In June 2010, this article won the Deadline Club Award for Business Feature Writing. The judges commended writer Jeff Chu for demonstrating, "a great nose for news along with persistence and dogged analysis. He exhibited the highest standards of journalism by identifying his subject and convincing key players to reveal hidden facts."
The Wigan Garden Spade is a thing of verdant beauty. Its hunter-green steel and sunny ash-wood handle evoke the pastoral fantasias of an aspiring gentleman farmer — a dwarf maple in your yard, perhaps, around the base of which you can, with Wigan in hand and Wellies on feet, conquer weeds and plant petunias. It's got history too: Smithies have been handcrafting tools at the same Lancashire forge since King George III sat madly on England's throne. Thanks to Design Within Reach, it can be yours for the queenly sum of $95.
Or it could be mine: I now want one, and I don't have a yard or even a potted plant. It's that combination of storytelling and compelling design that has propelled DWR from a Web-and-catalog-only startup 10 years ago into a major nationwide home-furnishings brand today.
Once upon a time, way back in the 1990s, America was a land of design philistines. Dwell and Domino didn't exist. On TV, people didn't trade spaces, nor did straight guys have queer eyes to help them remake their post-frat-boy apartments. Many of us still thought Ray Eames was a man.
According to the genesis story of Design Within Reach, it wasn't really the people's fault. We just didn't know. The finer things in life, which the enlightened residents of Europe had come to appreciate over decades of Danish-designed, Italian-made existence, weren't available to most of us. They were cloistered in showrooms open exclusively "to the trade"; only interior designers could give us the golden keys.
Along came a San Francisco-based revolutionary named Rob Forbes. He decided to seize those keys and share them with all of us ... who had the money. (The name Design Within Reach was never meant to suggest that we'd all be able to afford the lovely things.) In 1999, he launched a low-overhead business featuring an online store, an email newsletter, and a direct-mail catalog. These were more than just sales tools — they were the three main components of a nationwide introductory course in modernist design. He and his company became educators and tastemakers.
The branding was genius and so was the timing. Americans were ready to trade up in all aspects of their lives — from their takeout coffee to their homes to the furnishings inside. DWR rode this wave of consumer spending, splashing onto the stock market in July 2004. After its first day, the market valued the company at $211 million, an optimistic 70 times its 2003 net earnings.
Five years later, Design Within Reach's brand remains strong, but its business is a mess. Once a pioneering online retailer, it looks today more like an old-fashioned brick-and-mortar operation. Its past year has been unequivocally horrible, from hiring investment bankers in February to explore "strategic options" — corporate code for "we're in trouble" — to closing stores for the first time in its history to voluntarily delisting from the Nasdaq in July to seeing its market cap dip to just $4 million. In August, DWR got a much-needed lifeline $15 million in capital from fund manager Glenn Krevlin's Glenhill Capital Management, in exchange for 92% of the company. In October, the new leadership fired CEO Ray Brunner, who had presided over a series of failed attempts at renaissance.
Before his ouster, Brunner had painted the company's current woes purely as a product of the economy. But while DWR's sales did plunge by a quarter in September 2008, this isn't a story about the recession or even a simple corporate parable about overlarge appetites. The truth that has emerged from months of conversations with company insiders, former employees, design collaborators past and present, and founder Rob Forbes — in his first public comments since breaking his ties with the firm in 2007 — is that DWR has been a victim of its own unintelligent design. It veered from one ill-advised strategy to another, ranging from a craven knockoff program to a baroque pursuit of brand extensions, including an accessories boutique called Tools for Living, where you can buy that Wigan spade.
"We want to make DWR great again," Krevlin says. "We're doing everything we can." For a guide of what not to do, he only has to look back at the company's recent history. Given the depth of its woes, the tool for living that Design Within Reach's new leadership could really use most is one that it doesn't yet stock: a huge shovel.
Rob Forbes loves creation stories. On a blustery late-summer afternoon in San Francisco, we're still warming up in a cozy SoMa bar when he learns that gin is my drink of choice. He launches into a spiel about a local distillery called No. 209. "You can smell the spices, the juniper," he says, and insists that I just have to see its "amazing" and "beautiful" stills. I settle for the next-best thing: I order a No. 209 and tonic.
The company that Forbes built was as much about selling stories as it was about shilling furniture. To you or me, a Jens Risom lounge chair ($770) might be a convenient, even attractive arrangement of wood and fabric; to Forbes, it's the tale of one man's inspiration, written in maple and cotton webbing. In the first DWR catalog — 239,984 copies were sent out in July 1999 — "for every chair, there was the biography connecting the person with the product," Forbes says. "From the beginning, our brand equity was the sum total of the people behind it."
DWR tapped a wellspring of desire that most people didn't even know existed. "It woke up the American market to high design," says Shane Reilly, CEO of Decorati, one of the many online design resources that have popped up in recent years. "It paved the way." While provenance is ubiquitous today — we want to know the names of our chefs, our farmers, our font designers — potential investors questioned Forbes's business model 10 years ago. "The VCs told me it wasn't going to work because Americans were interested in cheap, cheap, cheap," he says. "Your only choices at the time were Pottery Barn — fashion furniture, seasonal products, and lifestyle — and Crate and Barrel, which had a minimal, mediocre furniture selection. Good design wasn't really available."
Even when a piece was available, you might wait months for it — under the old model, a sofa wasn't shipped or even built until you ordered it. One of DWR's original taglines was "in stock and ready to ship"; you could be sitting on that new piece in two days if you lived in San Francisco, six days on the East Coast. "We played on the desire for immediate gratification," Forbes explains. "If you really love something, you'd rather have it sooner than later." This inventory-heavy model wasn't cheap, but by focusing on Web and catalog sales, the company kept costs manageable.
It worked. DWR boosted sales of modern classics by giants from Eero Saarinen (60-inch marble pedestal table, $6,683) to Charles and Ray Eames (Eames lounge chair and ottoman, $3,049 to $4,799). It rapidly grew the market for European brands previously accessible only to the kinds of folks who jetted to Milan for the furniture fair. And it brought unexpected success to newer American designers who created original pieces for DWR, including Jeffrey Bernett (Flight recliner, $2,800) and Ted Boerner (Theater sofa, $3,880). "To their greatest credit, they've really honored designers," Boerner says. "It's largely thanks to them that I became a name."
Even as the economy dipped into recession in 2001 and DWR's dotcom-era peers died off, the company grew. Thanks to its well-designed magazine-like catalogs — Forbes hired the New York firm Pentagram to create the DWR logo — and Forbes's accompanying email newsletter, "Design Notes," the company won a following even among those who could not yet afford most of its offerings, and acquired the nickname Design Not Quite Within Reach, a moniker more affectionate than arch.
But after Forbes stepped back from day-to-day management in 2001 and was replaced as CEO by former Eddie Bauer chief Wayne Badovinus, DWR began to chase growth in the run-up to an IPO. It added stores, which it calls "studios," rapidly — from just one in early 2002 to 63 in 2006 — nearly all in high-rent districts in major cities. "We got cocky, silly, fat," says ousted CEO Brunner, who as DWR's real-estate chief oversaw the logistics of expansion. "When we went public, the feeling was that we could have a 250-store business in 10 years. I don't think there are 250 DWR stores unless you water down and become Pottery Barn Modern."
In the spring of 2006, the board replaced Tara Poseley, a former Gap exec who had succeeded Badovinus but lasted only seven months, with Brunner, who had retired just two months before. A no-nonsense coal-miner's son — as a child, he says, "I was so fussy my dad thought I was gay" — he speaks bluntly and confidently, frequently alluding to things that obviously smart people allude to, including gnosticism, Philip Johnson, and Maslow's hierarchy of human needs. (A Mensa plaque sat behind his desk.) With a textbook poker face atop a portly body, he has the look and the presence of a dad that you never want to disappoint (or else), and his self-assurance seemed perfect for a company in search of a compass. "His message was right: We were on course and we were chugging ahead," says one ex-DWR staffer.
His honeymoon lasted perhaps six months. Forbes, who had wanted to depart sooner but remained on the board to provide continuity, says that DWR quickly became "the Ray Show." Brunner unleashed a flurry of moves to restructure the company. He ditched DWR's in-stock-and-ready-to-ship strategy. He ignored some board members' entreaties to close underperforming studios and even intensified his focus on the stores at the expense of the Web site, whose production was outsourced. Worried about the strengthening euro, he deemphasized the newer European design that Forbes favored, putting a much greater emphasis on better-known but lower-margin classic designs by modernist greats like the Eameses. He added pieces inspired by his own likes, including a club chair that the company named the "Ray," based on one that Brunner saw in a Parisian flea market.
The company's finances seemed to improve: 2007 resulted in a revenue peak of $194 million and a small profit, and Brunner says DWR was showing considerable year-over-year financial progress in 2008 — until the economic collapse in the third quarter. "We got hit literally overnight," he says. Sales from the third quarter of 2008 onward have consistently been about 30% below what they were in previous years.
But DWR's financial reports before the crash reveal that the company was hardly in robust condition. In the second quarter of 2008, DWR's same-store sales declined 3.2% and the company posted a net loss of $159,000, an improvement from a $575,000 deficit in the same quarter of 2007 — but only because DWR recorded a tax benefit of $541,000 from the previous year's loss. Sales through DWR.com fell 3.3% in 2007, and in the first half of 2008, they sank 12.3% compared to the first half of 2007.
As these challenges accumulated, Brunner slowly transformed Design Within Reach. It became a company that looked less and less like the bold startup that revolutionized the design sector and more and more like the plodding retailers — Eddie Bauer, Gap — where he'd spent so much of his career.
The original Design Within Reach studio sits on San Francisco's tree-lined Jackson Street, in the shadow of the Transamerica Pyramid. DWR always tried to put its stores in notable buildings; this one lives in an elegant, three-story former liquor warehouse that made it through the earthquake and fire of 1906. The building's survival inspired local editor and wit Charles Field to write, "If, as they say, God spanked the town for being over frisky / why did he burn the churches down and save Hotaling's Whiskey?"
Step through the doors — which still bear DWR's old tagline, "The source for fully licensed classics" — and the first piece of furniture you'll see is the Dover credenza, a nearly 7-foot-long American-made piece distinguished by the louvers on its doors. Available in veneers of ebony-stained oak or walnut, the credenza costs $4,000. What the saleswoman can tell you, if you know to ask, is that until last year, DWR carried an extraordinarily similar credenza — in form, function, and price — called the Sussex. The Dover "is a replacement," she says. "It's the same, except sturdier."
Ronda 116 Chair // Aldo Ciabatti
Around the corner from the Dover, there's a wall with a montage of portraits of designers who have worked with DWR; one of them is Terence Woodgate, the Briton who created the Sussex. In September 2008, he got a call from the Sussex's manufacturer, the Spanish company Punt Mobles, which had just received a letter from DWR canceling a large order. Design Within Reach had swapped it for the Dover, telling Punt Mobles, "They could not justify the carbon costs of importing from Europe," Woodgate recalls. And because the Dover differs slightly from the Sussex — its legs, for instance, are slightly thicker and made of aluminum, not steel — "they also said it was not a copy."
"But it is," Woodgate insists. "They're clutching at straws to justify plagiarizing a design." DWR's Web site credits the Dover to DWR Design Studio, a fact that infuriates Woodgate. "I remember the exact moment I came up with this design," he says. "I saw this fisherman's hut that was covered in clapboard — only the door wasn't. I thought, What if the door had clapboard on it as well? That was the inspiration. I wonder if they remember their moment of inspiration."
The replication of the Sussex is startling for two reasons. First, the original had long been a DWR star. The company had included it in every single annual report since going public as an example of DWR's "design exclusives" — products not available anywhere else in the United States that the company believed to be "future design icons."
Second, Brunner has been a vocal defender of design integrity. Two years ago, when the manufacturer Emeco won trademark protection for its iconic 1006 Navy aluminum chair, which DWR stocks ($415), he hailed the decision in a public statement. "If the creative minds of today and tomorrow do not believe they can protect their ideas and the benefits that provides, they may stop having them," he wrote. "Intellectual property is perhaps the single greatest asset humankind has — it needs to be nurtured and protected."
Yet in early 2007, say three former DWR employees, the company began systematically copying popular pieces such as the Sussex. "The board was screaming for margins to improve, and this was seen as a quick route to do it," says one, who requested anonymity to avoid breaching a nondisclosure/nondisparagement agreement signed upon departure from DWR. "There was a running list of the top-selling products, and we scoured that to see if we could source it elsewhere. There was no way they'd touch the classics because there was so much talk of authenticity."
DWR focused mostly on popular European-made pieces created by designers well known within industry circles but less so among the general public. Board member Peter Lynch, a charmingly effusive retail executive with little design experience — "DWR has converted me and educated me," he says — gushes that "we're getting a lot smarter about how we source product." Midway through an interview in DWR's Upper East Side studio in Manhattan, he pulled me over to a sectional sofa called the Albert ($5,700) and told me to sit. "Isn't it terrific? This used to be called the Albero, but it's basically the same sofa. My brother has one," he says proudly. "It used to be made in Italy. Now it's made in America, from American leather. Bison!" ("It's not bison," says a DWR spokeswoman. "It's just called that. It's really cow.")
At least a dozen of the company's current offerings are essentially unauthorized reproductions of a foreign design. "Rather than saying, 'Let's come up with something better to replace it,' they said, 'Let's come up with something similar to what people liked,' " says a former DWR employee. French designer Christophe Pillet, who didn't know that DWR was copying his Tripod lamp until Fast Company directed him to the company's online catalog, says: "They are pirates and thieves, like the Chinese — except even the Chinese are calling me now to ask me to make something original for them."
Brunner saw DWR's strategy as "completely legal. We're not doing anything wrong." In every case, he said, DWR's product-development team improved on the original design. In most instances, the tweaks were small and not obviously better. Take Pillet's Tripod lamp. "We were inspired by it," says VP of marketing Chris Hope. DWR's version (also called the Tripod) "diffuses light differently. We changed some of the mechanics."
The strategy is a disappointing echo of a controversial decision Forbes made shortly after Design Within Reach's birth. He couldn't get permission from Knoll to sell Mies van der Rohe's Barcelona chair, and so DWR did an "inspired by" piece, to the original specs, called the Pavilion. Forbes emphasizes that DWR never tried to pass the Pavilion off as the Mies original, but still squirms and stutters over the decision to sell it. "I didn't feel that good about it... . It bugged me ... because ... as a designer ..." He trails off and finally continues. "Yes, it's legal to sell those things, but it's how you go about doing it. We all have our instincts about what you can live with. Some people are happy with breast implants and some aren't." Knoll finally allowed DWR to sell the Barcelona chair in 2005.
Then and now, DWR exploited the dearth of American laws on product reproduction. It's nearly impossible for a furniture design to win protection of its "trade dress," a legal term requiring the visual elements of a piece to be so distinctive that those elements identify the source. Even when it succeeds, that protection has historically been weak. "I looked up reported cases on furniture design," says professor J. Thomas McCarthy, a trademark expert at the University of San Francisco School of Law, "and I could only find one where the designer was successful."
Two companies have filed suit against DWR for trademark infringement. The New York furniture manufacturer Heller claims that DWR sells a knockoff of its Bellini chair, a well-known piece by Italian designer Mario Bellini. It has not gone unnoticed by industry observers that DWR's version is called the Alonzo ($88). "It's a middle finger to me," says Heller CEO Alan Heller, who was an original investor in DWR. Brunner denies that the names "Alan Heller" and "Alonzo" are related.
The Minneapolis-based design company Blu Dot sued DWR for the alleged knockoff of its Strut table, claiming that DWR even used a photo of the Strut to advertise its version, called the Metric. "Do they think that no one will notice?" says Blu Dot CEO John Christakos. DWR subsequently stopped production of the Metric ("quality issues," a spokeswoman said), and Blu Dot decided in late October to drop the suit.
During his tenure, Brunner was so confident that Design Within Reach would prevail in the lawsuits that the company didn't disclose them in its SEC filings. Nor was DWR's board informed. "I can't say anything about that because I didn't know until you told me," says architect David Rockwell, who joined the board in August. (Brunner explained to me that because the cases were "not material" to the company's prospects, he was under no obligation to disclose them.)
It would be one thing if DWR had borrowed an element or two and then built, say, a new credenza, in which case emulation would stay on the legit side of admiration. "That's like rap. You can sample other songs for a few seconds," says Antonio Larosa, chair of furniture design at the Savannah College of Art and Design and a DWR fan. "If you do more, that's stealing. The difference is, in music, boom — you have a lawsuit."
Discontent has steadily grown among formerly stalwart DWR supporters. New York-based textile designer Sandy Chilewich, whose rugs and mats are stocked by DWR ($280 to $600), says she's considering pulling her business and has been talking with other DWR designers about banding together to "tell them we don't approve." Eames Demetrios, grandson of Charles and Ray Eames and the guardian of their legacy, says, "DWR has been a great ambassador for the Eames story and DWR hasn't carried knockoff Eames product, but I think one needs to look beyond that. In the long run, we don't see our authentic product being sold next to knockoff products of any kind."
On a warm September evening, DWR's Tools for Living store in New York's Soho is packed with hipsters — thick-framed eyeglasses; skinny ties; business cards with titles like "stylist," "designer," and "architect"; lots and lots and lots of black clothing. It's the store's first birthday party, and so the guests — invited via DWR's email newsletter — are nibbling on appropriately mini cupcakes and sipping pink champagne. House music pumps softly from Geneva Sound System speakers ($979), which look like giant Legos, and with its light hardwood floors, high ceilings, and artfully spaced merchandise, the place feels like an Apple Store for housewares.
The crowd is totally buying the DWR vibe, if not the actual goods. "DWR products are more expensive, but it's hard to put a price on design, you know?" says Steve Haase, a Web developer whose past purchases include a Swedish fire starter ($25) and one cheese slicer ($22). Malik Starr, the president of a T-shirt company, adds: "There's nothing worse than going to someone's apartment and seeing the same mass-produced stuff that you have. You won't see this stuff at your friends' houses — and I think that's important."
Sussex Credenza // Terence Woodgate
This kind of consumer takeaway has been incredibly heartening to the DWR team, because hopes for Tools for Living aren't just high — they're huge. "We're looking at Tools for Living as the growth engine for the company," says Sally Yang, who runs the unit.
The ethos of Tools for Living is meant to be similar to DWR's: "Not ornamental and froufrou. It's easy to get sidetracked by bright and shiny," Yang says. "Everything has to be functional." (How to explain the function of a $200 wooden monkey from Danish designer Kay Bojesen? "Life is also about delight.")
The fall of 2008 was an odd time to launch a new business, but Yang says Tools for Living was conceived "when skies were blue and times were different." Brunner had been itching to sell accessories for years. "This is Design Within Reach, not Furniture Within Reach," he told me over breakfast, "and it seemed that there was white space in the market for someone to carry a broad range of accessories in a narrow band of taste."
In fiscal 2008, Tools for Living — with just two stores, one in Manhattan and one in Santa Monica, California — contributed 5% of the company's sales. (A third store has since opened in Newport Beach, California.) According to Brunner and Yang, the numbers have beaten their internal projections handily, especially given that the unit is, to use Yang's terminology, "still a toddler." DWR is now drawing up plans to open more Tools for Living stores; on December 2, it will create 20 pop-up shops in markets across the country as a test.
Brunner also launched two other offshoots, DWR Bath and DWR Kitchen, which he told me were ahead of plan. His comment suggests that "plan" was extraordinarily conservative, given that only one person purchased a DWR kitchen in 2009.
In Brunner's crystal ball, he envisioned larger Design Within Reach stores with both furniture and housewares, in the mold of Crate and Barrel, which "has done a respectable, intelligent job" with its retail layouts. And he imagined Design Within Reach becoming a curator of all kinds of things — and experiences — for lovers of the modernist aesthetic. " 'Lifestyle brand' is one of the most overused terms, but nobody has actually done it," Brunner told me. He was thinking beyond furniture and fire starters: How about DWR travel? "Could you take the interests the customers have, and work with the right person to take people to the Bauhaus or Le Corbusier's cottage?" And DWR homes. "Who better than us to vet them?" And DWR hotels. "Could you do them in Miami, Las Vegas, and Palm Springs?" And even DWR music, but only "certain areas of music — jazz, throat singing. A customer at that place in life is interested in these things, so the question is, What can you do to enrich that customer's experience?"
Three weeks after Brunner laid out this vision, the fat lady throat-sang for him: He was out as CEO.
In 2003, DWR republished How to See, a book by legendary Herman Miller design director George Nelson, who, in addition to creating some seminal pieces of 20th-century American furniture, brought the Eameses and Isamu Noguchi to prominence. Design's "basic rules," Nelson writes, "are not complicated: A designed object has to do what it was made for."
This is as true for a company as it is for a chair. DWR was designed to make money largely by educating America about modernism — its visual appeal, its unique stories, its integrity — and making prime examples of that design available quickly. These were its core competitive advantages. Under Brunner, many thought that the company had changed so much — moved so far away from its original principles — that it no longer did what it was made for.
Chicago 8 Box Shelves // Blu Dot
Reached at his Belvedere, California, home the afternoon after his resignation, Brunner was characteristically sanguine, if a bit defensive about his record. "We turned the company around. We got it through a very tough time," he told me. "But when you have a 92% owner, he'll go in the direction he wants."
DWR chairman Krevlin doesn't see it quite that way. "If we had not stepped in," he says of his capital infusion over the summer, "there might not be a company today." But he adds, "There was no intention of removing Ray at the time we made our investment." In the weeks and months afterward, "the information was building," he says cryptically, "and we felt we needed to make an immediate change."
As a guide to what's possible with DWR, Krevlin — who says he specializes in distressed retail — points to the rejuvenation of Restoration Hardware. He was part of the team that invested when it was on the verge of bankruptcy in 2001, and as a board member, he helped reengineer the company. In 2008, the private-equity firm Catterton Partners bought Restoration Hardware for $175 million. "When I invested, it sold tchotchkes and Mission furniture," he says. "Today, you may like it or you may not, but it's a higher-end home brand across many, many categories. There are parallels with DWR."
Brunner's exit was a "draconian move," Krevlin says, but one that was necessary to "reestablish the company's DNA." Though a new CEO for DWR had not been named as of press time, DWR Kitchen was quickly axed. Krevlin adds that DWR's new leadership is starting with two key initiatives. First, the company's original in-stock-and-ready-to-ship policy will return for core items in the catalog. Second, it will "reestablish strong relationships with the design community," Krevlin says. DWR's team is spending a lot of time talking with designers and vendors — "If there are people who are particularly pissed at us, I would like their names and phone numbers," he says — and the company is discontinuing products that could be considered knockoffs.
The positive news for Design Within Reach is that it retains enormous goodwill in that community. "It is a family member that makes one or two wrong choices, but you hope they'll get back on the right path," says Eames Demetrios. Sandy Chilewich adds: "I hope they survive this, because they have a great niche." And Forbes, who just weeks ago was struggling to feel hopeful about the company, says, "I am now more of an optimist about it."
All the drama of DWR's last few months makes me think of a print that Brunner had hanging behind his office door, across from a white Panton chair ($260) signed by Anna Nicole Smith (priceless). Created by the Brooklyn-based graphic designer James Victore, the image features a silhouette of a cowboy on horseback, riding off into the sunset. It's a curious piece, and tucked in that corner, it felt like a prophecy. Indeed, the words the end are splashed boldly across the scene. Reading them, I couldn't help but wonder at the time: His? The company's? For the moment, we have our answer.
Correction: In the original article we misidentified the designer of the Bellini chair.