Gold Standard

The Mitchell Gold Co. is bringing overdue change to an out-of-touch industry: home furniture. But unlike so many other mavericks, its primary competitive weapon isn't the Internet. Instead, the company is deploying a smart sense of design.

Mitchell Gold and Bob Williams started their furniture company from scratch in 1989 with blueprints for a couple of dining-room sets — and a strategic blueprint for how they could appeal to customers whose needs were not being met by the furniture establishment. "We were trying to attract the kind of customer who buys clothes at Banana Republic and J. Crew," says Gold, 49. "When customers left those stores and went to buy furniture, we wanted to be the brand that they turned to."

Eleven years later, that blueprint has become a fast-growing company that is a force in the furniture world — and has left an imprint on American lifestyles. With revenues of $65 million, the Mitchell Gold Co., based in Taylorsville, North Carolina, may be the biggest trendsetter among manufacturers in American interiors today. It supplies more upholstered goods to Crate and Barrel, Pottery Barn, and Restoration Hardware — the flagship retailers of baby-boomer design sensibilities — than any other manufacturer. Stay at one of the much-celebrated W hotels, and chances are you'll see the company's wares in the lobby or in your room. Starbucks recently outfitted one of its concept stores with Mitchell Gold furniture. And the company's chairs and sofas are all over some of the highest-rated shows on television, including Ally McBeal and Friends.

In short, the Mitchell Gold Co. has become a force for change in an industry that seems hopelessly out-of-date. The furniture business is notorious for offering customers a dizzying array of mediocre choices — and then expecting them to wait months for their selections to arrive. No wonder the industry attracted so much attention from venture capitalists and dotcom entrepreneurs who vowed to use the Internet to do for buying sofas what Amazon.com did for buying books and Dell did for buying personal computers.

Gold and Williams didn't bet on the power of the Net (fortunately, in retrospect) to make their mark. Instead, they bet on the power of good design. They helped spur the revival of the slipcovered sofa, which is now a huge business for the Mitchell Gold Co. and a huge product category for the entire furniture industry. Gold and Williams are also largely responsible for the return of the leather club chair — now a staple at Pottery Barn and Restoration Hardware stores across the country.

But well-crafted design principles don't apply just to the company's products. Gold and Williams have found ways to redesign the entire furniture game. They created a series of policies and programs to make sure that customers wouldn't wait months for their orders. They chose to work with fast-growing retailers who were rethinking how to sell furnishings, and they steered clear of most traditional home stores. They shook up the industry with provocative ad campaigns and unique ways of putting their sales staff to work.

Finally, they had faith in their customers. "I was watching a couple get married on the Today show recently," Gold recalls. "The viewers had picked out everything for them, from their honeymoon destination to their clothes. It was great to see how the taste level of the general public has improved — well beyond the taste levels of traditional furniture retailers. The reason why Pottery Barn is succeeding is because it's putting out good taste at a reasonable price." The same can be said of the Mitchell Gold Co. itself.

Elements of (Relaxed) Style

The Mitchell Gold Co. was built on a philosophy that its founders have dubbed "relaxed design." By targeting customers who wear clothes from Banana Republic or J. Crew, Gold and Williams recognized from the outset that in their business, style is substance. "Part of what they're selling is fashion," says Rob Pitt, 50, a furniture product manager at Crate and Barrel. Sure enough, most of the Mitchell Gold line is marked by the same clean lines, tasteful colors, and subtle patterns that show up in the clothes that its target customers wear.

But Gold and Williams are about more than product styles. They are about lifestyles. "In this business, you have to be thinking about what people's living habits are now and what their aspirations are for how they want to live their lives in the future," Gold says. In the 1980s, Williams, now 39, worked as an art director for a magazine, as well as in advertising, while Gold worked for a big furniture company. The pair, who were partners in life before they were partners in business, sensed that American lifestyles were changing — and that furniture manufacturers and retailers were not.

"At the time, there was a big shift toward people wanting to be more comfortable and relaxed," Gold explains. "But no one was taking that attitude and applying it to home furnishings. So people ended up with two kinds of furniture in their homes. There was the living-room kind, which was formal and dressy. And there was the family-room kind, which was scratchy and not very attractive."

Was it possible to create furniture that could work as well for receiving guests as it did for watching movies in pajamas? Gold and Williams weren't sure — that is, until they spotted slipcovers on some dining-room chairs at a show house in North Carolina. Soon, without testing the idea out on focus groups, Williams — who is the company's director of design and executive VP, while Gold serves as president and CEO — brought sofa slipcovers back to the world of furniture.

To Williams, removable covers seemed like a great innovation. Homeowners could change the look of their sofa from one season to another and back again. Gold and Williams promised to stockpile patterns for every slipcovered product they made, so that a customer could always call the company to order a replacement, no matter how old the original sofa might be.

It was a tough sell. The buyers who stocked the furniture retailers didn't take to the idea, despite Williams's attempt at high drama on the showroom floor. "Our showroom was so small that it couldn't hold that many sofas," he recalls. "So people would see one and walk to the back of the room to see the rest, and in the meantime, we'd be switching the cover on the one that they just saw. When the buyers would turn around to walk back, they'd do a double take when they realized what had happened."

Only one retailer placed an order for slipcovered sofas during the first season. But that company's sales were high enough that other companies gave in to the logic of replaceable slipcovers. In fact, over time, other manufacturers ripped off the look wholesale. Design wags even coined a term for the style, "shabby chic," which drove Gold up a wall. "Our furniture is not shabby," he insists. "It's so functional, and it's such a great way to live. Once you've had a slipcovered sofa, it's hard not to have one."

The numbers bear him out. While it costs between $400 and $600 to buy an extra set of slipcovers with the purchase of a sofa, about 15% of customers do it anyway. And that number has increased over the past few years: The company has about 30% more employees producing slipcovers than it did just two years ago. "Are slipcovers a fashion?" Gold asks. "There is such a thing as a timeless fashion — white T-shirts, Levi's jeans, khakis. We're hoping that the slipcover will endure in the same way."

Although Gold and Williams continue to have great success with slipcovers, the two men are not one-hit wonders. In 1994, they were scouting flea markets in Paris when they spotted a couple of old leather club chairs. "I don't know who saw them first," Gold recalls. "But the minute we looked closely at them, we realized that they had a unique style. They could work equally well with traditional furniture and modern stuff. Bob sketched some ideas right there."

Here too, it was obvious how an antique club chair — or a new chair made to look antique — could fit into the lifestyles of the customers that Gold and Williams coveted. "We'd been seeing people in Mercedes station wagons pulling up to antique stores to buy chests of drawers," Gold recalls. "These were people who could afford to shop at Bloomingdale's, but they wanted stuff that already looked broken-in." Adds Williams: "We knew we were onto something when we noticed that the same shirt at J.Crew cost more if it had been prewashed or made to look as if it had already been worn."

This time, there was less resistance to the company's insights. Crate and Barrel immediately understood that a weathered leather club chair would be the next logical acquisition for people who wore prewashed jeans and leather bomber jackets. Pottery Barn and Restoration Hardware soon lined up as well. This year, the Mitchell Gold Co. expects to sell close to 38,000 club chairs at an average price of $1,500 each.

Fast Furniture

If conventional furniture styles have been disappointing customers for many years, then the industry's standard operating procedure has left those customers downright desperate. Gold and Williams understood that people who would take naturally to their design sensibilities would also want a very different customer experience when shopping for furniture. Trying to improve how retailers sell and deliver their products has turned out to be a tougher job than designing appealing furniture. But the company has made progress by embracing some counterintuitive strategies.

One such strategy is to recognize that there are special challenges to manufacturing quality furniture and that even the most restless innovators can't wish those challenges away. For example, fabric is a big problem. "Most of the materials that our consumers want on their furniture are natural fibers like wool and cotton," says Gold. "Those fabrics take dye differently every time you use them, because there are all kinds of variables that can affect the way that they take the dye."

Sometimes, the company can cut around defects in the big rolls of fabric that it receives from mills, but 15% of the time, it has to return the entire roll. With leather, which takes on coloring as unevenly as human skin takes on a suntan, the odds are even worse. "Getting good, high-quality fabric is just the beginning of the production process, but it's probably the biggest reason why customers experience delays," Gold says.

One way that he and Williams have tried to overcome this challenge is by offering fewer fabrics. Sometimes, they argue, the right choice for customers is less choice. Because the company offers only a couple of hundred fabrics, it can keep them all in stock. And Gold and Williams hope that the mills will get better at producing the fabrics, since the company is ordering them in higher volumes.

While producing the right fabrics has been the biggest hurdle for Gold and Williams, planning the actual manufacturing of their products has been another challenge. "In the past, when we planned on growing 40% and grew 70%, we sometimes didn't have enough people to do the upholstering," Gold says. "So instead of a promised 4-week delivery time, we might end up going to 6 weeks, or sometimes even 12 to 14 weeks when it's really gotten bad."

Those days are over for the most part, thanks in part to the statistician they hired away from a fiber-optics plant down the road to work as a production planner. Gold and Williams have also insulated themselves from bad planning by forcing all of the retailers they work with to always keep every Mitchell Gold product that they show on their sales floor in inventory. That way, if customers see something that they like in a store and want an exact replica, they can have it that week.

Gold and Williams make the medicine go down easier for retailers by offering a program called Fast Furniture. Through this initiative, retailers have access to two styles of sofas, with a choice of four or five fabrics each — above and beyond what they actually show in their stores. The Mitchell Gold Co. keeps those items in a warehouse in North Carolina and is ready to ship them within five days of a customer request.

Of course, inventory initiatives wouldn't add up to much if customers didn't like what they were seeing on the sales floor and were instead putting in special orders. In fact, 80% of customers who buy the company's products want pieces that are identical to what they see in the stores. "We've aligned ourselves with retailers that have a good sense of what people will like when they walk in the door," says a clearly relieved Gold. Only 3% of buyers insist on using fabric that they've picked out elsewhere — something that the company allows but clearly doesn't enjoy. The other 17% pick from Mitchell Gold's selection of fabrics.

Retail Rules

When 80% of the Mitchell Gold Co.'s customers order furniture that is deliverable within one week, it's much easier to make them happy. But achieving that percentage depends on partnering with the right retailers — those that know what kind of furniture customers will want and which fabrics and colors they'll want it in.

After struggling for a couple of years to get their merchandise into department stores, big-box retailers like J.C. Penney, and large furniture showrooms run by retailers like Levitz, Gold and Williams threw up their hands in frustration. "When you're working with big, established retailers, it's hard just to get your foot in the door," says Williams. "There's not much incentive for them to change."

So Gold and Williams said good riddance. "We didn't have the stomach for it anyway," says Gold, who spent most of his twenties working as a buyer for Bloomingdale's. "Department stores aren't in a growth mode for upholstered furniture, their displays are terrible, they don't pay on time, and their salespeople are a mess." He says that the Mitchell Gold Co.'s selling strategy crystallized for him one day in the mid-1990s when he and Williams were looking at a list of the top-100 furniture retailers in the United States. "Bob basically said, 'Forget what this says. We want to be supplying the stores that are going to be on this list in 10 or 15 years.' "

It turned out to be a convenient strategy, since many of the retailers who are white-hot today were in their infancy back then and were more open to new ideas and new suppliers. When the Mitchell Gold Co. first started supplying Pottery Barn, the chain wasn't selling upholstered furniture at all. Restoration Hardware had only 5 stores when it first started carrying Mitchell Gold furniture; now it has more than 100. Crate and Barrel, which now sells furniture in 21 of its 87 stores, had only 2 stores when it started stocking Mitchell Gold products. And Storehouse, Mitchell Gold's sister company, also stocks the line in all of its 41 stores.

Gold and Williams also make a point of trying to get their furniture into places where their target customers are hanging out. "The boutique hotels are a real niche for us," says Brad Cates, 33, director of sales for the Mitchell Gold Co. "It's great for us to be in places like the W hotels, because they're making a style statement that appeals to the same kind of customer that we're trying to reach." Club Monaco, a clothing chain owned by Ralph Lauren, just launched a new store called Caban. Rather than outfitting the store with the Ralph Lauren line of furniture, the company turned to the Mitchell Gold Co.

Perhaps the most interesting experiment that the company is conducting in the sales and marketing of its furniture springs from a relationship that it has been developing with Bose Corp., a manufacturer of high-end audio equipment. Six years ago, Bose started building concept stores. Today, there are 80 of them, and almost half of the floor space displays the company's wares in a living-room-type setting, as the pieces would be used in a house or an apartment. "We wanted the look to be distinctive and upscale, but also approachable," says Peter Theran, 39, Bose's director of marketing. "I started doing some research and sort of stumbled onto these stories about how Mitchell Gold was having a lot of success in non-traditional retail environments."

Theran called Gold out of the blue, and soon Bose had outfitted its stores with Mitchell Gold furniture. Not long after, customers began asking if they could buy a sofa to go with their speakers. "We're still in the process of discovery around that," Theran says. "We're trying to figure out a way to communicate that the furniture is for sale without resorting to hanging big tags on the sofas. When Mitchell first came to talk with us, he told us that all he cared about were our customers' needs and that he didn't expect to do any business with us for at least 18 months. I thought, 'Yeah, sure.' But he really meant it."

That sort of patience is also paying off for the Mitchell Gold Co. on the Internet — a place where patience has never been considered a virtue. Three years ago, plenty of venture capitalists placed big bets on the fact that furniture could be sold on the Web as easily as books or computers. Today, there's a lot of red ink on the floor. Living.com is dead; Furniture.com is on life support.

What went wrong? The most obvious problem is that furniture is a high-touch product. Consumers carry a book around with them for a week or two, but they sit on their sofas for 10 or 15 years. So most of them at least want to test the sofa out. If online retailers can clear that hurdle, then they need an order-and-delivery system that can track thousands of customized orders and a cost structure that can absorb the outrageous shipping bills that result from driving hundreds of miles to deliver a couch.

The Mitchell Gold Web site catalogs everything that the company makes, but up until now, no one has been able to buy anything on the site. Gold and Williams's excuse is pretty standard these days: They don't want to alienate their retail partners by selling directly to customers. Gold, his department-store years far off in his rear-view mirror, also doesn't have much desire for getting into retail again. He insists that it's not as easy as everyone seems to think it is, and the spate of bankruptcies among furniture retailers both online and off prove him right.

"I firmly believe that there is an enormous opportunity on the Internet for our industry, but it's for established brands like Pottery Barn and Restoration Hardware that have a good brick-and-mortar presence along with a paper catalog," says Gold. "What concerned me from day one about Living.com and some of the others was that they were not run by people who have a passion for home furnishings. They were run by people who thought that they could build companies really fast and make a lot of money."

Of course, moving onto the Web too slowly can cost a company too, and Gold and Williams have received plenty of complaints from customers who have visited their site, liked a product, and were irritated to learn that they couldn't click and have a sofa show up seven days later. That will change sometime in the next six months, as the company plans to provide links to at least one retailer for each of its products.

In the meantime, Restoration Hardware and a couple of other retailers have been offering a limited selection of Mitchell Gold products on their Web sites, and both retailer and supplier have been surprised by the results. As a percentage of overall sales at Restoration Hardware, upholstered furniture sells 10 percentage points better online than it does in the brick-and-mortar stores. "We were not expecting it to do so well," says Marta Benson, 32, a Restoration Hardware vice president who runs the company's Web-site and paper-catalog operations. One possible explanation may be that people test the products in stores, discover that the Mitchell Gold Co. makes them, check the company out on the Web, and then go back to the Restoration Hardware site to make the purchase. Also, the fact that Restoration Hardware has built such a strong brand so quickly probably makes it easier for customers to trust the retailer enough to buy a sofa online.

How to "Tap" the Brand

As for the Mitchell Gold Co. brand, it's a work in progress. The company certainly doesn't rank as one of the biggest furniture manufacturers. And customers at Pottery Barn and many of the other retailers that sell Mitchell Gold furniture have to work pretty hard to find out who manufactured the sofas in those stores, because the retailers don't go out of their way to tell people that they don't make the merchandise themselves. And the Mitchell Gold Co. has no retail stores of its own.

But Gold and Williams have run a couple of groundbreaking advertising campaigns over the years in an effort to boost their visibility. From the outset, their key marketing insight was that furniture didn't need to be sold as if it were a major appliance. They weren't against putting people in their ads. And once they saw how much mileage Calvin Klein was getting out of his provocative advertisements, they decided to push their own ads even further. "We realized that no one in furniture was doing anything even remotely sexy," Gold says. "As a company with very little to spend on marketing, we figured that would be the best way to get people talking about us and perhaps even to generate some free editorial coverage."

The campaign pushed the envelope. One ad, which a couple of publications banned from their pages, pictured a couple enjoying coffee on a couch, basking in the afterglow of what was presumably a night of wild sex. Another ad depicted two great-looking young men on a sofa flanking a ringlet-haired child seated in a kid-sized club chair. Were the men gay? Were they dads? Had they adopted the little girl? It wasn't clear, because the ad copy had only one sentence: "A kid deserves to feel at home."

Who could argue with that sentiment? Not many, it turned out: The positive emails and letters that poured in far outnumbered the negative ones. "You have to figure that the majority of our customers are women," Gold explains. "They probably notice that the guys are cute before they think about whether they're gay." To Williams, it just makes sense that the company would have gay guys in the ad, instead of straight ones. "Whom among your male friends are you going to go to for advice on buying furniture?" Williams asks. "The straight ones or the gay ones?"

Many readers who liked the specific pieces in the ads did call to request more information. Others wrote in to applaud the company for promoting gay adoption or to say hi to Lulu, Gold and Williams's bulldog, who appears in some of the ads. But it's questionable whether people who aren't in the market for furniture at the moment that an ad appears will remember the company's name when they go shopping for a couch four years down the road.

To make that happen, Gold and Williams needed to reinforce provocative ad messages with well-designed approaches to selling the products in the stores. And they did just that. The first principle: Separate the people who sell furniture to stores from those who teach the stores how to sell to customers. "We decided to have separate people for training and selling," says Gold. "If you have people on sales commission who are doing both jobs, and they have a choice between doing sales training or going out to drum up orders, guess which part of the job is going to get shortchanged?"

Gold and Williams coined a new term for this training job: "the answer person," or "TAP" for short. Jeff McNeely, 26, is the tap for the northeastern part of the United States and eastern Canada. "I usually do anywhere from three to five training sessions a week, though lately it's been running closer to five," he says. "They usually take place at odd hours when the stores aren't open. If it's in the morning, I bring sinful breakfast treats, and if it's in the evening, I order pizza or bring sandwiches. Then I talk about the history of the company, and how and why we design our products the way we do."

To reinforce his message, McNeely travels with collateral. "I bring samples of the wood corner blocks from the sofa frames with me," he says. "I also bring different pieces of leather so that people can see how the color varies a bit from hide to hide. It's like a traveling trunk show, and I drag it down the street in two rolling suitcases."

He also leaves behind a custom-made book for each store. The books contain information about the specific products sold at a particular store, along with fabric specifications and information about the Mitchell Gold Co. With the help of folks back at the home office, McNeely updates each book several times during the year as the company adds new fabrics and discontinues old ones. He's also on call all day every day in case the in-store staff has questions.

The TAP position works well for a couple of reasons. The sales staff at many furniture stores turns over frequently — as people transfer to different stores, get promoted, or leave for other jobs — so there are always new people to train. And veterans appreciate being brushed up, since it helps them put more commission money in their pockets. But the TAPs are also important because the Mitchell Gold Co. has pioneered the art of selling furniture in stores that don't specialize in furniture — and those sorts of stores are eager to learn from the masters. Half of the company's sales come from three chains — Crate and Barrel, Pottery Barn, and Restoration Hardware — where teaching and training are especially crucial. "Separating the sales and the training into different jobs is an unusual system, and it really seems to work," says Rob Pitt of Crate and Barrel.

The result of all this legwork? Five TAPs and five sales managers will produce about $65 million in sales this year — $1,500 sofa by $1,500 sofa. "I was amazed by how small the sales force was when I got here," says the Mitchell Gold Co.'s Brad Cates, who worked at Calvin Klein before getting into the furniture business. Thanks in part to this kind of sales efficiency, the Mitchell Gold Co. has been profitable every year that it's been in business.

Ron Lieber (rlieber@fastcompany.com), a Fast Company senior writer, is based in New York. He spent nine months shopping for his first sofa. Contact Mitchell Gold by email (bigdawg@mitchellgold.com), or learn more about the Mitchell Gold Co. on the Web (www.mitchellgold.com).

Sidebar: Sold on the Future

Thanks to the on-site café inside their two-year-old factory, Mitchell Gold and Bob Williams have access to plenty of comfort food. But the debt that they took on to build the place left them with some indigestion. "Business was great, but we were leveraged up to our eyeballs," says Gold. "We had personal guarantees on everything." Seeking some measure of financial security, the pair decided to sell the company in 1998. But rather than bringing in a bunch of investment bankers, Gold and Williams shopped for a buyer the way that their customers shop for furniture. They had one criterion: a perfect fit. When they found it in the Rowe Companies, they called the company's CEO to negotiate.

"The phone rings one day, and it's Mitchell on the other end," says Rowe CEO Gerald Birnbach, 67, who still sounds surprised that his company somehow ended up as the parent of the Mitchell Gold Co. "It was ironic, because we were trying hard to grow at the time and had bought the Storehouse chain. Of course, Mitchell Gold was a company that people respected, and quite frankly, there weren't a lot of other names that came up. When the phone call came, it was almost as if it was fate."

Gold explains why he called Birnbach: "He has vision, and Rowe seemed like the most progressive furniture company out there at the time. The company had also done a great job of knocking off our products, copying our ads, and fiercely coming after our business. Plus, it's headquartered in Virginia — far enough away so that Gerry wouldn't be looking over our shoulders but close enough so that we could get there pretty quickly if we really needed something."

Birnbach cut Gold and Williams a pretty good deal: He promised not to meddle too much in their affairs, and so far, he's kept his word. In fact, he thinks that the pair have been a good influence on him personally. "My family says that they loosen me up," reports Birnbach. "I even have a pair of black dungarees now. Black, not blue, because when I see those two, I have to be in uniform."

Once the deal was closed, Birnbach got Gold and Williams to sign a five-year management contract, and he's paying them much of their loot over that five-year period. They received $13 million in cash up front and also got 300,000 options on Rowe stock, which they gave away to their employees. The pair (who have always been 50-50 partners) stand to make a total of $32 million from the deal if they hit their targets. So far, they've obliterated every goal.

Sidebar: Design Center

Mitchell Gold and Bob Williams have also brought their design principles to bear on their company's factory and headquarters building, in Taylorsville, North Carolina. When they built the complex in 1998, they could only afford to borrow $6 million, but they managed to cut a few corners in order to make the space more comfortable. There are no reserved parking spaces for the bosses and no drop-ceiling panels anywhere in the building. The factory is also air-conditioned — a rarity in the furniture industry until recently, even in North Carolina. "A lot of factories that I've seen are straight out of the Middle Ages," Williams says.

Gold and Williams also decided to build a day-care center that could accommodate 75 kids. "Our accounting firm, our insurance company, and our lawyers all told us not to do it," Gold says. The cost per child for employees is $65 a week (there are also slots for kids from the community, though they cost a bit more). When people visit the company, Gold takes them on a tour that includes the day-care center, and he swells with pride when the kids run up to him shouting, "Mr. Mitchell! Mr. Mitchell!" "It's nice to come over here when I'm having a bad day," he says.

Perhaps the best part about the new buildings, perched on One Comfortable Place in Taylorsville, is the on-site café. Rural North Carolina, with its world-renowned pork barbecue and banana pudding, is not a great place for people who have trouble resisting caloric temptation. Gold and Williams's solution: Hire the best local caterer, Sean Robinson, to cook for them. Now employees lunch on tuna burgers, swordfish, and duck-breast salad with raspberry vinaigrette and feta cheese. Gold and Williams pay their respects to local delicacies by keeping liver mush on the breakfast menu (if you have to ask, you probably don't want to know).

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