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Container Store a hit with customers, employees

By Karen M. Kroll

Where to put all that stuff? For 20 years, The Container Store, a Dallas-based chain, has been helping consumers store, organize and arrange everything from clothes to food to paperwork. In the process, the company promises to help consumers save time, energy and space.

Customers appear to be listening. The Container Store is credited by some as having launched the storage-and-organization niche in retailing. It now boasts 20 locations and 1,600 permanent employees; another 500 or so come on board for the holiday season and for the company's annual sale on Elfa shelving systems each January. Revenues were $214 million in 1999 and are expected to rise to $237 million this year. In addition, the retailer recently was named the Best Company to Work For by Fortune magazine.

Behind The Container Store's success is the decision by its founders, Garrett Boone, CEO; Kip Tindell, president; and John Mullen, executive vice president of real estate, to focus on a single niche — storage and organization, and then execute with top-notch locations and customer service. "The Container Store is a company with a very clear vision of how it chooses to create value for its customers, and that is to save customers time, space and energy through organization solutions,'' said Leonard Berry, director of the Center for Retailing Studies at Texas A&M University. Berry is the author of the book "Discovering the Soul of Service,'' in which he profiles The Container Store and about a dozen other businesses.

The firm also has benefited from the expanding economy, which means consumers have more things, but less time. "From consumers' perspectives, as our lives become more chaotic, we're looking for a sense of order,'' said Chris Boring, president of Boulevard Strategies, a Columbus, Ohio-based retail consulting firm. The products The Container Store sells help consumers achieve that, added Boring.

The original Container Store opened in 1978 in a 1,600-square-foot location in Dallas. Today's stores average 25,000 square feet and boast everything from galvanized metal storage trunks to tea bag containers to translucent hatboxes. The company's cornerstone product line remains its Elfa wire shelving systems for closets and pantries, which account for about one-fifth of sales. What's more, last year The Container Store bought Elfa International, which is based in Sweden.

The trio at the helm of The Container Store has taken a methodical, measured approach to growth, adding no more than a store or two a year. Currently, stores are located in Texas; Chicago; Virginia; Washington, D.C.; Denver; and California. Stores are either in downtown areas or in the suburbs surrounding them. They're often on the periphery of major malls.

Management often shows excruciating patience in waiting for locations with just the right mix of visibility, accessibility, co-tenants and demographic characteristics. An example: It took Mullen five years to negotiate the purchase and begin development on a site in White Plains, N.Y., where a new store is scheduled to open this fall. "That's what it takes,'' he said. "You can't just go in and say you want five stores in six months.''

The Container Store also has been locating in developments that might be considered high-end specialty strip centers, featuring stores that sell complementary products and appeal to the same higher income, educated consumers. "People have to make an effort to go to The Container Store, so we try to make every step along the way as pleasant as possible,'' said Mullen.

About five years ago, when Tindell and Boone began working with Gordon Segal, CEO of home furnishings and accessories retailer Crate & Barrel to help draw customers to both stores. Somewhat surprisingly, an examination of their product lines revealed only a 2% to 3% crossover. In addition, their target customers are virtually identical. "It made sense, rather than to be afraid of each other, to look for locations next door to each other,'' said Tindell.

The first such pairing occurred in downtown Chicago, where the two are side-by-side. The result? The store manager estimates that the crossover traffic boosts sales by about 25%.

The success in the Windy City has led to a development in Dallas, across from Dallas Galleria. Customers can shop The Container Store and Crate & Barrel, along with Restoration Hardware, and several other retailers.

Boone said he doesn't rule out the possibility of locating within an enclosed mall.

However, given the size of some of the products The Container Store sells, locations that offer both interior and exterior access are a must, he said.

Management plans to continue to add one to two stores for the next several years. After that, they may add three or four stores annually, in order to keep at a 20% growth rate, said Boone.

For now, they're concentrating on the bigger metropolitan areas in the United States where they don't have a store. While management sees strong potential abroad — "No one in Europe has closet space,'' said Tindell — they note that it doesn't make sense to head there while leaving some U.S. markets untapped.

Skill and patience in picking locations are just part of The Container Store's success, say its owners. Another key has been the company's dedication to service. Because the stores offer complicated merchandise that also can get expensive, it's critical that employees thoroughly understand what they're selling. "They have to have employees that love the product category, and are challenged and intrigued by the creative application of the products to customers' problems,'' added Berry.

To find such people, The Container Store frequently looks to its employees and customers. Up to 50% of employees either know an employee of The Container Store or are former customers, says Boone. Once on board, employees receive about 180 hours of classroom training each year. They learn what different products are made of, and just how they work. That's not all. Employees of The Container Store can make decisions that typically are reserved for store managers in other companies, said Berry.

Stores are staffed with 70 to 80 employees, about double the number of employees of many competitors, said Mullen.

To retain employees, The Container Store pays wages that are double or higher than the norm in retailing, says Tindell. No one works on commission, so sales associates are free to spend the time needed to help a customer find the best way to maximize the space in his or her closet, or figure out how to most effectively organize a home office.

While The Container Store has at times experimented with furniture and other items not closely related to storage, none of the forays met with a great deal of success, said Tindell. The businesses were too different to gain synergies by linking them. Thus, while The Container Store sells bookcases and armoires and other hybrids of storage and furniture, management has no plans to stray from the storage and organization business.

The Container Store achieves average sales per square foot of more than $400, said Tindell. The typical store sees between 800 and 1,000 customers per day, which he says is on par with many grocery stores.

In order to help hold on to its front-runner position, The Container Store is revamping its Web site, <www.containerstore.com>, which now is purely informational. An e-commerce site was scheduled to be launched by April, said Boone.