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Shopping Centers Today -> May 2004
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MESS MERCHANDISING
The Container Store helps people think inside the box
BY MAURA K. AMMENHEUSER
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“I just walked in the door, and my cart’s almost full already,” the Santa Clarita, Calif., resident said. “I’m a terribly disorganized person, and I thought maybe this store can help me get my life in order.” Engebretson is The Container Store’s dream customer.
This privately held, 30-store, Dallas-based chain specializes in storage and organizational products: boxes and bins, shelving and shoe racks, trash cans and turntables and oodles of other aids to help people file, pack, declutter, store and … well, contain their stuff. Its top-selling product — accounting for 23 percent of the company’s predicted $370 million in total sales this year, executives say — is Elfa, a patented, modular shelving system. “I design exclusively around the Elfa products,” said Monica Ricci, a professional organizer based in Atlanta.
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“You need to buy stuff to hold your stuff,” said Stan Hoffman, CSM, general manager of Corte Madera (Calif.) Town Center, an outdoor mixed-use center with 370,000 square feet of retail, including a 22,000-square-foot Container Store. “They have stuff in there you would never dream existed,” he said. “Really cool things.”
“I go in there to browse and always buy something,” said Rosanna Dalat, general manager of Metro Pointe at South Coast Plaza, a 385,000-square-foot open-air center in Costa Mesa, Calif., that has a Container Store. “They have things that make you think, ‘Oh, man, that’s a great idea.’ ” For her, this most recently took the form of a wheeled gizmo to handle heavy bags of dog food.
“I went there for boxes for the holidays and wrapping paper,” said Eleanor Pascale, senior property manager for The Market Common at Clarendon, Arlington, Va., where Container Store occupies 29,000 square feet of the mixed-use center’s 240,000-square-foot retail component. But she also brought home cleverly designed hangers that “gave me 50 percent more space in my closet.”
The chain’s comp-store sales are in the double digits, says Valerie Richardson, Container Store’s vice president of real estate. Sales per square foot have reached $450, Richardson says. That approaches four times the industrywide sales average for housewares of just $125 per square foot, says Jorge Leis, director of business consulting firm Bain & Co.’s Dallas office. He calls Container Store “a selling machine.”
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The company also prides itself on selling “solutions” rather than mere products. For example, staff members are savvy enough to ask customers about the space they’re grappling with, whether they’ve considered stacking items, and so on, says Barry Izsak, president of the National Association of Professional Organizers, which has 2,000 members dedicated to helping us all do a better job of organizing our businesses and homes.
To be sure, the urge to make order out of chaos is human nature, but various other forces have contributed to Container Store’s success too. The cocooning trend plus low interest rates have Americans lavishing money on their homes. The popularity and proliferation of home offices is another factor, Hoffman says. And then, of course, there’s our material culture — people simply accumulate too much and have too little time to organize it all. Izsak points to a boom in NAPO’s membership (it has doubled in five years) as evidence of the public’s desperation for organization.
Tapping into that, Container Store will open three new stores this year, each between 23,000 and 25,000 square feet, Richardson says, adding that a goal of 20 percent annual sales growth is driving expansion. Container Store won’t go public, though, because it doesn’t want pressure from Wall Street to grow too rapidly, she says.
The company is exploring enclosed malls but favors lifestyle centers’ typical shoppers: affluent, busy suburbanites — people with “no time, no space and lots of money,” as Container Store co-founder and CEO Kip Tindell puts it. The company is venturing onto urban streets as well. It opened a store in downtown San Francisco 18 months ago and followed that up in November with a 40,000-square-foot store in the Chelsea section of New York City. Richardson says she expects the Chelsea unit to post about $25 million in sales its first year, which would make it the top-performing store. (It’s hardly unlikely, given New Yorkers’ notoriously small apartments.)
But Container Store seems to be nowhere near any kind of saturation point. Ditto for four similar chains: San Francisco-based Williams-Sonoma operates eight Hold Everything stores (down from 33 in 1999; the company repositioned the concept following sales declines in 2001 and 2002); Lenexa, Kan.-based Organized Living has 25 stores in 17 states; Winston-Salem, N.C.-based Space Savers operates five stores in that state; and Storables, a private chain based in Portland, Ore., has six stores in three states. Clearly, this niche remains relatively untapped.
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Of course, shoppers can get boxes, bins, baskets and the like at Bed Bath & Beyond, The Home Depot, Ikea, Linens ’n Things, Lowe’s, Target and Wal-Mart, as well as in grocery and drugstores, over the Internet and from the Tupperware lady. But Container Store and its ilk are the rare retailers that specialize in organization, giving far more space to a category that is a mere department in other stores. “We have 20 different paper-towel holders,” Tindell notes.
Few of the aforementioned chains carry Elfa-like shelving. But the Container Store clincher is the service it offers.
“With so many buying options for the consumer,” said Ricci, “retailers will have to either compete on price or, like the Container Store, create a specialized niche in the marketplace so that they don’t have to compete on price.”
Said Hoffman: “They have absolutely the best customer service in the industry. Everybody in there is knowledgeable, courteous; you’ve never met a nicer bunch of people.”
At Metro Pointe, said Dalat, “they’ve only had two managers since they opened” seven years ago. “It’s a very seasoned group … they’re good at knowing their customer and knowing their product.”
One person impressed with both the chain’s niche smarts and the way it invests in employees is Chris Weilminster, vice president of anchor leasing at Federal Realty Investment Trust, Rockville, Md. “What struck me was how committed they were to their brand,” he said. “There are a lot of great retailers out there, but to be that committed to what they represent — I admire that.” Federal Realty has Container Store units at Congressional Plaza, in Rockville, and at Santana Row, San Jose, Calif.
So long as people attempt greater organization, Container Store will have a following. Izsak offers one warning, though — not for the company, but for folks like Engebretson, that shopper in Santa Clarita. He has clients, he said, who “bought hundreds of dollars worth of stuff [not necessarily from Container Store]. And guess what? They still don’t have a clue” how to organize. Experts like those at Container Store “can help them come up with a system” he said, but it’s up to the individual to stick with it.
Say, could that be the next hot seller from the Container Store — motivation in a box?
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