13240 Thu, 12/06/2007 - 1:10pm
NEW YORK-- Gordon Segal says his second act is finally ready for the big time.
This week, the iconic founder and chief executive officer of Crate & Barrel brings CB2, its younger, hipper spin-off format, here to the Big Apple.
Like an offBroadway play, "We really wanted to be really good before we got to Broadway," he said.
In an exclusive interview with HFN, Segal spoke candidly about business; his merchandising philosophy-although he's too down-to-earth to use such a term; competition; and why public companies face unfair pressures.
He also explained why when it comes to retailing, Crate & Barrel is more like the tortoise than the hare.
Seven years after launching its concept of modern furnishings at affordable prices, Crate & Barrel is opening its third CB2 store in SoHo, the trendy Manhattan neighborhood.
'We move slowly," Segal said.
"Two things we believe in are fiscal responsibility and doing it right," he said. "Until you find out what the customers respond to and get excited about [it doesn't make sense to expand], I tell our people that sales are illusory but expenses are real."
Now that the CB2 format is "zooming," Segal is bullish on entering the market of all markets. "We think it will be terrific: There's so much pent-up demand," he said. "New York is like no other place in the world. It's so expensive to do business in New York, but [there's the potential] to do an enormous business," he said. Indeed, Crate & Barrel's New York stores generate twice the volume of its Chicago units, where CB2's two stores are based.
The SoHo location fits CB2's niche, which caters to city living.
"We wanted urban and gritty," he said. "We think it's for the young people living down there and for people who like contemporary design."
Having fine-tuned CB2 with a shift toward more big-ticket fare such as bedding and furniture and less of a reliance on small-ticket items that "don't generate enough volume to carry a store today," Segal is now ramping up expansion.
Another CB2 will open in San Francisco in March, and the retailer expects to operate 15 CB2s in two to three years.
Crate & Barrel is also expanding "aggressively," doubling its rollout pace to eight stores a year in 2006, Segal said.
CB2 was created for young shoppers on a budget, but has drawn an unintended audience.
When the affluent, middle-aged wife of a large real-estate developer raved about the store, Segal said, "But this isn't for you." That's when he realized, "Let's forget about [thinking of the store as just] for this young, hip college kid. It's more than that. It's for everyone who likes contemporary or urban [looks] and people who like great value."
Despite the housing slump, "We're having a great year," Segal said. "We're doing very well and we're very profitable."
Still, "We see more volatility in weekly store sales than we have ever seen before."
Regarding the holiday season, Segal said, "Every retailer holds his breath going into Christmas," adding that "I love our product this season. Who knows what's going to happen?"
Asked to articulate the key difference between CB2 and Williams-Sonoma's West Elm, its symbolic twin, Segal said CB2 aims to sell more European and Scandinavian designs.
"I respect that organization [Williams-Sonoma] enormously. If it wasn't for them, we wouldn't be this big," he said. "They were aggressive in opening stores, and it all became synergistic." I say, "Never get paranoid about a competitor, but get paranoid about your own execution."
Segal thrives on competition.
"Howard Lester [Williams-Sonoma's CEO] likes to put stores next to Crate & Barrel and Gordon Segal likes to put stores next to Williams-Sonoma."
From Z Gallerie to Restoration Hardware, "Retail stores have a certain personality," he said. "Like a Paris food market, when you see more variety and product, you get more interested, excited and stimulated."
But while retailers must be "very good today and changing all the time," the sector suffers from a quick-fix mentality, Segal said.
Bombay's original founders were asked to leave the company following a rough patch, Segal mentioned as an example. That was a big mistake, he said.
"We have had hot years and cold years," Segal said. "The only difference is we're private, so nobody knows about it. That's why we stay private."
But Segal is energized by what he calls "more creativity today ... and a much bigger option of products around the world" than ever.
"I'm always shocked that I get paid to do this," he said. -- Barbara Thau