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I’m Josh Cooperman and this is Convo By Design with a new series called The Business X Design. I’m starting this monthly addition to the show for one reason, an important reason. The shelter space, industrial design, hospitality, architecture, home goods …this business of ours is one of the most important industries in the lives of those who inhabit the dwellings you design, those who work in the offices and stores architects create. Over the years and certainly post-pandemic, the business behind design has changed dramatically, but the coverage really hasn’t changed all that much. I love the design publications, I do and I always have, I predict that I always will because they showcase some of the best work being done today. I’m also frustrated by them because they don’t show enough of it, they continue for the most part to feature exclusively the celebrity, super luxury and trendy sides of the business. I get that because that is how it has always been. But I think there is a desire for more. So, in keeping with that idea, every month as long as I feel like it serves a purpose, I am going to showcase a new episode in addition to the stories behind design, that episode will showcase how the business is changing in real time. I’m going to bring you my interpretation of the data that is shaping our economy and external factors molding and shaping the state of the business today. Each of these episodes will be shorter, more concise and cover one single idea that I think you should know. With that, here’s the first episode of Convo By Design’s, The Business X Design. 

So you know, the following opinions are mine and do not represent or warranty any economic or future performance. There are no guarantees here, just ideas that have been constructed based on research so I suggest that you do your own research as well before acting on any of the ideas shared here. This is what those in the business call a disclaimer and it is meant to make sure you know that I am not giving you any financial advice, I am presenting ideas in the hopes that it gives you a way to perhaps think a bit differently about this business of ours.

When I record interviews, speak with clients and check in with people around the country, I have been asked one question with greater frequency lately, “Do you think we are going to see a recession?” I believe the answer to that question is “yes” but it also comes with a few caveats because that is not an easy question to answer. Why?

What is a recession? A recession is considered by many to be 2 consecutive quarters of negative GDP.  I read a Forbes Advisor article recently that sourced the origin of this idea back to economist, Julius Siskin in 1974. Since so many subscribe to this idea, it has become a part of everyday conversation as it relates to the health of the US economy just like the goal of 2% inflation by the Federal Reserve. If this is true, then according to the Bureau of Economic Analysis (BEA.GOV), with negative GDP growth in Q1 and Q2 of 2022, we have already seen a recession this year. It gets complicated because Q3 saw a GDP pop of 2.9% and this is purely a guess but I think Q4 will see positive growth as well. I’ll tell you why in a moment. I also have a few thoughts on what we’ll see after that in the first 2 quarters of 2023 and why.

Before I get further into the nuts and bolts of this, Convo By Design is more than just a podcast. I have spent the past 10 years building a production company and consulting firm that develops brand ambassador programming, CEU’s, live event programming as well as branded content for companies in the design and architecture industry including; designers, architects, furnishing companies, showrooms and others in the trade. We have content producer talent in every region of the country and can help you grow your design business through brand development campaigns, social media and CEU content development and production as well as content consulting and live event programming and production to help you build strong and meaningful partnerships that will help you grow and strengthen your design business. For more information, message me @ConvoXDesign with an “X” on Instagram or email convobydesign@outlook.com.

I have been following a basket of stocks that are inextricably tied to home improvement, development and design. I am going to continue tracking these stocks to see what connections materialize. Keep in mind that stock performance is a rear facing indicator but, the best way to predict future performance is to look at what it has been in the past. Here are the stocks I’m following;

Bassett Furniture BSET

Ethan Allen ETD

LazyBoy LZB

Flexsteel FLXS

William Sanoma WSM

Home Depot HD

Restoration Hardware RH

Mohawk Industries MHK

Middleby MIDD

Whirlpool WHR

Sherwin Williams SHW

American Woodmark AMWD

Year to date in 2022, this the overall performance of a few of them with some thoughts (mid-December),

Bassett Furniture BSET

Ethan Allen ETD

LazyBoy LZB 23.32, down from 36.10 – 22 saw significantly higher earnings and revenue from the 3 previous years.

Flexsteel FLXS

William Sanoma WSM

Home Depot HD

Restoration Hardware RH

Mohawk Industries MHK 97.50, down from 100.24 at the start of the year. Revenue and earnings were up in 22 versus the past 3 years. 

Middleby MIDD

Whirlpool WHR 141.49, down from 227.04 – Revenue and earnings were up in 22, after 3 years of declining revenue. 

Sherwin Williams SHW 240.47, down from 243.48, the 2022 high.  Revenue was up in comparison to the past 3 years, earnings were not, but they were fairly close.

American Woodmark AMWD

What I see from this is that this sampling shows 4 mainstream companies with higher revenue and 3 of the 4 with higher earnings as well. This tells me that consumers are still buying, improving and designing. At the same time, according to the BEA again, the US savings rate was 3.2 % in July of 22, 2.8% in August, 2.4% in September and 2.3% in October. That makes sense because of inflation. 

The PCE, defined as “A measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services. The PCE price index is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior.”

Year over year PCE rose 6.2 in August, 6.3 in September and 6.0 in October. Monthly saw a 0.3 rise in each of those 3 months.

So we all get it. Prices continue to rise, savings continue to fall. But many if not most of the companies selling the products continue to record higher earnings over the past 3 years. 

I should also mention that my exit interviews with my guests indicate that some projects have been pushed further out in the calendar. A few have cancelled, and many of those cancellations are replaced with other projects looking to expedite. This is where I think the business gets really interesting. I do believe there will be another technical recession again in q1 and q2 of 2023 but after that.… I think it will be bumpy and bouncy with interest rates dropping, inflation rates dropping. I also think as the supply chain continues to free up, that could, in and of itself, create new supply delays as many clients green-light projects when they feel things have stabilized.

Supply Chain & Logistics

In a recent Los Angeles Times article, it notes that the supply chain backup of 2020 is relatively dispersed now. Because the ports of Los Angeles and Long Beach represent 40% of U.S. imports, some of that business is looking elsewhere. Traffic in these two ports in down and traffic in New York/ New Jersey ports is up. If you specify goods from abroad, this will affect you, your clients and your projects. The time has come for those in the design trade to understand more about the logistical activities of their partners.

Rise of the Workroom, Provenance & Sustainable Design

The past few years have seen a demonstrable growth in a desire for clients to know the story behind the products they bring into their homes. They want to know who made it, what it’s made of and where it comes from. My guests and friends in the business have explained to me that clients want to know this because it adds meaning to their purchase. It adds a special nature to the design and it creates a narrative for their lives and the lives of their family. I believe this wholeheartedly and I believe this concept is going to remain true for quite some time. Because of this, and the amount of competition, if you don’t already have your roster of specialists, builders, artists, workrooms and trades… The first part of 2023 should be spent solidifying your relationships. The workroom and the supply chain also happen to be inextricably tied because if you can’t get that material to your fabricator, how can you hope to complete the piece? You can’t. 

Sustainable design is more complicated these days. Is the material made of virgin or recycled material? How far did it have to travel to get to the project? Who made it and were they paid a reasonable wage? What else is in that material from a chemical composition standpoint? Does it off-gas? Were there chemicals used in growing the material? Is that textile pattern original? What is the origin? Some food for thought here… The idea of cultural appropriation has been a hot topic in the fashion industry lately. I have linked a few articles in the show notes if you care to read them. Some are staring to call use of indigenous patterns in textiles “plagiarism”. Which technically could be true. I mention this because this idea is gaining steam and there are major manufacturers who have been accused of appropriating patters and ideas for use in their own work. It’s a fine line, but certainly one that appears to be gaining steam and one I think every creative needs to be aware of considering how designers are shooting more projects and publishing them to social media. On the other Side of this, there is an amazing opportunity to work with indigenous people to use their products in your projects. Not only do you get to share the story, you also have an opportunity to obtain a new source, directly.

Key Findings- I also believe that 2023 will be that “moment” just about every creative I have spoken with since August 2020 has been looking for to catch their breath. Catch your breath and plan accordingly. 

What does that mean? I think based on the sticky inflation numbers, high interest rate environment, low savings numbers and higher cost of both raw materials and high cost of labor: The U.S. will see sporadic drops in GDP with the greatest opportunity for another technical recession in q1 and q2 2023. It could be one quarter or it could be two. I believe that the need and desire for a well designed home has become universal and that budgetary limitations notwithstanding, the strong consumer will continue to spend but it may be at lower price points. Perhaps it’s a shift in the high-low mix to more on the lower end, or that could translate into more “vintage” or locally, artisan made. Something else for the design professional to consider… Office design, hospitality, senior care facilities, school design, restaurant design, civic space… all have undergone major shifts in thought about what these spaces are and how they can be redesigned to better serve those who use them. This disruption to the marketplace will also create new opportunities, and a new client base. 

Speaking of competition, there was a time when most designers were extremely concerned about e-design and taking over the business… A recent visit to a few brought special messages of discontinuation. Check the show notes for images from their sites. You can also find a link to an interesting article from TechCrunch about Modsy’s discontinuation of services. A similar story to that of the original Laurel & Wolf, Homepolish and Decorist. 

Is e-design a thing of the past? Not a chance. I was in broadcast during the time of Napster. Music is now readily available online and what’s interesting is that according to Zippia, Global paid music had 8MM paid streamers in 2010 compared to 523MM in 2021. I think the e-design industry is in its infancy. I think the growth will be driven higher when the major brands and designers adopt it using their own talents to drive the business, not merely a discount site for creative talent but a true marketplace for creative talent to offer their services using their actual remote and virtual design skills. Keep checking this space because ewe will be following this and developments as they occur. 

2023 is shaping up to be another interesting year in design. As I have for the past 10, I will be bringing you the stories from across the globe here o n Convo By Design as well as design business insights on CXD’s The Business X Design. Thank’s for listening. Please make sure you are subscribing to the show so you get every episode the moment it’s published. 

Until the next episode, be well and take today first.