We wrap up Season 5 with yet another remarkable leader from a most remarkable retailer. This week our guest is Satish Malhotra, the CEO of The Container Store (TCS), the leading specialty retailer of storage and organization products, custom spaces, and in-home services.
We wrap up Season 5 with yet another remarkable leader from a most remarkable retailer. This week our guest is Satish Malhotra, the CEO of The Container Store (TCS), the leading specialty retailer of storage and organization products, custom spaces, and in-home services.
Satish took the helm of TCS last year after an amazing two decade run at Sephora where he helped drive their retail growth strategy as Chief Retail Officer and Chief Operating Officer of the Americas.
We unpack what has TCS' success and momentum over the past 18 months, before delving into their plans to double its business over the next few years via it's 3 Pillars strategy: intensifying its product and service focus, expanding its reach (both digitally and by opening 80-100 new stores), and strengthening multiple capabilities. We also discuss how to overcome the cultural challenges that can impede any transformation effort and get Satish's views on how to navigate the coming choppy waters of a challenging economic outlook.
But first we dip into the week in retail news, including dissecting the latest sales report from the US Census Bureau which seems to suggest storm clouds on the horizon. Then we take on the surprise news of Amazon' Deal Days, before a short riff on the importance of the week after Christmas. Then it's a trip to the retail graveyard with news of Sears Hometown's apparent pending demise and a quick take on H&M's recent sales report. We wrap up with Walmart's doubling down on omni-channel fulfillment while Nordstrom Rack struggles to make it work.
Catch Steve and Michael at NRF's Big Show
Catch Steve and Michael at the World Retail Congress (more details soon)
A seasoned retail executive with decades of diverse and valuable experience, Satish Malhotra joined The Container Store on February 1, 2021 as Chief Executive Officer and President.
For the previous 21 years, Satish held various leadership roles at prestige beauty retailer Sephora Americas, most recently as Chief Retail Officer and Chief Operating Officer. In this role, Satish was responsible for leading Sephora’s retail growth by expanding its in-store services and experiences, developing digitally enabled solutions and by growing its off-mall store locations.
Prior to that role, Satish served as Chief Operating Officer and was responsible for Technology, Supply Chain, Store Development, Legal, Strategy and Partnerships, including the Sephora inside JCPenney (SiJCP) business which now operates in over 600 stores. He also spent several years overseeing Sephora’s expansion into Canada and Latin America.
Before joining Sephora, Satish was a Transaction Services Senior Associate at PwC. He is a Certified Public Accountant (inactive).
Throughout his career, Satish has excelled at developing and growing new sales channels, solving complex “back of the house” problems with innovative solutions, and attracting and developing high performing talent. Among his many career highlights: transforming Sephora’s IT department to a Center of Excellence within parent company LVMH, launching all of Sephora’s digital commerce properties (including website, mobile, social and CRM), strengthening Sephora’s supply chain to enable 98% of online orders to be received by consumers within two business days, developing an off-mall store concept which dramatically improved Sephora’s accessibility to its consumers, and led the efforts in creating Sephora’s purpose of “inspiring fearlessness”.
In 2020, he was presented with the Innovation Leadership Award from the World Retail Forum.
A graduate of the University of California, Berkeley, Walter A. Haas School of Business with a Bachelor of Science in Business Administration, Satish has also completed the LVMH Inspiring Entrepreneurs Senior Executive Leadership Program.
Malhotra currently resides in Flower Mound, Texas, with his wife, two children and their Coton du Tulear. An avid Peloton rider, he clocked well over 11,000 minutes in 2020.
Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his website. The expanded and revised edition of his bestselling book Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a Forbes senior contributor and on Twitter and LinkedIn. You can also check out his speaker "sizzle" reel here.
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global E-Commerce Tech Talks , The Food Professor with Dr. Sylvain Charlebois and now in its second season, Conversations with CommerceNext! You can learn more about Michael here or on LinkedIn.
Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue, his YouTube BBQ cooking channel!
Michael LeBlanc 00:06
Welcome to Remarkable Retail podcast Season 5, our season finale, Episode 24, presented by MarketDial. I'm Michael LeBlanc.
Steve Dennis 00:14
And I'm Steve Dennis.
Michael LeBlanc 00:16
Well, Steve, last episode, we celebrated our 100th regular reason episode milestone, this episode a wrap on season five. And we're already, already hard at work on Season 6.
Steve Dennis 00:27
It's been a very interesting season. And I think there'll be a lot more going on. We're gonna have a little bit of a break. But we will be back I believe; January 17th is our plan. And,
Michael LeBlanc 00:34
That's right. That's right. That's right. We,
Steve Dennis 00:40
I look forward to reloading.
Michael LeBlanc 00:42
Yeah, we'll be recording our news right on the floor of the big NRF show, actually. So, we'll be, we'll have our hand, collective hand on the collective pulse of retail. Our very special guest to close out this season is Satish Malhotra, The Container Store, CEO and President.
Steve Dennis 00:58
Yeah, we've been really lucky as we talked about last episode to get quite a few CEOs of really interesting companies. And I know that The Container Store will not be known to everybody because they're just in the US. But I think they're one of the most interesting stories. I've been a catan-, I was thinking about this before we came on air. I've been a Container Store customer for probably at least 20 years. I used to shop at their Northbrook Illinois store when I lived in Chicago. And it's been fun to see their evolution. And as listeners will hear, they have some pretty aggressive growth plans. And Satish is a very interesting guy. He was the head of retail and had a bunch of other jobs at Sephora and did extremely well there. And now he's bringing, combining that talent with the great team at The Container Store to take things to the next level. So, a great interview,
Michael LeBlanc 01:48
A reminder to all the listeners you and I will be on stage at the NRF show on Monday, January 16. For a session with one of Satish's, his top executives, Gretchen Ganc, talking about what it takes to be remarkable. Presented by our friends at MarketDial.
Steve Dennis 02:01
Yeah, It's going to be a fun, fun event. We'll just mention it quickly. I think we're starting at 12:30 on Monday, and it's going to be a extravaganza of a little bit of my talking, a little bit of Q&A, a little bit of Gretchen sharing, about what The Container Store is up to, so it's very fast paced. And we're also going to be giving out free copies of my book Remarkable Retail. So, get there early, quantities are limited. And then right after the talk, we will be over in the MarketDial booth, and I will be signing copies. So, if you get your copy at NRF, great. If you bring your own copy, I'll be happy to sign that as well. So, see everybody in New York,
Michael LeBlanc 02:40
Speaking of taking the show on the road, World Retail Congress in Barcelona, Spain, April 25th, and 27thm we will be there together. I'm very excited, it's my first time. My first time in Spain.
Steve Dennis 02:51
Well, you're going to love it. Barcelona is one of my favorite cities. And yes, I will be speaking at that event, along with plenty of other people you've heard of. We'll give more details in the new season. But we'll also be getting a few of those folks on the mic.
Michael LeBlanc 03:06
Let's get to the news. So, the US Census Bureau reports, some sales, lots of conversations back and forth, as it is always the case month-over-month, year-over-year, adjusted dollars, seasonally adjusted dollars. I lost track. So, what, what did you think anyway, if you step back and look at the numbers that came out? What was your kind of net, net on what we saw?
Steve Dennis 03:30
Well, I think what the numbers show pretty clearly is that sales are decelerating. There still was this pretty significant year-over-year increase. And of course, that varies depending on the category. A fair amount of that was driven by gasoline sales and driven by grocery which are subject to higher-than-average inflation. So, once again,
Michael LeBlanc 04:02
Steve Dennis 04:03
(Inaudible) you cut the parse out the inflationary impact. But the consumer is still spending. My guess is this report really reflects through a decrease, or at least a pretty flat perspective on transactions. So, but I think the overall picture is definitely an economy that is slowing, and consumers being a bit, bit more cautious. We also had some commentary from, because there was a big investor conference and Macy's CEO, and Nordstrom CEO, and Walmart CEO were all making comments and most of their comments were that they were seeing a slowdown in sales. So, storm clouds are on the horizon, I guess.
Michael LeBlanc 04:36
Let's talk about Amazon for a sec. They announced, it's something they I've never seen them do before, kind of a last-minute holiday sale. What, what do you make of that?
Steve Dennis 04:44
Ah, desperation. Yeah, it was a bit of a surprise kind of another, you know, a Prime event or whatever they call it that and apparently, (crossover talk).
Michael LeBlanc 04:54
Oh, I like that, Festivus Prime. Optimus Prime or Festivus Prime, maybe they called (crossover talk) Festivus Prime.
Frank Costanza 04:59
“The tradition of Festivus begins with the airing of grievances. I have a lot of problems with you people”.
Steve Dennis 05:05
You can air the grievances, and I've got many, so we might have to do that, an extended cut, (crossover talk).
Michael LeBlanc 05:11
A bonus episode, Steve's grievances.
Steve Dennis 05:13
Steve's grievances. But yeah, they added this extra event. And I do think it is reflective of, you know, weak sales, or at least pockets of inventory that they're trying to clear out. My understanding was a lot of it was focused on their own private brands.
Michael LeBlanc 05:28
Oh, that's interesting. Get yourself an Alexa device at a real, a real discount, basically,
Steve Dennis 05:33
That's (inaudible) again, I think, you know, it speaks to a real slowdown that we've seen in spending in pockets of, pockets of inventory. One thing I was going to say, which is a little bit of a digression, perhaps. But I think the most interesting week of the whole holiday season is actually the week after Christmas, you know, with all the discussion on Black Friday, Cyber Week, Super Saturday, all this kind of stuff, they are important.
Steve Dennis 05:41
But the week after Christmas, to me, has always been interesting, because number one, since gift cards have become so important, which is, you know, 20 plus years now, I guess, a lot of that redemption happens right after Christmas. So, you don't really know how you've done in terms of moving product till you get post the Christmas holiday. The second thing is, that's also when retailers have to kind of go back. I don't know if this was your experience, but I certainly know it at Sears and Neiman's and some other places. It's like, well, okay, we weren't able to take advantage of the gift occasion. So, where are we on inventory? Where do we need to get more aggressive about moving through things that are seasonal, really starting to think about bringing in spring goods. And so there can be a lot of activity and a lot of marked down, or a lot of margins. Opportunities start to get sorted out in that week or two right after the holidays. So, I don't think we really, we really know where, where retail is sorting out for the holiday season until we're into January.
Michael LeBlanc 07:00
Yeah, it's a big event here in Canada and the UK. We call it Boxing Day. It is sometimes the next day, sometimes the day after, but it's really Boxing Day Week is what we call it. It's a week, basically. And you're absolutely right. A lot of retailers, well, retail has planned for it, right. They do bring in special buys, because it's one of the top three retail events of the year. And it's also a time for them to (inaudible) up their inventory. Make sure they try and go clean into 2023. Let's go to the opposite end of that scale to the graveyard. Sears Hometown let's talk about Sears Hometown.
Steve Dennis 07:33
Well, one of the things in talking about Sears at least is the way most of us know it. And of course, when I worked there long ago, that Sears ended up being, like there's the real estate holding company Seritage, I think it's called, There's Sears Hometown, which was spun off. So, we're talking about Sears, there's actually a bunch of different pieces that are still out there. Well, Sears Hometown, which were these smaller, home focused stores. They filed for bankruptcy this week. So, it's hard to believe that there's still any pieces of Sears that are still around, (crossover talk).
Michael LeBlanc 08:05
It's still there. It still exists. I mean, (crossover talk).
Steve Dennis 08:07
It is like, what is it (crossover talk) Jason, (crossover talk). as this keeps,
Michael LeBlanc 08:12
It just pops back up again with that, (crossover talk).
Steve Dennis 08:14
Pops back up again. So yeah, I keep getting you know, even though I worked at Sears, you'd think I would like to be a little bit more familiar with all these things. And I'm like, wait, Sears Hometown still exists?
Michael LeBlanc 08:17
Let's talk about the last couple of things. H&M, I want to talk about both H&M just to kind of round out our discussion around some sales. So, they got some interesting news. What did you think about, what's going on at H&M.
Steve Dennis 08:35
Couple of things were interesting there. H&M reported, essentially flat sales. And that sent their stock down. Although the stock market's been so crazy the last few days, it's kind of hard to sort out how much of that is particular to H&M versus just, in general, what's going on with retail in the market more broadly. But I think it speaks to some of the challenges in apparel. More broadly, just about every apparel retailer that's reported over the last quarter, really hasn't shown much success. But one of things I thought was interesting, I decided to look at what H&M stock performance has been over the past five years. And I was surprised to learn that the stock has gone nowhere. It's basically flat or down to where it was five years ago. And I kind of had it in my head that H&M has way more successful. And you know, stock performance is not the only measure of success.
Michael LeBlanc 09:27
Sure, sure, sure.
Steve Dennis 09:28
But, but you know, when we talk about the growth and fast fashion and you know, some of the issues around fast fashion as well from a sustainability viewpoint. I just guessed; you know that I would have guessed that they had been consistently more successful because they have been growing nicely. But they're not, that performance is not getting rewarded, but they seem to be hitting even more headwinds than they've been experiencing of late.
Michael LeBlanc 09:52
Let's shift gears a little bit. Let's talk about Walmart and how they're leaning into omni-channel fulfillment at the same time, Nordstrom's are going in the opposite direction. They're slowing in store fulfillment, what's going on there?
Steve Dennis 10:03
Well, I think the Walmart story, there was more discussion about it, I guess, because Doug McMillan was presenting at an investor conference, but they were really talking about what we continue to see is really this, you know, hybridization or blurring of the lines between physical and digital. So, just like we had the episode with Nancy King from Target, and you've talked multiple times, we've talked multiple times about how stores are being used to fulfill eCommerce orders. Walmart is essentially, the best as I could tell, following the same strategy to tie in a little bit to Nordstroms news. So, this was specific to Nordstrom Rack, the Nordstrom Rack, the off-price concept had been doing buy online. pick up in store, as the rest of Nordstrom has been doing. And they announced that they were slowing things down, basically putting a pause on those orders, because they were having a hard time doing it well.
Michael LeBlanc 10:59
A Lot of cancellations that I think I read too, right?
Steve Dennis 11:02
Yeah, well, you know, one of the, one of the things that's, of course, true about the off-price market is you have a certain percentage of your assortment that is not, you know, planogram is not consistent,
Michael LeBlanc 11:14
Steve Dennis 11:16
Across the whole chain. And so it's not as easy to know what inventory you have in the store is the first part. The second part is well, you may know that you have it, but you're not exactly sure where it is. Because you don't have this, you know, structured sections and shelves and things like that. So apparently, they were having a lot of issues with customers. I mean it's you know, it's not a great customer experience to say, Yeah, order online, pickup in-store, come to the store, and then the sales associate can't find it. So, I think this does speak to some of the pressures, you know, kind of tying it back to Walmart. It's a big deal for retailers to figure out how to do this omni-channel fulfillment well, and it puts a lot more pressure not only on inventory visibility, but also, I think it's tied to some of the labor issues, right, because omni-channel fulfillment,
Michael LeBlanc 12:06
Steve Dennis 12;07
You know, not that there's not that much,
Michael LeBlanc 12:09
It's labor intensive.
Steve Dennis 12:12
Robotics right now, yeah, it can be quite labor intensive. And given that people are having a hard time finding employees and keeping them and training them and all that kind of stuff, you kind of have this confluence of growth and popularity with difficulty hiring people. And I think that's starting to smash together. So, what, what Walmart's talking about is, you know, making some of those investments to, to be able to scale that and, and operate it more consistently. Nordstroms are having to tap the brakes, because they haven't figured out how to do it. And again, that's a particular challenge when you're talking about the off-price market.
Michael LeBlanc 12:42
Well, a good round out for the end of the year, let's say let's leave it there. Happy Holidays to everyone. Happy Festivus for those who, of course,
Steve Dennis 12:51
For those who celebrate,
Michael LeBlanc 12:53
For those who celebrate. And once again, keep an eye out for the bonus episode coming out on the 23rd with your grievances. So, we'll record that just after this. All right let's hear from our sponsor MarketDial. MarketDial is an easy-to-use testing platform that emboldens great decisions leading to reliable, scalable results. With MarketDial, you can be confident in the outcome of your in-store pilot initiatives before rolling them out across your fleet. In a challenging retail climate of supply chain disruption, labor shortages and dynamic customer behavior. The need for reliable insights has never been greater. Validate your remarkable ideas with MarketDials’ in-store testing solution. The proof is in the testing. Learn more @marketdial.com. That's marketdial.com.
Michael LeBlanc 13:36
Satish, welcome to the Remarkable Retail podcast. How are you doing this morning?
Satish Malhotra 13:39
I'm doing great. Thank you for having me.
Michael LeBlanc 13:41
Well, fantastic. Thanks so much for joining us. Where are we finding you today? I think you're located in Dallas, is that right?
Satish Malhotra 13:47
That is correct. I came over here almost about a year and nine months ago from San Francisco, California and I have loved every minute of being in Dallas.
Michael LeBlanc 13:58
Wow, fantastic. And that gets us into a bit of your personal professional journey about what you were doing there. But let's start there. Let's jump in there.
Satish Malhotra 14:05
Sure. So, my background is, I would say, a bit unique in that I was born and raised in London, England, and then came over to the US, really for higher education. So, I went to UC Berkeley, and started off my career, actually, within finance. So, I became a Certified Public Accountant working for PricewaterhouseCoopers. And that was where I thought my career journey would take me was to be the CFO. And very quickly, I left public accounting and went to private accounting. So, I went to work for Sephora in their finance department, and I had just an unbelievable journey there, being there 21 years. And one of the reasons I actually stayed (inaudible) I didn't necessarily think I'd be there for that long but one of the reasons I stayed was because Sephora is just a great company, allowing me to take on new responsibilities in different areas of the business. So, not only was I grounded within finance, but I had an opportunity to create the Sephora inside the JCPenney business model. I went on to take on responsibilities for technology, for supply chain, and then internationally was able to take on responsibilities for our growth within Canada and Latin America. So, it truly gave me a great perspective to understand not only the “back of the house”, but also the “front of the house” in terms of how to relate to customers in different environments.
Satish Malhotra 15:33
I wasn't planning to leave Sephora; I was very happy being in California until this fantastic opportunity came around with The Container Store. And I was familiar with The Container Store earlier on in my career, but honestly, I wasn't a frequent shopper of The Container Store. And when I was doing my due diligence, and looking at the company, I quickly fell in love, quite frankly, because they have an unbelievable culture, and almost, you know, fanatics within the business there are really passionate employees who really love what they do. And I quickly felt that this was an opportunity where I thought I could take The Container Store to the next level. And so today, I am the CEO and President of The Container Store.
Michael LeBlanc 16:18
You know, it's super interesting. We'd often talk to leaders with backgrounds and merchandising or finance, accounting or marketing that take on a CEO leadership role. Do you find when you look at issues and opportunities, is that your default? Do you start at the numbers and work your way up? Or, you know, with a broader lens? How do you, how do you examine both opportunities and, and businesses? Do you, do you reflect back on that at all?
Satish Malhotra 16:42
You know, it's a combination of both, you know, I try to use all the skill sets that I have. So, if I'm looking at a particular initiative or a project, clearly, I'm understanding the impact that it has on the customer experience. But secondarily, then you try to understand how quickly are we able to implement that project or that initiative? Is there a minimum viable proposition that we can go in and test and learn. And that allows us to understand the resource constraints needed to launch that project. And then finally, given my financial background, also looking at the return on our investment, I think that is the balanced perspective, I'm able to bring across any initiative or growth strategy, we may have been able to break it down to those three key components. And you know, oftentimes, you may speak with an executive and they get really passionate around a particular project, but,
Michael LeBlanc 17:34
Satish Malhotra 17:35
They don't really understand what it takes to implement it. And more importantly, you know, what is the ultimate return on our investment? Are they doing postmortem analysis to understand? Are they hitting the mark or not? And I think that's kind of what I bring to, you know, everyday discussions when we're with our leadership team at The Container Store.
Michael LeBlanc 17:55
We have an international audience. So, not everyone listening might be familiar with The Container Store, can you give us an overview of scale, scope, value proposition? Who's your customer kind of thing?
Satish Malhotra 18:06
Sure, absolutely. So, The Container Store, we have about 95 stores in the US. And we are excited about actually our ability to more than double that in the coming years, we're a billion dollars in sales in our republic company. The value proposition that we offer is extremely unique. No one really out there does what we do. And that is providing our customers really with an opportunity to transform their lives through the power of organization. So, we have close to 10,000 SKUs dedicated to organization and storage for our customers' everyday needs. And that is across every space within the home that could be in your pantry, your garage, your office, your, your vanity areas that you have. So, that's one kind of line of business that we have.
Satish Malhotra 18:56
Another line of business we have are our custom spaces. And that is when we can go in and actually transform a space for you. And that could be your laundry room or your primary closets, your garage, your mudroom, your entertainment space. And that's through both our metal-based systems that we have and that we own completely through Elfa and wood based premium systems, through Preston, which we also own the manufacturing facility for that as well.
Satish Malhotra 19:24
And the last piece of the business to kind of bring it full circle in our ecosystem is providing in-home services. And that's both within design we can come in and actually design spaces for you, but also provide you in home organizing services, where we can not only transform the space and bring you all of the completion products through general merchandise, but actually provide you a system to make sure that you are living in an organized way. And I would say that's, you know, critical for you to really be able to fully transform your life through the power of organization.
Steve Dennis 19:58
When I was getting ready for this, I was reviewing some of your investor presentations and things like that. And I was really struck by the tremendous success you've had in this great momentum, particularly during the past year, 18 months or so, which seems to line up with when you happen to show up so, ma-, must be you, but, but I imagine there's some other people and other things involved. But what have been some of the keys to that success over the past year or so?
Satish Malhotra 20:26
You know, I would say one fundamental key has been our relentless focus on our three strategic pillars. Very quickly, early on, I spent a lot of time understanding the DNA of the company, and also spending time in the field with our stores, as well as our distribution centers and our vendors to really understand the inherent bones that have made the company successful, up until I joined. And for me, it was really to determine where did we wanted to take the company. And what I was able to put together were our three fundamental pillars, one around deepening our relationship with the customers. And we've been really focused on making sure that we're bringing products that our customers truly love and appreciate, whether it's our sustainable line that we've grown to now 600 SKUs, or our private label line, which is phenomenal value, play with great quality and durable products at a great price. Or whether that's our ability to engage with customers and let them play and try and discover many of the great merchandise we have. And what we find is when customers, you know, are able to touch a product, they become emotionally connected with it. And that allows them to walk away with not only the product, but with an ability to understand how best to use those products.
Satish Malhotra 21:54
And also, within our loyalty programs. So, we launched a brand-new loyalty program. And it's been, it's called Organized Insider. And it's really been a fantastic program to reward our customers with their level of engagement. So, our first pillar is really around kind of deepening the relationship with our customers. And we did that through product, we did that through loyalty, we did that through an element of discovery in our, in our services. And it was actually quite natural for us to deliver on it. But it was focusing our efforts on those things that helped us propel our success, and to really win with the customer.
Satish Malhotra 22;30
The second pillar that we have, that we've also been focused on, is around expanding our reach, how can we become more accessible to our customers. And we do that, you know, in a few ways. One is through opening stores. So, we've just opened our small format store in Colorado Springs, it's around 12000 square feet in size. And it's doing incredibly well for us. And as I mentioned earlier, we plan to open, you know, mor-, north of 70 stores, we have a potential to open over 100, actually. So, we're excited about bringing The Container Store to a lot of new customers out there who can't necessarily discover us in our brick-and-mortar format.
Satish Malhotra 23:11
And we've invested heavily with our eCommerce business as well, we launched a brand-new app. And it's doing 7% of our sales now. And again, it's a relatively new app, and it's doing incredibly well. And we're expanding our reach with our customers through our custom closet business. And that I think has been incredible. We do very well with our metal base system, as I mentioned, Elfa. And as we were doing a lot of research, understanding the size of the prize, we realized that the custom closet, custom space business is about a $6 billion addressable market. And we were playing in the under $2,000 space without the Elfa line. But that only represents about 15% in value of that 6 billion market. So, we're missing out on the lion's share of potential out there in a very fragmented sector. So, we've gotten really focused around our custom space business in particular around our premium spaces, whether that's Avera and now with Preston.
Satish Malhotra 24:18
And then the third pillar we have is around strengthening our capabilities. And that's I would say it's really just operating more efficiently, delivering a better customer experience, becoming really profitable about the way we go look at growth and how we achieve that growth in profitable ways, hiring the right talent, so that we can continue to strengthen the back-end operations and focusing on D, E & I and ESG. So, those three pillars even though there's sub-, there's, you know, a lot of kind of sub-bullets to those three pillars, has allowed the company to stay focused in terms of what we do when we talk about it and report on it and every meeting that we have, but also allows us to make sure we've got the resources allocated in the right possible way as well. So, a couple of quick questions. One's more, I guess, tactical in a way. But you know, I think we all know many of us have tried to drive transformation initiatives at companies that, you know, sometimes there's a lot of resistance to change. Did you find that? And if so, how did you overcome it? I get that question a lot actually, especially coming as an outsider, not in the world of storage organization, and in particular, not coming from within the company.
Satish Malhotra 25:14
And I actually found that a vast majority of the store personnel and at the home office, which we call the Support Center, really were hungry for us to become the best version of ourselves. They, they, they, they loved where they were, but they knew they could do so much more. And I think they were just looking for someone to focus the company on those three strategic pillars and provide the resources necessary to unlock this potential growth that they all knew was there, and they just needed someone kind of with the key to unlock it. And, you know, I was fortunate enough to come in at a time where a lot of my predecessors had stabilized the company. And, you know, we paid off a lot of debt, we had a great balance sheet with a great P&L model. And they've taken, they took the company to a fantastic place that I was able to just kind of then grow from it. They're great bones on the company, I just, I essentially just added the meat to it. And, and, and for the most part, I would say that there was, there was a lot of enthusiasm around where we were going, whether that was in our product assortment and discovery, or just within the expansion of, of custom spaces.
Steve Dennis 26:50
Sure, sure. Interesting. So, I have to ask, I don't know if it's a little bit of the elephant in the room. But, you know, there have been a number of businesses. I guess we all know by now that there were a number of businesses that really benefited, which sounds like a weird thing to say from COVID. But you know, given that certain categories like the home, performed disproportionately well during the heart of the pandemic, and many of them are now starting to and I'm thinking about Wayfair, Peloton, you know, some others that are starting to experience trouble. How do you know how much of this success is driven by kind of macro-economic, external factors versus kind of the inherent changes you're making? And (inaudible) is that even a fair question?
Satish Malhotra 27:31
It's absolutely a fair question. I'm not sure I can quantify it. Like, what I can tell you is this. There is an inherent need for customers to find a way to make sense of all of the chaos that's out there. The world is getting (inaudible), it's getting more and more chaotic, not less, there's a lot more stress out there. And customers are looking for ways to kind of de-clutter and de-stress and to have some sense of control with what they can control. Now, maybe that got heightened during the pandemic. But I think it's actually an ongoing concern out there where customers are just trying to, you know, do the best that they can in the environment they're in, whether that's in the pandemic, or now in a recessionary environment, or even a growth environment is how do I make the most of what I'm doing here?
And I think what we offer our customers is an answer in any of those environments. And there's no doubt that customers were paying far more attention to their homes, because they were trapped in their homes, and they started looking at spaces in a whole new way. They had to find multiple uses for their spaces. They needed an office for work, they needed a space for their children to be able to do their homework or schoolwork. But yet they also needed a space for entertaining their own family members, internal family members or whatnot. And we provide all of that.
But if you, if you take a step back and you look at, you know, the success, for example, the Home Edit has had or Marie Kondo in providing customers with answers to, you know, bring joy into their life. That's universal. That's an everyday desire that customers have. And I think that's where we get to, we get to play in. We're able to come in and help customers truly, as I mentioned, transform their lives because we've got the tools necessary to do that. And customers are hungry for that. They're like, I want to, I want my pantry reorganized, but I don't know how to do it. Like well, we can help you, not only do we have a known organizing service that can come in and help you do it, but they can also teach you how to stay organized with the right product so that you're not overspending, especially in today's environment where groceries are super expensive. How do you make those groceries last? How do you make sure they don't spoil? Putting them in airtight containers? How do you ensure that you've got the right labeling on your products so that you actually know what you need to replenish.
Satish Malhotra 30:06
I mean, before I came to The Container Store, you know, I would, my wife and I would go to Costco, and we'd buy a lot of products. And I would, because it was on sale, and I would just buy more than what I needed. And I didn't realize that I had, you know, that I use the example of batteries. When I was moving from California to Dallas, and I was boxing, my office probably had 10 years’ worth of batteries, because every time I'd go in it was on sale, and I'd buy it. And I was like, well, if I was organized, right, I would know I wouldn't need batteries. And it's just how true is that for all of us, right? Like we end up buying, thinking we're saving. And quite frankly, we end up you know, wasting,
Michael LeBlanc 30:42
Satish Malhotra 30:43
Because we over buy. And or, or we waste time because you're trying to find things that you're looking for. If you have an organized garage, or pantry and office, how quickly are you able to, you know, find the things you're looking for. So, you're not wasting time. And it just provides a sense of clarity and focus that allows you to take on your everyday duties. If we had a camera on, you'd see that I'd be sitting in my home office, and it's very well organized. It's not just, (crossover talk).
Steve Dennis 31:09
We don't have a camera on because I was very much in need of a trip to The Container Store,
Satish Malhotra 31:14
Yeah, you'd be very impressed, but what, and by the way, you can go to my pantry, and you'll see the same thing. And that is that the day that it was organized, a year and a half ago, it is as organized today as that first day. Because we were able to maintain the system, we learned a system and everybody in the house for myself, my wife, my son, my daughter, we all maintain the system.
Michael LeBlanc 31:37
Well, you're, you're a fantastic ambassador for the brand. I wanted to talk about lessons that you brought over from your last retail experience. I mean, it's a different group of cats, right prestige vendors, prestige beauty vendors are, are a different, different zone, you've got celebrity, you've got high touch fashion, talk about what you brought over from Sephora, that, that you're applying with rigor at, at The Container Store.
Satish Malhotra 32:01
Yeah, you know, there's two elements that you know, to just very simplify 21 years of Sephora. Two elements I brought over to The Container Store. You know, one is understanding the customer. And so as we interact with the customer, whether it's in the US or in Mexico or Brazil, and in Canada, you know, each customer interacts with a category in a very different way, even though the category is the same. So, makeup, beauty is the same, skincare is the same category across all, but the interaction is very different. And what I learned is that, you know, it's really important that while you can have a breadth of assortment and be really deep and narrow in a particular category, to ensure that you don't overwhelm customers with choice. Customers can easily fall into a cognitive meltdown moment because you've provided too much choice. And it becomes that much important to then ensure that you've got specialists in the store that are able to engage with customers and help them narrow down their choices. So, they find the right product that they're looking for and feel good about that purchase. And then can take that purchase home and actually realize the dream.
Michael LeBlanc 33:19
Satish Malholtra 33:20
I can't tell you how many situations we would have within the world of makeup where customers would come in and buy what they're trying to achieve a smokey eye, they buy all the products necessary for it, they go home, they're like I can't really achieve that look. And now I'm disappointed with my purchase and the experience because they cannot achieve that look. And so similarly I think within The Container Store while we've got 10,000 SKUs dedicated towards storage and organization, how we narrow that down to provide you know, through our, either through our filtering on the website recommendations or more importantly our specialists in the stores and really help customers achieve what (inaudible) the goals for their projects and can really then celebrate what they took home. So, that was one area.
Satish Malhotra 34:03
I think the other area which is equally as important is around education. And what I find is, there is a significant amount of, there's a lack of awareness. Now whether in particular beauty surrounds skincare. You know folks, folks are more well versed within makeup. It's an easier purchase to make. You can always buy a lipstick or a lip liner, eyeliner and achieve the look and as long as you don't get too complicated with your smokey eyes or strobing, but you can get, you can quickly get that great lip. But when it comes to skincare, it's a lot more engaging of a category right? You're looking at a cleanser, you're looking at a moisturizer, you're looking at,
Michael LeBlanc 34:48
Anti-aging or whatever, (crossover talk).
Satish Malhotra 34:50
Tension or elasticity and there's a lot that goes into it. And you know customers are fearful of engaging because they don't want to make the wrong product choice. And what I find is that when it comes to storage and organization at The Container Store, there is a considerable amount of folks out there who just don't understand how organization can, can really be a liberating experience for them, whether at home, or in their offices or in their own businesses, you know, think of, think of a cafe or, you know, a, any other business that might be out there, a restaurant for that matter, and how organization can actually help them achieve their goals. And that's where I think we can do a much better job of helping customers discover how organizations can help. You know, and it could be a very small step, you take one step, and you're organizing your under sink, or that junk drawer. And that leads you to organizing your next draw. And then before you know it, you just, you just feel more kind of put together, you're like, Okay, I can take on now. Whatever is out there, I can do it. I can fi-, like I'll give you a great example. I'm not a handyman at all, okay? But it doesn't mean I don't have desires to do, you know, a project from time to time.
Michael LeBlanc 36:09
Satish Malhotra 36:10
But anytime I'd even attempt to take a project on, a small project, I couldn't find my tools. I was like, I don't know where my tools are, I don't use them on a regular basis. And so then I'm spending 45 minutes finding the tools I need. And then by then I've lost that inertia, that momentum to actually go ahead and do the task. And I've done that. I've limited time, you know, to start off with. Now, in my garage, I have a pegboard and alpha pegboard. I have all my tools displayed. It's very easy, if I'm trying to find a hammer or a screwdriver or flat screw, a drill bit, a tape measure or whatever I need, I know exactly where I need to go. And then I'm able actually to now, you know, fulfill that task at hand. That's not something I would have done before The Container Store, not at all.
Michael LeBlanc 36:50
Well, I tell you I'm inspired, I think I want to hit the pause button and go organize my under sink. Because I was looking at it yesterday, it was a mess.
Steve Dennis 36:57
So, Satish. You know, it looks like we're going into more challenging times economically. And of course, that can put pressure on consumers' desire to spend and how they spend and all those, those kinds of things. How, how is this affecting your, your plans? If it's affecting them? Are there any lessons in terms of the way you approach it that members of our audience might, might also think about and take away from this conversation?
Satish Malhotra 37:22
There's no doubt that the current environment, which is first and foremost, you need to understand is Fed lead, right. So, the Fed is bringing about a desired slowdown in the economy. And so, you need to understand the macro headwinds and where they're coming from, because it allows you to understand in what is your playbook? What do you end up doing? And so, if it's Fed led, and it's largely due to, you know, inflation pressures, and rising interest rates, tho-, that's essentially out of your control. So, what you try to do, as you're looking at, okay, in this environment where, you know, customers are really thinking of their pocketbook, how you might be able to engage with them. So, the way that we look at this is very simple.
Satish Malhotra 38:14
First and foremost, how can we provide value to our customers during this time period, and that value could be making sure that they fully understand the projects that they're embarking upon, and how we can simplify that project for them. And they can really get the most out of their dollars that have been spent. Value could also be in the place of like, we offer interest free financing on many of our projects, and that's interest that, you know, we pay for the customer and making sure that they're aware, and they can tap into, to that as well, could also be value in associates of if you spend more, you get to save more, so you get to take more dollars home with you. That's one component of it.
Satish Malhotra 38:56
The second component of it is coming back to our path to 2 billion now desires to double the size, the revenue of our business. It is if you, if we've said that a couple of key components to that growth is around our custom space business, and our new store growth and our eCommerce business. And so what we are doing in this time period is reallocating our expenses, reallocating our capital endeavor to support those growth initiatives? So, my advice to listeners out there is to, you know, don't be shy in an area where you know we're moving into a recession, be bold enough and have the conviction to invest in those areas that you know are going to drive growth. It may not be at this very moment in time, but it will be when you get out of the recession, so that you're actually further ahead. I think if you end up kind of, you know, either one being playing status quo or pulling back in key areas of growth, I think you'll end up paying the price of that later and I think that would be a missed opportunity.
Satish Malhotra 40:03
So, we're looking at, we know custom spaces for us is that it's big, it's a big part of our growth. And we're invested, we continue to invest there, we may pull back in other areas that we don't believe are nice to have. And that, you know, won't perhaps give us the same amount of growth as our custom space business and that's fine. So, then we'll put back in that or reallocate those resources into areas we know we'll get far more growth. So, that's what I would say is you don't have to shy away just because we're in a, in turbulent times, you know you brace for impact, but be smart around the choices you make. And those choices should be in areas that are either providing a meaningful difference in the customer's experience, and are providing growth opportunities, meaningful growth opportunities in the future, you put those two together, I think that's a winning proposition.
Steve Dennis 40:54
Well, I think that's a great place to leave it. Thanks so much for joining us. So, many exciting things are going on. It sounds like well, I know many of our listeners already enjoy an experience in The Container Store. It sounds like many more of them will get to enjoy that experience in the future. So, thanks so much for joining us. We wish you a happy holiday and a great 2023 and thanks for coming on the Remarkable Retail podcast.
Satish Malhotra 41:17
Absolutely, my pleasure. Thank you, Steve and Michael.
Michael LeBlanc 41:19
If you like what you heard, please follow us on Apple, Spotify or your favorite podcast platform so you can catch up with all our great interviews, including Hal Lawton talking about Tractor Supply's Remarkable "Life Out Here" Growth Story. New episodes of Season 5 presented by MarketDial will show up each and every Tuesday. And be sure to tell your friends and colleagues in the retail industry, all about us.
Steve Dennis 41:40
And I'm Steve Dennis, author of the bestselling book, ‘Remarkable Retail: How to Win & Keep Customers in the Age of Disruption’. You can learn more about me, my consulting and keynote speaking at stevenpdennis.com.
Michael LeBlanc 41:54
And I'm Michael LeBlanc, Consumer Retail Growth Consultant, keynote speaker and producer and host of a series of retail trade podcasts including this one. You can learn even more about me on LinkedIn, and you can catch up with Steve and I in person at the NRF Big Show in New York, January 16 on the stage talking about what it takes to be remarkable with The Container Store, SVP, Gretchen Ganc.
See you in New York, everyone.
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