Container Store sets example for service

04:55 PM CDT on Sunday, July 8, 2007

Outside the Chicago Board of Trade, commodity can be an ugly word. To us, it means a product or service that is barely distinguishable in perceived merit from your competitor's, leaving price and perhaps convenience as your only bargaining chips. Thus, one key to prosperity is to differentiate your product so the customer can recognize its greater value.

Extraordinary service, if demonstrable, produces elevated value, and with it, higher profit margins. But many talk a good game, and few deliver. To learn how to execute the promise of astonishing service, we went to Melissa Reiff, president of the Container Store.

Melissa Reiff is president of the Container Store. Her philosophy: 'Intuition comes to a prepared mind - therefore, training is critical.'

The Coppell retailer started in 1978 with $35,000 in seed money and a modest 1,600-square-foot store. Today the Container Store has 39 stores that average 25,000 square feet. The company had sales revenue in 2006 of approximately $550 million.

The Container Store sells time and efficiency. The shower caddies, stack baskets, tubular hangers, bold boxes, sassy hooks, butterfly hampers - and a rare species called large nested woven nylon bins - are mere conduits to a complete organizational solution.

Shoppers can find similar products elsewhere, and there were hundreds of knock-offs in the 1980s. But customers have shown considerable loyalty to the Container Store, putting those imitators out of business. The reason: Container Store employees are religious about service.

Ms. Reiff helped explain how the company does it.

Hire from the top drawer, then shut it. Ms. Reiff believes that, with extensive training and incentives, one great employee can outperform three good ones. So the Container Store hires one great one. Then it adds 241 annual hours of professional training for first-year fulltime employees - in contrast to a paltry industry average of eight.

Each store has its own personal, full-time trainer. As Ms. Reiff explains, "Intuition comes to a prepared mind - therefore, training is critical."

The company pays more in wages and other benefits than the industry average, but a highly productive and motivated employee performing the work of two or three saves the company money.

Hire your customers. Here's another unique but wildly successful strategy. The company's customer base tends to be well-educated, in the upper echelon of income earners and mainly female. Most important, they have a passion for what the company sells, and no one relates to customer needs better than another customer.

There's no human resources department - Ms. Reiff makes recruiting every employee's responsibility.

If an employee is impressed with a customer, the employee is expected to encourage her to apply. But only 6 percent of applicants are hired.

Each employee undergoes a comprehensive three-hour annual performance review that's unlike any other. It covers 10 key characteristics, such as teamwork and professionalism.

Each employee is counseled about how she needs to grow to reach the next compensation level. Guidelines are clear and explicit - they all emphasize contribution.

Communication is leadership. "Leadership is not something that you do to someone, but with someone," Ms. Reiff says.

The Container Store doesn't share compensation figures with its employees, but everything else is wide open. "We want everyone at the Container Store to know everything, because it makes everyone feel more valued and part of the team," she says.

In Ms. Reiff's view, that relentless communication gives the Container Store a competitive advantage because most companies give internal communication scant attention.

A complete tally of daily sales - for each store and in the aggregate - is posted in every store and on every employee's computer.

That kind of immediate feedback is as valuable as it is uncommon.

Ms. Reiff delivers a weekly message in which she recaps weekend sales, emphasizes new initiatives and discusses the week ahead.

In addition, every morning employees huddle to discuss the day's objectives, visual displays, direct mail pieces, new products and the campaign du jour.

Last week, the employees were the first to hear that the chain had reached an agreement to be bought by Leonard Green & Partners, a Los Angeles private equity firm that also holds a stake in the Neiman Marcus Group. In fact, Leonard Green's managing partner wore a Container Store apron while addressing all 3,500 employees.

People receive information differently. Employees are trained to discover and implement the most effective and vivid way to communicate with one another. If someone misinterprets a comment, the speaker is trained to empathetically clarify. Even when an employee is tired or having an off day, courteous communication is habitually practiced. This is how the Container Store builds trust, understanding and collaboration.

Ms. Reiff's philosophy is that everyone must know what's going on to contribute. Ideas and valuable information are shared from bottom to top, in reverse and side-to-side. This guards against silos and myopic thinking.

Her success is self-evident: The chain's turnover rate is less than 10 percent, remarkable for a retailer. It's easy to see why.

Pauline Graivier is president of Dallas-based Verbal Communications Inc. Rob Hoffman is a partner with Gardere Wynne Sewell LLP.