Ah, but at least it wasn't Boring. In fact, the excitement was just starting. In 1965, with their customer base and pricing procedures more solidly established, Crate's proprietors were threatened with loss of their Old Town lease. Gordon again improvised an unusual deal -- Crate would put up a new building, lease it back from the landlord, and finally would buy it 15 years later -- that foreshadowed a string of advantageous lease arrangements he would hammer out over the next two decades. In 1968, with the company grossing $500,000 a year, Crate opened a second store, Plaza Del Lago, in suburban Wilmette. The third store appeared in Oak Brook, in 1971. With each expansion, says Segal, they were "betting the company."
"Crate was highly leveraged all the way," he explains. "We'd never sought outside capital, in part because we wanted to keep the business small and exciting. We really did want to have fun with this thing." Contending that it wasn't until the opening of the Michigan Avenue, Chicago, store, in 1975, that "we finally got recognized," he mentions that his first bank wanted Crate to put up half the $300,000 cost of the Oak Brook expansion itself. Their response? "We found another lender."
Crate found other sources of inspiration as well. In 1966, Gordon and designer Lon Habkirk flew to Boston to look over Design Research. Founded by architect Benjamin Thompson, DR, as it was known familiarly, was the archetype of everything Segal aspired to: a clean, contemporary-looking, European-flavored design store specializing in imported housewares and furniture. As described in a Harvard Business School case study, DR "conveyed a glimpse at a lifestyle that was both gracious and yet conducive to the demands of modern society. . . . The results were a shopping experience unique for its time."
Habkirk, creative director of the Crate & Barrel Furniture store in Cambridge, Mass., the only furniture outlet in the company chain, remembers the exposure to DR as being "enormously influential" on the Chicago operation.
"We went there because we were considering handling Marimekko," says Habkirk, referring to the fashionable line of clothing and fabrics that Thompson imported from Finland, "but both of us fell in love immediately. The genius of Ben Thompson was that he wasn't a retailer, so he didn't approach [retailing] in a conventional way at all. Beautiful women stood at the front door handing out fresh oranges. There were fresh flowers everywhere. It was retailing, yes, but it was retailing with spirit. Eventually we took the whole idea and translated it into a reproducible formula."
The formula they developed was not pure DR, however. DR featured top-ticket items and one-of-a-kind imports, but despite average sales of $236 a square foot, the store was unprofitable. Segal concentrated on building his business through volume buys and low margins, importing directly from manufacturers to keep prices 30% to 40% below comparable merchandise. Coupled with favorable suppliers' contracts, these measures committed Crate to a policy of setting one fair price on a piece of merchandise and holding it, not jacking it up or knocking it down as customer response might dictate. Volume was ensured through imaginative advertising and even more imaginative display techniques. Carole Segal was a singular force in the latter regard. Until she left the company in 1965 to start a family, her touch was evident everywhere. In 1979, she opened Foodstuffs, a food store with a Crate-like merchandising approach; it may become the family's next great retail venture. And Habkirk himself influenced Crate's display concept after a sabbatical with the Peace Corps in Afghanistan from 1967 to '70. Traveling throughout Asia, he was struck by the merchandising at open-air bazaars, where vendors hung racks of copper pots "like piles of jewels." Like Segal, he was convinced that shoppers would buy more readily if they didn't see one precious vase or pot sitting on a shelf "like some museum piece."
But the real key to reproducing the formula, and probably the missing element most responsible for DR's demise, was cultivating a sales force that could grow into a management team. Hiring bright young people was rarely a problem; keeping them motivated -- and therefore employed -- was. Segal, who worked the floor in one store or another for the first 10 years himself, was fully capable of leading by example, but his personal elan meant only so much to a group of college grads with ambitions of their own. In a low-paying, labor-intensive field like retail, these people would either burn out, get hired awat for better money, or rebel against managers brought in from outside the company. Whatever course the erosion took, it would doom even the most modest of Crate's growth plans.
So Segal developed an alternative strategy. Grow slowly, adding no more than a store or two a year until recently. Expand only in cities that appeal to employees. ("I love New York," he volunteers, "but I've never particularly wanted the hassle of doing business there.") Build up a respectable catalog business. (Crate's now accounts for about 10% of sales.) Finally, hire full-time people with the express aim of moving them into management positions. One such early hire was Barbara Turf, now Crate's executive vice-president in charge of merchandising and advertising. A former schoolteacher, Turf started 18 years ago working part time in sales. Soon, she was managing the Oak Brook store; about 13 years ago, she began traveling overseas on regular merchandise missions. During 1970, a watershed year, Turf helped hire and train a core group of new staffers, 60% of whom are senior company executives today.
