization's food needs? Just one. EasyCater, the workplace food platform that lets teams order from a huge variety of restaurants, over 100 ,000 nationwide, all through a single vendor.

0:45In addition to all that variety, EasyCater also gives you full visibility of your organization's food spend with invoicing, centralized reporting, and seamless integration with expense management systems, all on one platform. Easy Cater, your business tool for food. To learn more, visit easycater.com slash podcast. Running small and medium-sized businesses is hard work. Business owners need to be sure their ads are working just as hard as they do. Amazon streaming TV ads makes your marketing dollar work harder. With Amazon ads, trillions of insights help small and medium businesses reach the right customers that matter.

1:24Your ads will show up during the shows the people are actually watching. And measurement tools show you what's working the hardest. Gain the edge with Amazon ads. Bloomberg Audio Studios. Podcasts. Radio. News.

1:52Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway. And I'm Joe Weisenthal. Joe, can I start this conversation with what will seem like a random story, but I swear I have a point. Go on. Okay, so a long, long time ago when I was visiting my mother in Beijing one winter, she was working out there. Beijing winters are really cold. They're really dry. And I was sat in her apartment and all of a sudden I hear this giant crack and I run downstairs and it turns out the console that the TV was on had just like completely split in half because the air was so dry. Whoa. And it was so freaking cold.

2:27And I never considered that you could have weather locations where the weather was so extreme that you actually had to factor that into your furniture. I never thought. I mean, I do have one sort of connection to that, which is we're going to start bragging about our international experiences, etc. You know, I mentioned my family lived in Malaysia for a year. We bought this big round table that we brought back with us to Illinois. And I do remember now that there was some discussion about like, oh, this was designed for the humidity of Malaysia, et cetera. Maybe have some natural give, et cetera, but it's fine.

3:00But it's funny you say that because, yes, now I would not have remembered that otherwise. All right. Well, the reason I bring it up. We're so sophisticated in international, aren't we? So sophisticated. I hope everyone's factoring in climate considerations into their furniture. But there is actually a reason that I'm bringing that up, which is we are in Alaska. Yeah. And Alaska does have cold, very, very dry winters. And it's also very, very large. It's very hard to get things into and out of the state. And so I think it would be really interesting if we actually talked about the furniture industry within Alaska.

3:33We need no more introduction. We need no more. Let's do it. All right. So we do, in fact, have the perfect guest. We're going to be speaking with Dave Cavett. He is the CEO and founder of Furniture Enterprises of Alaska. So really the perfect person to speak to. Dave, thank you so much for coming on All Thoughts. Thank you so much for having me here. So tell us about Furniture Enterprises of Alaska. What exactly are you doing there? Yep, we are furniture retailers. We have 14 stores under six different brand names. And so we have our stores are Sadler's Furniture, Williams & K Home Furnishings, which is more design and custom order products.

4:14Sadler's is mid-market. We have two Ashley stores that are a licensee of them. We have three mattress firm stores, a Lazy Boy store, and a Ultimate Mattress Store, which is a higher-end mattress retailer. So what we do is we segment the different demographics in the marketplace and then combine the operations back behind it to be able to deliver the furniture at a lower cost than other companies. And tell us a little bit about, you mentioned the size of the retail footprint. Tell us a little bit about the history. How did you get into this? Are you a native Alaskan? We learned the term sourdough recently.

4:56Are you a sourdough? What's the story of you and your company? Yes, I am a sourdough now. I am 69 years old. I grew up in Central California in the farming area, and it was not the right fit for me. So two weeks out of high school, I hitchhiked up here, kind of thing by myself. Amazing. All right. That, I did several different odd jobs, short term as a commercial fisherman, but we sunk the boat. That was not good. I was a janitor and bedmaker on the North Slope during the building of the pipeline. And then I went as a day laborer to a furniture company and stayed there ever since. This is already really fascinating.

5:38So one thing that Joe and I are learning about Alaska in real time is it is incredibly cyclical and sort of you have these boom bust cycles that are tied to what's happening in the oil industry. So you mentioned making beds when the pipeline was getting constructed. Is it fair to say that furniture sales follow that boom bust cycle as well when there's a lot of activity, lots of people moving to Alaska and building stuff? Do you suddenly see demand for furniture ramp up? And then when it kind of goes bust, do people start selling their, I don't know, their beds on the corner? Yes, we definitely have our cycles.

6:11They're not as extreme as they once were. The largest of those booms and busts was the building of the pipeline. And then the first years of the oil revenue for the state that came in, and then the state built a lot of infrastructure. And those were booming times. And there would be whole subdivisions built on spec and that type of thing as it was growing. And then the oil prices dropped to around$8 a barrel. and the construction stopped and the people moved out of the state. So back in the mid-1980s, Alaskans knew all the terms of your house being underwater and people mailing their keys back to the bank and that kind of thing.

6:51And about a third of the homes in Anchorage at that time were walked out on, vacated by the owners. So that was worst of the bust. How did the furniture, how did you, at that point, had you already started your furniture operations? Like, where were you in your career at that point? Yes, I was then a half owner of the furniture company that I'd gone to work for, and it was just terrible. I mean, revenues dropped like 70 % type of things. We had 14 banks and savings and loans at that time, and half of them were closed by the FDIC or whatever the savings and loan one is called again at that time.

7:26And so we ended up having to do workouts with the banks and the FDIC and people along that line. Sorry, before I forget, were you really on a commercial whaling? Oh, sorry. Were you really? Listers. Yeah, no, no, no. Listeners need no further context. Does everyone know that Joe is obsessed with Moby Dick and whaling at this point? To the point where you accidentally introduce it into sentences. You're on a commercial fishing boat. Did it really crash? And were there any sort of, did that, you know, is there lessons from business that you could take from the allegory of going down on a ship? Yeah, I think it would be to, it didn't go down with us on it.

8:06It did go down. And I think it would be to interview the person leading that. I just got up to Alaska. I met another fellow who was the same age I was, but we were both just turned 18, but he had a fishing boat and said that I could work on it. he wouldn't pay me, but I'd get experience. And we went out and he ended up not knowing what he was doing. And we got caught into a storm, heavy seas, and that boat took on a lot of water. And the engines died. And we were hailing a mayday out in the Gulf of Alaska. And luckily, another ship, a tanker, heard it and said, do you want us to call the Kodiak Coast Guard for you?

8:53We said, absolutely, because we are sinking. And they came back and said, boys, we've got bad news for you. It's too rough. Oh. They're not coming. And they came out and got you? That tanker did. Yeah. The Coast Guard, it was too rough. The Coast Guard couldn't, but. Yeah, couldn't do it. And so they came out, and it took us a little while of the boats bumping together. They were 550 feet long. We were 42 feet. And it slapped together at one time, and they'd hung a ladder off the edge of that boat. And I saw that and I scrambled up to the... Must have been the most satisfied ladder you've seen in your whole life.

9:26Absolutely. We thought we were goners, you know, because you only last half an hour in that cold water. So... Okay. So no more fishing. From fishing to furniture. Yep. What should people know about furniture sales in Alaska? What are the special considerations versus, say, furniture sales in the lower 48? Yeah, the biggest thing that separates us from the lower 48 is the additional freight cost to Alaska. You know, we're a long ways by road. We only have the one road, the Alaska Highway, which goes through Canada and up to us. And only heavy equipment really gets shipped over that. Everything else is shipped to the Port of Seattle and then put onto ships.

10:10And it takes three days for those shipments to arrive to us. and we pay more for that freight from Seattle to Anchorage than we do from the containers that we bring in from China, Vietnam, Malaysia, and those areas. Yeah. So explain that more. Intra-U.S. shipments are costlier than trans-Pacific shipments. Yes. I just checked because I figured it might come up. We're paying currently$1 ,900 China to Seattle. Then we have to reload that onto a carrier that can bring it up to here. And it's about$9 ,000 from Seattle to here. Wow. Is there a Jones Act? Sorry, I have to ask. Is there a Jones Act angle of this story?

10:56Jones Act is a part of that for sure. Jones Act everywhere. Can you not get shipments direct from China? Could that happen? No. There is nowhere near the volume out of the Anchorage area and where the port goes. there's maybe 650 ,000 people. We have about 760 in the state, I think. And so we just don't have, there's just no economies. So I have to imagine that one of the keys to running a successful furniture business in Alaska is you have to be really, really good at shipping and logistics. And to some extent, it sounds like you're basically running a distribution center for furniture, right?

11:34Is that the thing that you're sort of competing on? Or is that the area of expertise that you really have to have in order to be successful in this business? I would say yes. We are good at the merchandising. We're good at the market segmentation, the advertising. We're good at everything, but we excel in logistics. We have a full-time person. We're not that big a company, but a full-time person that puts together those and is always negotiating the rates and trying to make sure that every container is filled to the maximum that can be. We can't pay for dead air space and containers. What was 2021 like?

12:10So, you know, we as a podcast first started getting really interested in, you know, shipping and logistics and freight is very important because like everyone else, we didn't think about it much in the 2010s when there was plenty of excess capacity. And then what was 2021 and 2022 like during those sort of extreme levels of both inflation and, you know, just bottlenecks in the supply chains? You know, those were trying times for us, but at least everybody was in that same boat, kind of thing. And we had to put out our orders where we usually try to put them out a few months in advance. We were having to put them out up to eight to 10 months in advance.

12:53And of course, the freight rates were coming in. We had been paying about$1 ,700 a container Trans-Pacific before that. And I think our peak was around 22 ,000 for a container. But the demand was there, you know, and during that time, it was the biggest boom for the furniture industry that's ever been because as people in COVID times could not go to the bars and the restaurants, they weren't traveling and they decided to take that money that they usually spend to other places and put it into furniture. And so we had to pass on those costs to the consumers, of course, but it happened and it worked.

13:33At times like that, how does it work in terms of getting inventory? Because I imagine it's not just Alaskan residents that want a whole bunch of new furniture because they're stuck inside and everyone feels like redecorating their house at that particular moment in time. People in the lower 48 are doing the exact same thing. It's probably not enough furniture stock to go around at that particular moment. How are you actually placing orders? And I guess, how does it work in general when you're buying inventory from big brands like a Lazy Boy or like a mattress firm? Right. That's really two different things.

14:08One, if we're talking about during the COVID times, we had to align ourselves and ensure that the people that we're placing the orders with would actually ship them. And we put a lot of focus into that. We did narrow down our selection to people that could get it shipped to us finally, even though there was rolling delays on that at all times. And then along with the manufacturing delays, then they would go and put the containers into the Vietnam or China ports, and you couldn't get the bookings on the shipping. Right. It was overburdened type of thing. But it's different now. It's back closer to how it has been in the past.

14:47And we go to the furniture markets. We go to four of them a year and we select the items. And then when we bring something into our showrooms, we start the backup process and ordering and what we think demand is going to be. We do keep those items on our showrooms and then we sell our back stock and we sell into incoming stock. So we're keeping a close hand on when the arrival dates are going to be so that our sales staff can say, this is out of stock right now. It's coming in in three weeks. And we can even book a delivery date from that point. I didn't realize there are furniture markets, but I guess that makes sense.

15:28So the idea is these are big wholesale furniture markets where you have the wholesalers unveiling what they might have available to the retailers every year? Yes. There's two in High Point, North Carolina, and then two in Las Vegas that we attend. The ones in High Point, well, you should find out a little bit about it. Yeah, we should. It is just a massive market that's tens of millions of square feet manufacturers displaying the new products.

16:12Your best restaurant location gets five-star reviews. How do you make every location like your best location? Your best paper mill has been operating at peak productivity. How do you make every mill like your best mill? Your best data center has optimized every drop of water. How do you make every data center like your best data center? The answer is Ecolab. Better performance. Better outcomes. Better impact. Ecolab. Now every location is your best location. For enterprise organizations, managing all your food needs is a tall order. But with EasyCater, you get a single workplace food vendor with the tools and resources to make it easy.

16:53Giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform. All while consolidating your corporate food spend so you can control costs, streamline billing and payment, and simplify reporting. EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. You're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic options plays on the side. The point is, you're engaged with your investments, and Public gets that. That's why they built an investing platform for those who take it seriously.

17:33On Public, you can put together a multi-asset portfolio for the long haul. Stocks, bonds, options, crypto, it's all there. Plus an industry-leading 3.8 % APY high-yield cash account. Switch to the platform built for those who take investing seriously. Go to Public.com and earn an uncapped 1 % bonus when you transfer your portfolio. That's Public.com. Paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for U.S.-listed registered securities, options and bonds, and a self-directed account are offered by Public Investing, Inc., member FINRA and SIPC.

18:10Crypto trading provided by Backed Crypto Solutions, LLC. Complete disclosures available at public.com slash disclosures. I want to talk about the contemporary economy a little bit. One angle that strikes me is very furniture relevant is housing. And due to interest rates, there's a lot of perceived stagnation. I mean, there is a lot of stagnation in the housing industry. In general, a lot of people aren't moving due to mortgage lock-in. There's not a lot of new construction happening right now due to financing costs. What are you seeing? I don't know much about the Alaska housing market, but what are you seeing in the Alaska housing market right now?

18:45And I have to imagine whatever is happening feeds into the impulse to buy new furniture or not. Yeah. Unfortunately, in 2015, Alaska, the oil prices took a dip. And when that went down, then the oil companies laid off their people and a lot of them. And since then, we've not recovered. So we're now in the 10 years of a recession, in my opinion. Home building in Anchorage has been very slight. Only 25 to 50 homes a year have been built in the past decade. And so each one of those is an opportunity for us to furnish. But it's been pretty slow. We've had a decrease in our population from about 305 ,000 to about 285 ,000, maybe somewhere in that right now.

19:36Home building in the rest of the state has been slow. The only place that is happening is in the Matanuska Valley, which is about 35 miles outside of Anchorage. Land is less expensive there. There's less municipal regulation and that kind of thing. So they're building several hundred homes out there a year, and that's our hotspot right now. Talk more about that. So when you see a particular area of Alaska booming or when you hear that, I don't know, there's going to be some new oil project built in one particular town or city, do you immediately start thinking like, well, maybe we need to open a store over there?

20:11Do you sort of direct your business to where that oil money is going? No. It's a good question, but no. Where the oil is developed is on the north slope of Alaska, and there is no town there. It is just the oil camps. The closest to that are some native villages like Barrow, which is now called Yupiavik, and there's another native village up there, but those are a few hundred people kind of thing, so no market. All the infrastructure is through the Anchorage area. Talk to us about tariffs. What substantively are you seeing on that front? Tariffs are troubling to me. I lean as a conservative. I'm not really, I'm not a Democrat nor Republican.

21:02I'm an independent, nonpartisan kind of thing. It's troubling, you know, because we buy product from China, but now there's all the tariffs that are happening there that can price out that product to the marketplace. Today, I heard that India is doubling from 25 to a 50%. And we have now switched over, just had recently switched over some of our imports to India. And I was looking at those yesterday and thinking, oh, those are a couple of good bedroom sets. So planning must be brutal. I mean, setting aside cost and we'll get to cost, just the idea of like any sort of forward planning. It's brutal right now.

21:43You know, if you're the size of a Walmart or, you know, these Home Depot or something, you can probably get the manufacturers to guarantee you prices. We are way under that level and we just have to take what they are going to add on to it. But they're into lack of confidence in how things are working out themselves. They're skittish. And so some of them, other manufacturers, won't ship if they think that there's going to be a sharp increase in the tariffs because they don't want to ship and then have the people they're shipping to say, not pay it. Not pay it. Yeah. Oh, interesting. Yeah. And what about just in terms of the added price from the tariffs?

22:22At the moment, are you planning to absorb most of that yourself or do you pass it on to customers in a state where, you know, costs are already pretty high just because it's so remote and everything has to be shipped in? Right. We're having to look at those and some of them we go hard back onto the manufacturers saying they're going to have to take on a lot of that. And they did originally just absorb portions of that and then started adding some back to the cost. And then we're absorbing some. And like retail, we're taking the markups where we can, but in some of it is too price sensitive and we're just having to eat that for right now.

23:00And it's too volatile. Yeah. I think I told you, Joe, but I went to, it was like a local British import shop. in, I think it was in Vermont recently. And so they import everything from the UK. It's like, come here to get British candy and British groceries. And they basically just stopped publishing their prices because the tariffs were changing on an almost daily basis. And they were like, you know what? It's too much trouble to try to update all our pricing to take this into account. So we're just like not putting them on. Yeah, say more about, because this is from the perspective of the Fed.

23:34I mean, this is the trillion dollar question about the degree to which tariffs can be passed on to the consumer or not, et cetera. And I'm just curious, like how you think about like pricing in general and how you sense when there's an opportunity to push price a little bit more, have the customer defray some of those costs or not, like talk just a little bit about what you're seeing on that front. Our pricing, even though we're pretty remote and everything like that, goes back to national pricing. And if we get too high in our pricing, then consumers will shop in the lower 48 and pay that additional shipping up to here themselves.

24:10So that's always something we always have to make sure that we're negating that difference. Yeah. Do you sense just in terms of like the economic cycle right now, like setting aside tariffs, how does end demand feel among consumers in August 2025 than it would have been in August 2024. Is there any slowdown in any of the segments that you perceive? Are there some segments that are more robust than others? Yeah, it's softer right now. And a large portion of that softness, I do believe, goes back to consumer confidence. And whenever the consumer confidence wanes, then they push off deferrable large ticket purchases.

24:49And we see that right now. Well, one of the reasons we wanted to talk to you is because you have, you know, furniture brands that cover a sort of spectrum of consumers. So you have higher end versus maybe, you know, more budget items. Do you see segmentation in consumer demand between, you know, maybe people who are buying slightly more modest furniture versus the people who are buying more higher end or custom? Yes. Right now and with my knowledge of the furniture industry nationwide is that, of course, the higher end is more insulated from that. And when it gets down to the starting price points that we have for people that say that are apartment dwellers, renters and stuff like that instead of homeowners.

25:35And with the inflation taking a bite out of their incomes, that's where we're seeing it hit us the hardest. What are you seeing on the labor supply, particularly, I imagine, like, movers or people who deliver the furniture or either retail workers in the showrooms, et cetera? How easy is it to hire right now? Not easy at all. It's a little bit better now than it was a couple years ago, but it is very difficult. Why? What's the constraint? Well, there's more jobs available than people. So what are the sectors that are like, where are they when you look at like, OK, there's some prospective employer.