It’s a glass half-full, glass half-empty moment in the home furnishings industry. There are those who, eyeing their balance sheets, which are fat from the home spending boom of the COVID era, feel optimistic that this surge will keep going for another year at least. Then there are those who are quietly watching the world return to a new normal and anticipating a decline in demand for sofas and side tables.

Farooq Kathwari, the longtime CEO of Ethan Allen, falls in the latter camp—though he has an even-keeled view of the matter. “This has been an incredible run. But I think that people are now coming out of their homes, so as we go forward, we are preparing for the fact that it’s going to be harder,” he tells Warren Shoulberg on the latest episode of the Retail Watch podcast. “People are going to be more cautious. They’re going to demand better quality and service. [Demand is] not going to remain at the levels we’ve seen, which means that we have to work harder and differentiate ourselves to gain market share. That's what we intend to do.”

To be fair, it’s not as though Kathwari hasn’t already been working pretty hard over the course of the past two years. Ethan Allen certainly enjoyed some advantages over its competitors going into COVID—for one, it manufactures 75 percent of its goods in North America, meaning the company wasn’t quite as vulnerable to the ballooning cost of overseas shipping. However, its lead times have still been bogged down by raw-material shortages.

“We have one of the highest backlogs we’ve ever seen, even though we make [most of] the products ourselves,” he says, pointing to the foam crisis and a shortage of upholstery springs. Kathwari’s strategy has been to let clients know what to expect. And if you happen to use that touch point to let them know good news too? All the better.

“You’ve got to be very proactive, and reach out to your customers—don’t wait for them to complain,” he says. “[But] we still haven’t raised our prices to the level we should. So our clients are benefiting—that message is going to them, that this is a good time to buy. You have to take adversity and turn it into something positive.”

In this episode of the podcast, Kathwari weighs in on a variety of hot topics in retail, ranging from the sensitive relationship with China to why he’s betting on smaller stores more than some of his competitors are. He also shares a thumbnail sketch of an incredible life story that took him from the mountains of South Asia’s Kashmir region to leading a venerable American retail brand for more than 30 years.

Listen to the podcast below. If you like what you hear, subscribe on Apple Podcasts or Spotify.

Homepage photo: Farooq Kathwari | Courtesy of Ethan Allen