Gold's New Rush

By Lev Grossman

Not so very long ago, we liked everything to be smooth and sleek and glossy. We liked glass coffee tables in our living rooms and black lacquered tiles in our bathrooms. Then suddenly everything changed. Fabrics became worn and soft. Leather became old and brown and distressed. Smooth was out, texture was in. What happened? It all started with two gay men and an English bulldog in a tiny town in North Carolina.

They don't have the brand power of Martha Stewart, but Mitchell Gold, Bob Williams and their dog Lulu are changing the way you decorate your living room. Gold and Williams are the Mitchell Gold Co. of Taylorsville, N.C., which they founded together in 1989 and which has grown into a business that sold close to $70 million worth of furniture last year. That may sound paltry next to the hundreds of millions pulled in by such A-list retailers as Pottery Barn, Crate & Barrel and Restoration Hardware (armchair giant La-Z-Boy did $2.6 billion in sales last year). But guess who makes most of their upholstered furniture? And the leather club chairs and slipcover sofas in Ally McBeal and Friends? Mitchell Gold.

After 20 years of nonstop growth, the furniture industry is on a downhill slide. According to the American Furniture Manufacturers Association, shipments dropped 10% last year, to $23 billion. Chains such as Montgomery Ward, Heilig-Meyers and Sears Homelife went bust, flooding the market with discounted furniture. "It was as bad an industry downturn as we've experienced in our careers," says Joel Havard, vice president of equity research at BB&T Capital Markets. Amid that wreckage, Mitchell Gold is opening its very first store, a self-contained shop at ABC Carpet & Home, the upscale New York City clearinghouse for fine housewares of every kind.

The secret of the company's success goes back to Gold's childhood in a house full of fussy, formal furniture. "Growing up, we had cane-backed dining-room chairs that really weren't comfortable," says Gold. "We couldn't have a dog. We weren't even allowed to sit in the living room." That helped him appreciate the pleasures of an overstuffed sofa. He met Williams in 1986 in New York City, where Gold spent six years as a furniture buyer for Bloomingdale's and Williams worked as a graphic designer for Seventeen magazine. They both saw the same opportunity: a stuffy furniture industry just waiting to be turned upside down.

Gold and Williams found inspiration where most people find their pleated relaxed-fit chinos: J. Crew. "We looked at J. Crew's blue shirt that comes already broken in," says Gold. "It's your favorite shirt from your closet. It's familiar." Their idea was to synthesize that familiarity using new materials that felt and looked like well-worn heirlooms. Gold calls his furniture philosophy "relaxed design," which means elegant and affordable, old and new, all at the same time. It makes deracinated college students feel as if they're at home, urban hipsters feel as if they're in the country and suburban yuppies in ranch houses feel like aristocrats, all for a reasonable price. Restoration Hardware founder Stephen Gordon, no stranger to selling nostalgia, compares Gold with Ralph Lauren: "He doesn't really offer a 1930s suit, because nobody would wear it, but he offers the associations of a 1930s suit."

The formula paid off immediately. In the company's first year, Gold says, it turned a profit on $1.5 million in sales, and the ink has been black ever since. Gold and Williams celebrated by acquiring an En-glish bulldog they named Lulu, who has become the company's advertising mascot. In 1998 Gold sold out to the Rowe Cos., owners of Rowe Furniture, which makes upholstered and leather furniture, and two retail chains, Home Elements and Storehouse. The deal afforded Gold financial security, and the ongoing relationship is strictly hands off.

The real wonder of the Mitchell Gold Co. is that its reach has consistently exceeded its limits. For all the ubiquity of those brown leather club chairs, they were an initial disaster. Gold and Williams picked up a pair of 1930s vintage chairs at a flea market outside Paris in 1994. But they were too small for 1990s American legs. When they approached leather wholesalers with their order, Gold and Williams found that American companies were not prepared for them: they could buy white leather or teal leather, but not basic brown. What's more, the key to the chairs was their age, their power to evoke the cigar-laden atmosphere of a bygone era, so the leather had to look old. After a long search, Gold found a factory in the Netherlands with a process for distressing leather to make it look artificially aged. He bought up its entire year's output, $100,000 worth, and turned the exclusive rights over to Pottery Barn.

Gold's alliance with Pottery Barn was just the first in a string of special relationships with retailers that has given him unmatched access to middle-class American households and has impressed industry watchers. "It's quite unusual to have captured them to the extent that he has," says Donna Warner, veteran editor of urban-style bible Metropolitan Home. These relationships come partly from connections Gold made during his stint as a buyer: when Pottery Barn decided to start carrying furniture, a friend there made sure its buyers knew about Gold and vice versa. He has also consistently backed the right horses, judging from the start which stores could take him where he wanted to go. "We smelled early on that these were going to be the hot retailers of the next decade," says Gold.

One secret of Gold's success has been an exceptional knack for supply-chain management. Every shipment passes under the watchful eye of a full-time statistician, a "master planner" who constantly surveys retailers and wholesalers, anticipating their demands so the factory can be ready with the necessary personnel and raw materials. In 2001 mad-cow disease had most manufacturers scrambling to fill orders for leather furniture, but not Gold: when the epidemic first made headlines, he bought up $5 million worth of South American hides, enough to keep the club chairs rolling for the next eight months. Result: 97% of the company's orders arrive on time. Gold limits his business to a selection of high-volume accounts on which he can lavish personal attention. About five years ago, he deliberately reduced his slate of buyers from 72 to 48; in the subsequent year, his business increased almost 50%, and since then his work force has more than doubled. "Joe Schmoe's company can knock off our style," he boasts, "but they can't reproduce our service."

The ultimate key to the firm's success may be the mutual respect between Gold and the rural community that has become his entrepreneurial base. Tiny Taylorsville, 1 1/2 hours north of Charlotte, has more than 60 churches, most of them Baptist, but from the beginning Gold and Williams defied local convention by being openly gay. "When I came out," Gold says, "I decided I just didn't care anymore. When we moved down South, we just bought a house and moved right in, didn't even think about it."

They did think about their role as employers. Along with a gourmet chef and a free gym, Gold gave his workers Lulu's Child Enrichment Center, a $500,000 day-care facility that is run on a strictly break-even basis. "When you drive up to the factory, the first things you see are toys and kids running around," Gold says with pride. "You know something special is going on." The message is getting through: Gold says a local minister sent him a letter congratulating him on his commitment to family values. These values are paying off: employee turnover is less than 2%, which means exceptional productivity. BDO Seidman rates productivity at Gold's factory at $168,000 per employee, compared with an industry average of $105,000.

Until now Gold has been content to direct American taste from behind the scenes. But this month, when the first Mitchell Gold retail outlet opens at ABC Carpet & Home, Gold will be selling straight to consumers, with no safety net and nobody else's name on the label. "We're going to really push the boundaries of his work," says Evan Cole, president of ABC. "He's going to do some avant-garde stuff. He'll really be able to use his creativity." Also for the first time, he will be risking channel conflict with his closest allies, the retailers that made his fortune (that's one reason Gold has steered clear of the Web).

As for that downturn in the furniture industry? In addition to the carnage among the retail outlets, Rowe, Mitchell Gold's parent company, plans to consolidate its two retail chains later this year. How does it all affect Gold? "It doesn't," he says curtly. "The people we sell to have not contracted. The people we sell to are the exciting, profitable retailers who are expanding!"

Gold even sees an upside from last year's terror attacks in the U.S., at least from the retail perspective. "Post-Sept. 11, people have really had this much deeper, warmer feeling for family and friends," he muses. "That translates in subtle ways into how people furnish their homes: people will stay home more." Another positive bellwether: furniture sales have not kept up with construction of private homes, which suggests pent-up demand waiting to be released. Williams and Gold are tight-lipped about how the company will respond to the new national mood in its furniture, but think guest-friendly items like sectional sofas.

Throughout all this, Gold's only false move may have been not taking out his brand earlier. Plagiarism is epidemic in the furniture industry, and there are few designers who haven't borrowed, if not stolen, from his work. But, as is not the case with Chanel perfume or Rolex watches, few people care whether their slipcovered sofa is an authentic Mitchell Gold or a knockoff, and that could hurt him. Nonetheless, there's no arguing with his influence: he is everywhere. Walk into any hipster apartment from New York City to Nashville, Tenn., and you will see his work, or at least his influence. "I do think about not letting stuff get too pedestrian," Gold says. "I was in London a few months ago, and I saw all this furniture being unloaded into a flat, and I said, 'That's my Kathleen sofa! That's my Pottery Barn chair! This is really too much!'" Never one to miss an opportunity, Gold walked right in and introduced himself to the owner. "The first thing she asked me was 'Where's Lulu?'"