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SEGAL TO DEVELOPERS: THINK LIKE RETAILERS

By Debra Hazel

LAS VEGAS — Real estate developers actually are retailers, and have to learn to merchandise their centers with the same passion and flair exhibited by the greatest stores, according to Crate & Barrel founder Gordon Segal, speaking at ICSC’s Spring Convention here.

"I’ve always had this conversation with developers, telling them, ’You’re retailers, not real estate people," Segal told a packed luncheon audience. "Both retailers and developers need to have passion and love to generate great retail."

Today’s regional mall, he said, is the successor to the great department stores of the 19th and early to mid-20th centuries. Such great retailers as John Wanamaker sold everything a customer would need, putting great merchants in charge of individual departments. That model still holds true.

"The truly successful malls have a leader with a point of view," Segal added. "Every once in a while, you see a wonderful mall where they’ve gone out of their way to find special stores. In these stores you find a personality, a pride of ownership." Having a point of view was the key to Crate & Barrel’s success. Segal and his wife, Carole, founded the Chicago-based chain in 1962, about a year after their wedding, and their personal experience drove their vision for a retail store.

"Carole and I were bored with our careers, and we had more taste than money," Segal recalled. The young couple realized that there were few, if any, U.S. outlets selling the fashionable, but reasonably priced housewares they had found for their home during their travels in Europe.

With $17,000, the two launched their first store in an old factory in Chicago, and were so financially strapped, they had to display their merchandise on the packing crates and barrels sent by the manufacturers.

A name and a chain were born. The company launched its catalog five years later, and opened its first mall unit in 1971. Today, Crate & Barrel has 91 stores across the United States.

By bringing product directly to the consumer, bypassing the importer and other middleman charges, Crate & Barrel could offer stylish housewares to its customers affordably. While the practice is much more common now, it was revolutionary in the early 1960s. So was the idea of highly designed housewares.

"In the late 1960s and early ’70s, America had so little taste; in Europe, homes are not large, but are done so carefully," Segal said.

Crate & Barrel became a store about using good design every day, not just for company. Merchandise assortments were carefully assembled to reflect Segal’s clean, modern taste. He has no time for Rustic French provincial design, for instance; no "shabby chic" is tolerated at Crate & Barrel.

"The merchandise had to be utilitarian, comfortable," he said. "Our vision and philosophy was to make our customers’ homes more beautiful than before they came in."

That meant finding ideas in some odd places.

"We tried to watch other retailers and learn from them," Segal said, visiting shops around the world both for goods and inspiration.

Growth came because the Segals ran a good business, not because they wanted to make more money, he said.

"Stanley Marcus [of Neiman-Marcus] said, ’If you run a great business, the customers will reward you with their business, and you make money," Segal told the audience.

That means sending Crate & Barrel’s buyers to find beautiful pieces that people can afford, preferably from smaller manufacturers that won’t be shipping the same goods to other retailers. Treating the customers well is the second half of the equation, he added.

"It’s not very hard to give poor service; you can see that in the airline business. We want to do the opposite. So we create stores with wonderful environments, with a staff that’s passionate and with product they can afford," Segal said.

Segal acknowledged that merchants starting today face far greater challenges than he did.

"The cost of doing business is so much higher. The ideas are out there, and if someone is impassioned, they can do it," he told SCT after his speech.

But it is up to developers to find unusual merchants that will make their centers different, and to think of the combination of stores that will draw a shopper rather than send her down the road. Too many developers can claim their center is 90% leased, he said, but the tenants are the usual suspects and not exciting to the shopper. The result may be great for the short term, but ultimately developers shouldn’t look for the immediate profit, Segal cautioned.

"If you think of yourself as an aggregator of retailers, you can be a great shopping mall developer," he said. "The guys who’ve cared about unique developments, who are concerned about who they put in the mall, those who have a love, a passion for the job, will make great shopping in America go on."

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