Steve Eberman, co-founder and chief executive officer of Function Junction, a Kansas City, Mo.-based housewares chain with eight stores in the Midwest and two more on the way, pinpoints three crucial factors in the development of any exemplary retail organization.

"One is a store or merchant with a good concept, but they're a dime a dozen," Eberman avers. "The second is a good merchant who's also a good businessperson, and that's rather rare. The third is someone who's both of those, plus being an outstanding manager of people. As far as this business goes, I'd narrow [the last] list to Gordon [Segal] and myself."

Others give Eberman high marks as well. Donna Prince, editor of Totally Housewares, an industry trade journal, finds him "very unorthodox -- but also very exciting. In some ways Function is distinctly Crate-like, but it's also more price-oriented, and more utilitarian. There's a lot less glitz."

Eberman opened in Kansas City in 1977, hoping that by avoiding such major markets as New York City and Chicago he could refine his merchandising concept without undue pressure to succeed immediately. His concept emphasizes color scheme ("the most flexible choice the consumer has to make") and product exclusivity. "Our stores don't carry appliances or have a lot of sophisticated fixtures like Crate," he says, "but we do have what I like to think is a more universal concept than they do. You won't find any Crate stores on the South Side of Chicago, for instance, but there could be a Function Junction there."

With 100 employees on his swelling payroll, Eberman notes that his greatest satisfaction comes from watching his employees develop into good managers. "To me, it's a thrill anytime someone in this company takes a job away from me," he says.

A major influence on Eberman during his wanderings around Europe in the mid-70s was a chain of home furnishing stores known as Habitat. Designed around tile floors, splashes of color, and whimsical displays, the stores divide products into three generic categories: First Home/Lifestyle (functional, inexpensive home items); Country (furniture, rugs, and dinnerware); and City (high-design products in chrome, leather, and glass).

Founded in 1964 by entrepreneur and author Terence Conran, the Habitat chain moved into the United States in 1977 under Conran's own name and now has 13 stores scattered throughout the Northeast. Conran's outlets, many in the 20,000- to 30,000-square-foot range, feature furniture, glassware, and kitchenware -- "all the basic needs for the home," according to spokeswoman Pat Grabel. "About 90% of our products are exclusive to us, and a majority of those are designed by our own design group. All our stores reflect [Conran's] philosophy of good design at good prices."

"We're very different [from Crate], and will be increasingly so," says The Pottery Barn's Hoyt Chapin, veteran of many a European buying tour with his old pal Segal. "Like Crate, we developed relationships [with manufacturers] overseas that cannot be built overnight. Unlike them, we're more of an item store: "We might have only 2 or 3 products in a category where they have 10. And though our stores are smaller -- they average about 3,000 square feet -- we're committed to a much more rapid expansion policy than they are. We really believe the moves we've made over the last year and a half ensure we have the systems and procedures to do that without sacrificing quality at all."

Founded in 1949 by Paul Secon, The Pottery Barn maintained a single housewares store in Lower Manhattan until Chapin bought the company in 1964. "[Secon] was a pioneer in this type of merchandising," says Chapin. "Before World War II, it was something of a sacred approach to well-de-signed merchandise -- almost like museum shopping -- and he turned it into a supermarket." When he sold the operation to The Gap Stores Inc. in 1983, Chapin had 13 company stores and another 9 franchised outlets, all on the East and West Coasts. That number has since grown to 28, with 10 to 15 more Barns on the drawing boards for next year.

"I was looking for a company that knew us, understood us, and would let us run the business the way we knew how," observes Chapin of his courtship with the publicly traded clothing retailer. "Now we have a much bigger resource pool to draw on, and we've been able to upgrade systems like electronics and computers without suffering any disasters. Since the acquisition, we've also lost only one old-time employee -- a healthy sign. And it's no problem now promising our people plenty of opportunity to move within the company. Specialty stores are clearly the way to go in retailing. It's how you organize and manage them that makes the difference."

Gordon Segal himself is a student of management philosophy, and has often lavished praise on such retailing gurus as R. H. Macy's Edward Finkelstein. The Cellar, Macy's innovative housewares concept, is one of the more imaginative department store responses to the challenge of the specialty stores. Recently, Segal also singled out a company in an altogether different line of retail, Nordstrom Inc., a Seattle-based fashion specialty retailer. Founded by John W. Nordstrom in 1901, this chain, now six western. states and 42 outlets strong, grew into the largest independent U.S. shoe retailer before branching out into men's and women's apparel and accessories.

"Here they come into California," Segal tells his own people, "where there must be a new department store every three miles. And they succeed. They open in [Los Angeles] and do $300 to $400 a square foot in a 200,000-square-foot store.Phenomenal. How do they do it? They talk to you, they come up to you, they care for you. You can't believe you're in a major department store. Nordstrom does $900 million, $1 billion a year, and they still care!"