gordon segal; crate and barrel
AMERICAN FURNITURE HALL OF FAME
ORAL HISTORY INTERVIEW
OFFICES OF PRAIRIE MANAGEMENT GROUP
JULY 24, 2012
Tony Bengel, Interviewer
INTERVIEWER: This is Tony Bengel. I’m interviewing Gordon Segal in Northbrook, Illinois, on July 24, 2012, for the American Furniture Hall of Fame. Mr. Segal, let’s begin at the beginning. When and where were you born?
SEGAL: I was born in Chicago 74 years ago, and my wife Carole was born in Calumet City, a south suburb of Chicago.
INTERVIEWER: Tell us about your family.
SEGAL: My family happened to be in the restaurant business, a very customer-service oriented business. My sister and I worked in my father’s restaurant. It was in Chicago in the Loop area. We used to commute downtown after school and on weekends to work for my father. Our mother, who was a school teacher, would keep the restaurant books at night at home.
INTERVIEWER: The restaurant business is tough. What did you learn about it as you were growing up?
SEGAL: Well, exactly that — that it was a very tough business, but a very enjoyable business if you treated the customers right and you had a good product. The ability to talk to customers in a very positive way and serve them well gives you a lot of gratification. My upbringing was really serving customers in a form of retail. In the restaurant business, you've got to make the product every time people order their meals, which is different from the housewares or furniture business.
INTERVIEWER: Did you work in the kitchen and do all the typical restaurant jobs?
SEGAL: Yes, I worked everywhere. I worked in the kitchen with the dishwashers, the salad bar, steam tables, and preparation area. I was a busboy and waiter. We really learned to do all the jobs of the business.
INTERVIEWER: What was your schooling like as you were growing up?
SEGAL: I attended the Kilmer Elementary School in Chicago’s Rogers Park neighborhood and Sullivan High School for the first year-and-a-half of high school. Then my family moved to Evanston, just north of Chicago, where I attended Evanston Township High School for the last two-and-a-half years, which was at that time, and still is, a superb preparatory high school.
INTERVIEWER: How would you describe your father and mother, especially in light of what you ended up doing in your career?
SEGAL: Well, my father was a gregarious, outgoing, fun human being, with a great personality, but somewhat of a loose cannon. My mother was a very disciplined, organized lady who made you take Parker Penmanship to get your cursives right and your letters right. She was a very detail-oriented person, and very good at running budgets and numbers for the family. She was really the business stalwart, but my father was the creative, enthusiastic type. It was a very nice combination for me as I grew up.
INTERVIEWER: How did your father end up in the restaurant business?
SEGAL: He bought the business from my mother’s oldest brother, who was retiring. That didn’t take much money, because the restaurant wasn’t doing much business. He turned it around and started making a living out of it. He completely changed the restaurant, gradually fixed it up, and slowly built up the business. My sister and I were inexpensive labor. As in most immigrant families, the whole family worked in the business. The restaurant was downtown and we lived in the northern part of the city, but within a half-hour train ride or streetcar ride downtown.
INTERVIEWER: Had your father been in the restaurant business before he bought out his brother-in-law?
SEGAL: No, he had been a candy jobber. My father came from what was then Palestine, now Israel, and lived in Jerusalem before he came here as a student 1928. My mother had come as a baby, also from Jerusalem in 1904, and they were distant cousins. They met in New York, decided to get married, and then settled in Chicago. My father was at that point a candy jobber. He’d buy from wholesalers and sell to a myriad of small stores.
Then World War II came along. He had two children by then and wasn’t drafted. He was very mechanically oriented, and went to work for the Buick Company, which was building B-17 engines near O’Hare airfield. He worked there one shift and also worked his candy job. I think he slept four or five hours a night all during the war. My mother was always very ill. She had a rheumatic heart and cancer. She really was not a well woman. My father really did a lot with us as children. He worked the night shift at the plant, he’d come home, get a few hours sleep and make sure we got off to school, and he’d be home for us if we needed anything after school. He was an amazing man.
INTERVIEWER: What kind of education did he have?
SEGAL: He had a high school education in Palestine and came here to go to Yeshiva University in New York. He was thinking of training to be a Rabbi, and then decided not to. He probably had several years at Yeshiva College.
INTERVIEWER: What about your mother's education?
SEGAL: My mother was the first woman in her family to go to college. In fact, I believe she was the first person in her family to go to a university. She went to Chicago Teachers College after high school and got a bachelor’s degree in education. She became a school teacher, and her younger sister also became a school teacher.
INTERVIEWER: Did she have to retire early because of her health problems?
SEGAL: Eventually, but during the '30s, '40s and '50s she would walk to a school several blocks away from our home and teach, even with her health problems.
INTERVIEWER: When did your father acquire and operate the restaurant?
SEGAL: He acquired it during the late '40s or early '50s, and he operated it through the mid to late '60s.
INTERVIEWER: Your mother was both a school teacher and a bookkeeper at home at night?
SEGAL: Right, my father would bring home the receipts and the bills, and she would keep the books, pay the bills, count the cash and make deposits.
INTERVIEWER: Did they expect you to go into the restaurant business?
SEGAL: No, but I was thinking of going into the restaurant or food service business after graduating university. I went to New York and worked for Restaurant Associates at the Four Seasons. I did that for about five months and found out that you couldn’t make enough to live in NYC, even as a management trainee. I came back to Chicago and went into the real estate business. I was somewhat familiar with that since I had done a little of that during the summers working for my brother-in-law, who was a lawyer.
INTERVIEWER: When did you graduate from high school?
SEGAL: I graduated in 1956, and went to the University of Pennsylvania's Wharton School of Business for one year, then transferred to Northwestern University in Chicago, and graduated in 1960.
INTERVIEWER: You majored in business?
INTERVIEWER: You majored in business?
SEGAL: Yes, I was what they called a commerce major. When I arrived at Northwestern, I already had so many business credits from Wharton that I only had to take a few business courses; only three a year out of a total of 12. I cherry picked the University for the best classes I could get in subjects I liked. I loved history and political science, English and geopolitical studies, and American and European history. I took courses that I knew I’d relish, from the best professors at the University. Other students would say, “Oh, you've got to take this course from Dr. Leopold or Dr. McGovern”, so I did. I was really very lucky. I had a great experience, and these people really motivated me to look at the world in a different way.
INTERVIEWER: You took more humanities courses than business classes at Northwestern?
SEGAL: Yes. I didn’t think business school was very interesting. I had done a lot of the basics and had learned a little bit about accounting, a little bit about finance and marketing and so on. I found business classes kind of boring. I found international affairs, international travel, and international history much more interesting.
INTERVIEWER: What kind of degree did you get?
SEGAL: I got a Bachelor of Commerce degree.
INTERVIEWER: And at that point you were thinking about going into the restaurant business.
INTERVIEWER: And so you went off to New York?
SEGAL: Well, first I went to Europe for three months with a friend, and toured restaurants and food service places, and went to cookware stores and glass and ceramics stores. I had an eye for a lot of those things even then. When I came back in September of 1960, I then went to New York.
INTERVIEWER: Then you came back to Chicago after deciding you couldn’t make much of a living in the restaurant business, and went into real estate. Tell us a little bit about that.
INTERVIEWER: Then you came back to Chicago after deciding you couldn’t make much of a living in the restaurant business, and went into real estate. Tell us a little bit about that.
INTERVIEWER: How did you meet at Northwestern?
SEGAL: We met at lunch in the student union and started dating nine months later. When I went off to Europe and New York, I didn’t think it would continue, but it did. We missed each other, so we exchanged letters. When I returned to Chicago at the end of 1960, we started dating again.
INTERVIEWER: She graduated with a teaching degree?
SEGAL: No, she had a liberal arts degree and got a teaching job in south suburban Chicago. She soon became bored with teaching — she had more energy than that required — and I was certainly bored with real estate. I couldn’t see the creative aspect of it. When we got married in the summer of '61, we went to the Caribbean on our honeymoon.
We noticed stores there that carried beautiful, contemporary housewares like I had seen in Scandinavia when I was in Europe, but the prices were much better than what you could buy them for in Chicago. We asked one of the store owners why, and he said, “Well, every year I go over to Europe and I buy direct from factories, or I attend trade fairs, or salesmen come here and we buy direct from the factories, and that’s why we can sell it for less.”
Then we went to New York City, and saw stores there the likes of which we hadn’t seen in Chicago; cookware stores, china and glassware stores and design stores. In Chicago, if you wanted well-designed housewares, you went to a few design “stores,” and the products in those stores were very limited and expensive. We’d never seen really great product at great prices.
When we got married, our wedding gifts were not all to our liking. They were very traditional and not very well done and not very utilitarian. One night in early ’62, I was standing washing the dishes with Carole, dishes we had bought in one of those stores in New York, and my eyes landed on a cutting board we'd bought from a store in the Virgin Islands, and I said, “You know, this is great stuff. There has to be other young couples like ourselves with good taste and little money. Why don’t we open a store?” My wife looked at me quizzically and said, “What? Are you kidding?” I said, “No, I’m serious.”
Within a week, I had set up appointments to visit the trade commissioners from Denmark, Sweden and Belgium, to see if we could get connections with factories in Europe that sold china, glassware, flatware, teakwood cutting boards and so on. Luckily, they were very enthusiastic, and they helped us get catalogs from all the vendors in the categories we’re talking about.
We wrote the vendors and told them we wanted to start a company and were interested in their products, and asked if they would sell to us. They said they would. We started looking for a store location in the near north side of Chicago. We finally found one on Wells and Burton streets, just south of North Avenue. It was an old dumbwaiter factory, but the owners wanted to build a newer, bigger factory elsewhere. They told us we could move in in August or September of ’62. As it turned out, they were delayed in their construction plans. We didn’t get in until late November.
We had already bought goods and they were coming in and waiting on the docks. We had to set up the store quickly. We worked day and night for some 18 days or so. We had one employee, and we hired a few people we knew to help us hammer the store together. We put crating lumber on the walls to cover up the factory grit and grime because we couldn’t afford to hire someone to put up sheetrock. We sanded the floors ourselves, hung the light fixtures and built the counter. We forgot to buy a cash register.
We had never worked in retail - never knew a markup from a markdown, never had any background in running a store. But we were young and enthusiastic and had a passion for what we were doing. Carole had a unique talent for display and putting things together. When we opened the first crates, she took out the product and displayed it on top of the crates. We also had some big barrels from England with bone china that was displayed on the barrels. That’s how the name Crate & Barrel came about.
We opened the store on December 7, 1962. It was sort of like a counter-culture store of the '60s. The floors were all sanded. The walls smelled fresh. There were no spotlights, which we’re famous for now. But there were very nice displays of product sitting on wooden crates and barrels. And that’s how we started.
INTERVIEWER: You didn't come up with a name for your store before you started setting it up?
SEGAL: No, not until a couple of weeks before we opened. We had a lot of names in mind, but we didn’t come up with that one. A friend of ours, who I think was in the advertising business, had walked in to take a look as we were setting up the store, and he said to Carole, “What about Barrel and Crate?” I was working downstairs in the basement. Carole came down and said, “How about Barrel and Crate?” I looked at her. She said, “Well, I actually think Crate and Barrel is better.” I said, “That does sound better. Let’s do Crate and Barrel.”
INTERVIEWER: What was the square footage of the store?
INTERVIEWER: What was the square footage of the store?
SEGAL: About 1,700 square feet. It was one floor, with a basement that was maybe 1,500 square feet. We made the basement our stockroom, with a little area where we sold seconds. If we could buy factory seconds of dinnerware or something, we would sell the seconds downstairs. We had cookware, glassware, flatware, dinnerware, woodenware and so forth upstairs.
INTERVIEWER: How did you convince European companies to sell to you, since you and Carole had no retail experience, no track record?
SEGAL: Well, we didn’t tell them that! These were small companies. I guess they weren't inclined to investigate who we were. We told them our company was Euromarket Designs, which we had created as the parent company, while Crate & Barrel became the brand name as far as the public was concerned. We wrote and told them we were an importer of good European design, and asked them to sell to us. And they sold to us! These were small factories; there were many small factories when we started. In Sweden, there were maybe 25 to 30 glassware factories and wood factories, and France had lots of factories and so did Germany. There were a lot of small, family-owned businesses. But 20 years later, they had disappeared. If you go to Sweden today, I think there are three glassware factories left.
It’s really changed. But in those days, there were a lot of small businesses, a lot of talent, and a lot of skills in terms of how to make products. They didn’t have the marketing skills and the capital to ultimately survive, but when we were there in the early '60s, they were more than happy to receive us. We didn’t travel in ’63, the first full year we were open, but we went to Europe in the spring of ’64. By then we knew what we wanted, and selected a lot more product by physically being there.
INTERVIEWER: Did you have to give them 10 percent down? What were the actual terms?
SEGAL: Most of them shipped as “cash against documents”. In some cases, they may have asked for some money up front, but I think in most cases they just billed us and trusted us. In any case, we got the merchandise in. One vendor, Paul Secon who had shipped us some merchandise, didn’t have time to send us an invoice right away. When the invoice arrived after Christmas, it turned out we had sold most of his product at cost.
Pretty quickly, people were talking about the store. They were talking about this amazing store on Wells Street that had this great looking, unusual merchandise at great prices, and that it was selling its merchandise out of crates and barrels. We opened on December 7, and by December 31, we did $8,000.
We’d done a pro forma plan, not quite back-of-the-envelope but just about, and figured out that if we took $100 week in salary between us, and allowed about $5,000 a month for merchandise, rent and other expenses, we needed to do about $90,000 to $100,000 a year to break even and maybe even make a little money. And sure enough, it looked like we were lucky and off to a good start with that first month’s sales of $8,000, since $8,000 times 12 comes out to $96,000. But I’m Jewish, and had never had a Christmas holiday and didn’t know that people bought a lot of gifts and entertained a lot at Christmas.
The next month, January of ’63, we only did $4,000. We started getting scared. Then in February of ’63 we only did $2,000. We knew that math didn’t work. It was a very snowy, cold winter here in Chicago, and we weren't sure we could even make the payroll for the next three months. All we had when we started was $17,000 in capital. We put $10,000 into merchandise and $7,000 into setting up the store, and the hope was to turn over the merchandise fast enough to get some cash flow.
We were scared during those first months of 1963, but things got better and at the end of the first full year we ended up with about $96,000 in sales. The next year was $190,000, then almost $300,000 the following year. Then our landlord, who had owned the elevator dumbwaiter company, said, “Gee, you’re making it because Wells Street is very popular.” (It had become a much nicer place with gas lights, a nice place for tourists and locals, and it started drawing crowds on the weekends.) “Oh, by the way, we’re not going to renew your lease because my girlfriend and I want to open our own candy store.”
I knew he had what they call a “quiet title” to a property next door, which was 50 feet of vacant land. I said, “Well, what if I build a building there? You put down the land as collateral and I’ll get a mortgage and build a building. In 10 years, you can own the building and my mortgage payments will be the rent.” He agreed to that, but it turned out they only had a small part of the title to the land. I had to find the other owners by tracing real estate rolls and tax documents. I found three other owners, and also discovered the property was about to be foreclosed on. Fortunately, we knew how to file a quiet title suit and a partition suit. We were able to buy the land for them with their money before the foreclosure.
That first building we constructed in 1965 was a beautiful building. That’s when we started doing beautiful pine beam ceilings and pine walls and oak floors. It had about 2,500 square feet on the first floor, a 500- square foot mezzanine, and an elevator going down to a full 2,500 square foot basement. It was really a neat store, the first real Crate & Barrel store.
Then in 1968 Martin Luther King and Bobby Kennedy were assassinated and the riots broke out in Chicago. People had been pushing us to open a suburban store, and we decided this was a good time to do it. We opened a second store in the Plaza del Lago shopping center in the suburb of Wilmette in June 1968.
INTERVIEWER: You said you never really drew up a business plan before you launched the store.
SEGAL: That's right. We had no formal business plan when we started out. We had a little pro forma that we had laid out with a budget of what we could afford to do if we made $100,000 in annual sales.
INTERVIEWER: How did you decide on pricing?
SEGAL: We wanted our prices to be really good, therefore, if something cost $1 at the factory and landed at our store at $1.25, we’d charge $2.50. But a similar item from another competitor’s store would cost $4 or $5. Our product was different and better priced. Of course, Carole and I were there day and night, and we gave tremendous service. We eventually hired people who we also trained to give good service. We were able to buy products people had never seen before and weren’t available in the Chicago market. Customers would walk in and become very excited and pleased by the collection, and we slowly built a reputation.
At first we had little tiny ads, and later bigger ads. It wasn’t until some years later, probably in the mid '60s, that we started doing a catalog; we tried to make it unique and unusual. One of the part-time salespeople we had hired early on helped me design the bags and boxes for our customers. He was an art director at Young & Rubicon, named Tom Shortlidge and he helped create the logo you know now, with the modified black and white Helvetica type wrapping around the bag or box. Then he started helping us put our ads together. Since he worked part time at the store, he knew the stories behind the merchandise, and the ads he created became like me talking to our staff.
INTERVIEWER: What was the competition like when you started out?
SEGAL: We had a lot of competition. There were several stores within three blocks of us. There was a kitchenware store, a design studio store, and another store selling designer furniture and accessories. And there were other stores in the city — Baldwin Kingery, Frank Ryan’s. We had four or five competitors.
INTERVIEWER: And they were selling essentially housewares?
SEGAL: Some were selling cookware, some others were selling furniture, but nobody did it like we did. No one had the same look, but our competitors all had very lovely stores. We were more like a stack-it-high, pile-it-up, and sell-it-low store in those days. Our competitors’ stores were all very elegant, very nicely designed stores, and they charged high prices. They didn’t go to Europe to find the product. They just went to New York or San Francisco and bought it from wholesalers. Our prices were always better than theirs, and our service was always nicer and friendlier, and the atmosphere was fun.
INTERVIEWER: How did you and Carole divide the duties of running the store back in the early days?
INTERVIEWER: How did you and Carole divide the duties of running the store back in the early days?
SEGAL: I did a lot of the business work in the office. We both sold during most of the hours we were open. Carole did all the display work. We counted inventory together. She helped buy, and I did the bookkeeping and unpacking. Most days, we did everything — sweep the floors, clean the windows. I learned how to do displays, but she was the master at it. We both sold very well. Our personalities were always on the selling floor.
INTERVIEWER: Do you remember what your first ad was like?
SEGAL: Our first ad was quite small, maybe three-inches.
INTERVIEWER: Was it in a major Chicago newspaper?
SEGAL: No, it was in a Chicago Magazine. And it said something like, “Opening soon! A Crate and Barrel with European Imports,” and it showed a little wooden barrel, with a stenciled logo positioned diagonally across it, and the words below.
INTERVIEWER: Who designed that ad?
SEGAL: We both worked on it. Our advertising was just sort of OK for a couple of years until Tom Shortlidge started helping us create a real style.
INTERVIEWER: Did store traffic gradually increase?
SEGAL: At first, of course, we weren't well known. Like I said, the first December was terrific, but January and February business was slow, just local people. Then slowly, people started hearing about Old Town, where we were, and that it was making a comeback commercially. Nearby, there were antique stores, kitchen stores, restaurants, and it became a popular place to go and walk and shop. By the spring of ’63, traffic had picked up, and by the summer of ’63 traffic really picked up.
INTERVIEWER: What kind of hours did you have when you first opened?
SEGAL: We worked every hour the store was open for a year or two. We worked till 10 o'clock on Friday nights and 10:30 on Saturday nights, and we were open on Sundays as well. Eventually, I think about a year after we opened, we found someone to keep the store running on Sundays and we took Sundays off. But we worked every day for 12 hours a day. We couldn’t afford a lot of help in those days. We did everything ourselves.
INTERVIEWER: You mentioned a fellow that helped you do some higher-quality advertising. Were there other key employees you hired early on?
SEGAL: At about the same time Tom Shortlidge joined us, Barbara Turf joined us in 1965. At first, she was a part-time salesperson. When we opened our second store in north suburban Chicago, I convinced her to work full time. In early ‘69 she became the store manager when the previous manager was dismissed. When I opened my first big shopping center store, at the Oakbrook Shopping Center in ’71, I moved Barbara out there and she ran that store superbly. In 1974, she came to headquarters and started helping with personnel and merchandise issues. She became a truly great merchant over the years. She had a wonderful personality, a keen sense of design, and had the ability to convey to her subordinates the type of merchandise we needed. She was my president and head merchant and succeeded me as CEO in 2008, then retired from the company in 2012.
INTERVIEWER: Did she have any retailing background before she joined you?
SEGAL: No. Like Carole, she had been a school teacher. I convinced her that retailing would be a lot more fun than teaching school. But we didn’t pay as well in those days. You had to really want to leave teaching school to try something else. I told her this could be a really fun career. She started out working part time. Then I guess she decided I was right about it being a fun career, and left teaching and worked for us full time. She had an unusually good personality, and she wanted to be there and help us build Crate & Barrel.
INTERVIEWER: On the first buying trip you and Carole took to Europe, did you find a lot more vendors?
SEGAL: Yes, and that continued over the years. We went to our first trade shows in Cologne and Frankfurt. I don’t think we went to the Copenhagen furniture show till years later, but we went to Birmingham in England. These were the most important European trade shows where we found many vendors and opened up new business relationships. We also traveled from city to city looking at stores and going to local markets, and we eventually found other vendors, such as Gerard Hoffman in the south of France and Torben Orskov in Copenhagen, and Armi Ratia Marimekko in Helsinki.
We slowly built up these vendor relationships, and sometimes bought product from people that friends introduced us to. We were at a great advantage because the American dollar was very strong in those days, and the European currencies were relatively weak. The Deutschmark was four to $1. The cost of product from Europe was relatively cheap in those early days.
INTERVIEWER: Wasn't it difficult to keep track of all the vendors and the products? Even in the early years, you were dealing with hundreds, maybe thousands of small items, right?
SEGAL: Well, probably a couple thousand. We kept records by hand then. We had what we called little visi-cards, and they would go into a book. They would list what you think your demand would be, you could subtract what you had on hand and on order, and come up with a number. In the beginning it was all done by hand, by memory, by looking at old invoices and just making educated guesses. Both Carole and I are very thoughtful people, and we were smart at it, we didn’t overdo it, we didn’t overspend, and we grew slowly.
We didn’t grow fast. People today think of Crate & Barrel as a big company, a big brand, but we had only one store from ’62 to ’68. We did not have a second store until Plaza del Lago in ’68. We then bought a furniture store in Harvard Square in ’70, and we opened Oakbrook in ’71. We then had four stores. We opened our first Michigan Avenue store in ’75. After 12 or 13 years, we had grown to six stores. We could not just roll them out because we didn’t have any capital. We didn’t want to go public. We didn’t want a venture partner, there weren’t many in those days. We did it with earnings and bank borrowings, and we grew slowly and carefully.
INTERVIEWER: You gradually introduced more formal accounting procedures, I'm sure.
SEGAL: Yes. We got very good at it. We hired a good accountant who helped us set up our books. We hired other good people to do buying and they helped us set up better controls. We even had a big board that tracked the ships bringing our goods. We did all of this in house. We had a good time doing it. We did all the entry work ourselves. We calculated our prices, beginning with the first cost, adding the ocean freight, inland freight FOB charges, and the brokerage fees to establish the landed costs. I used to take all that work home and do it at night. My wife used to call me “the harbor master”. We’d have these big spreadsheets where I’d list all the costs and allocate it across all the merchandise by hand. We really knew our landed costs per each product.
INTERVIEWER: And your gross margins?
SEGAL: Yes. In the first years, we decided to take a very tight margin. If something cost $3, we charged $5.95. If something cost $10, it was $19.95. We just did a 100 percent markup, and we made about a 48 percent gross margin in those first few years. Our overhead was very low. We were still able to get a nice bottom line.
INTERVIEWER: You must have run into some real headaches with shipping damages and things like that.
SEGAL: Oh, yes. One time we opened a crate and it was full of cobblestones from Belgium. They had stolen all the glass items. Another time there was nothing in the crate; everything had been stolen. They didn’t have sealed containers in those days; that wouldn’t be coming for another 10 or 15 years. You just had wooden crates or wooden barrels appearing at your door, packed with items, and you just opened them up and prayed for the best.
We had a vacant yard next to us. We would back the trucks in, put down an old tire and drop the wooden crate onto a tire. We’d roll it over and pry it open, and carry the glass or the dinnerware or whatever else was being shipped into the store. It was okay when the weather was nice, but when the weather turned against us, it was hard duty.
INTERVIEWER: You had to figure a lot of loss and breakage into your costs.
SEGAL: Well, some, but it wasn’t a lot. They packaged stuff very, very well in Europe and it usually got shipped decently, but in those days it was easy to pry open a crate and take everything out then close it back up. The whole international trade scene changed with sealed containers.
INTERVIEWER: How would you describe the style, the look that you and Carole were aiming for in the early years?
SEGAL: That evolved quite a bit over the years. The first store looked nothing like the stores we build today. One big mistake we made was that we didn’t take very many photographs of the first store. I think we have three or four from the first three years. In retrospect not very smart.
INTERVIEWER: That’s too bad.
We never thought it was going to be this big success. We weren’t planning to be when we opened. We hoped for one successful store. Then we figured if we opened two or three stores, we’d be lucky. That was the total we had in mind at the beginning. We certainly didn’t have unbridled ambition. We had the ambition to succeed and be good merchants and find unique merchandise, and we were thrilled by meeting these Europeans and selling their products and going to their factories or meeting at trade shows. It was quite nice. We were very satisfied and very happy with the business when it was small. The stores did well. We kept a low overhead.
We worked hard and we had enthusiastic associates; and we could communicate with all of them. They were smart and prepared to imitate what Carole and I did. We eventually hired a young man named Lon Habkirk. He became a great store designer, and came up with a lot of our display concepts. Tom Shortlidge, like I mentioned, joined us part time and became our outside creative graphic artist and advertising and catalog person. Barbara Turf became a very good manager. Like I mentioned, when we opened Plaza del Lago in ’68, she went there as a salesperson and later became the manager. She had to learn management, but turned out to be very good at it.
INTERVIEWER: Did you send her off to school?
SEGAL: No, I didn’t. She learned on the job by listening and watching and having great instincts.
INTERVIEWER: How did you go about hiring people?
SEGAL: Very carefully.
INTERVIEWER: Did you advertise?
SEGAL: Yes, we advertised. People would come in, and we’d interview eight or ten for every one we hired. I was looking for people who were somewhat sophisticated and certainly high energy. We wanted somebody who’d work not only for the money, but for the mission of bringing good design to Chicago; somebody who would be loyal long term and know how to work hard. We also wanted people that we could relate to, since we were managing them. We didn't want it to be a big hassle relating to and managing them.
INTERVIEWER: Where did this passion for design that you and Carole had come from?
SEGAL: We don’t know. My sister’s an interior designer who is now retired in Scottsdale, Arizona. She has it too — a tasteful contemporary design aesthetic. And her daughter has it. Carole and I had a little of it, and I think a lot of it developed over the years through traveling to Europe, meeting these designers, meeting these special manufacturers, talking about it, working with them, living it, reading books on design, reading magazines in the field. We just picked it up. It wasn’t taught to us. But we became purer and purer in terms of what we believed was good design and what was truly beautiful, and we just learned as we went.
Like I said, we weren’t in any rush to open a lot of stores. We loved to search for new well-designed product at great prices. As we often said, it’s not hard to find beautiful things at high prices, and it’s not hard to find poor-looking things at low prices, but how do you find great-looking products at low prices? It was hard. But we loved the search. If you asked me what was the most enjoyable part of running Crate & Barrel in its first 10, 15 years, it was creating new products, searching for new products, searching for new suppliers, finding things that no one else had, seeing things that no one else saw. That was the joy of the business.
INTERVIEWER: When you say creating new products, did you and Carole do sketches and then ask your vendors to do something like that?
SEGAL: Yes, we did that. Carole designed the famous roly-poly decanter that sits in our library now. The decanters we had at first were sort of flat sided. Carole made it round and it sold like the dickens when we got it in the store. Of course, we were enthusiastic about selling our own design. We would design different things, or perhaps more importantly, modify things — increase the size of a product, decrease the size, make them square, make them oblong. We would vary the product and make the product better and better.
INTERVIEWER: In your early years, did you find any resources in the United States?
SEGAL: Yes, we did. There was a West Virginia glass company that we bought from, and Heath Ceramics in Sausalito, California, which made beautiful stoneware. About 10 to 15 of our vendors were American out of about 75. Approximately 20 percent of our vendors were in the United States.
INTERVIEWER: How did you connect with those vendors?
SEGAL: By hearing about them, by meeting them at markets, in various ways. Their product was sometimes terrific and sometimes not so terrific. We basically don’t have a dinnerware craft industry anymore in America, and we never had a woodware industry here, at least not in the kind of woods we wanted (except in kitchenware woods). In flatware, they were making very traditional-looking designs and we wanted contemporary. Europe had contemporary designs that looked much better. Having that quality in our stores was very important to our success.
INTERVIEWER: Did you ever advertise the actual vendors?
SEGAL: No. We were building the Crate & Barrel brand.
INTERVIEWER: You’ve described your early months when revenue was going down. But that didn’t last long. Given the various recessions in Crate & Barrel's 50-year history, have you ever wondered if you were going to survive?
INTERVIEWER: You’ve described your early months when revenue was going down. But that didn’t last long. Given the various recessions in Crate & Barrel's 50-year history, have you ever wondered if you were going to survive?
SEGAL: No. From 1963 on, our business went up almost every single year until 2008, when the Great Recession hit. Our sales were down in 2009. The only year we didn’t have increased profits was the year we had to close the old Michigan Avenue store and move. We were closed for about six months before our new store was finished. That was the only year when our profits didn’t stay the same or go up. We opened the white metal and glass building on Michigan Avenue in September of 1990. As I said, the first year we did a little under $100,000, the second year we did $200,000, the third year $300,000. When we opened the new Old Town building sales went to $450,000, $550,000. When we opened a second store sales went to $850,000, 900,000. Our revenues just kept climbing.
Except in the early years, we never grew by 20, 30 percent a year, but we grew nicely every year. I didn’t want to grow the business past our capacity to finance it internally, to have a really good management team ready to open a new store, to have people I felt would carry on our methodology, and the tradition of warm, intelligent management throughout the company. Everything I did was based on a quiet pace of growth that we could be comfortable with and that wouldn't create unnecessary worries.
When we opened the first store on Michigan Avenue in 1975, it was a big deal with a very big rent and big investment, and we were a little scared till it opened and became successful.
INTERVIEWER: How did you go about choosing the locations of new stores?
SEGAL: We knew Chicago very well, and as we moved into other cities, we looked around and traveled and visited the better shopping centers and the high-class commercial streets. We became very good at real estate. I was involved in every single real estate transaction. I would look at properties and work with my architects to see if a store would work. We just got better at it with experience. I'd gotten into real estate after my brief restaurant experience. Later on, when it came to properties and store sites, I would take a close look and make sure it was a good corner or a good piece of property, or a good location in a mall. I knew what we needed to build our special stores, and I had good architectural teams, both inside and outside the company.
One very important associate inside the company was Raymond Arenson, one of our first store designers who helped me with real estate. Lon Habkirk had helped me earlier with the designing of the stores and fixtures, and Ray Arenson took that role on from about 1973. Ray’s still in the company; Lon’s now retired. We built a very good team of talented people. Of course, as we grew, we had to bring in people from outside the company. But for the key positions, we didn’t go outside. We brought people along inside. Barbara was doing the merchandising, and we had Tom Shortlidge doing advertising and reporting to her. Ray Arenson was doing visual displays, and Carla Swirsky and Barb Reimann built the store operation teams.
All these people worked for me for years and years and years because we had a family culture; we had a very collaborative culture. We’d listen to what people would say, we’d take good suggestions from customers and staff. We kept it like a big family and tried to make working for Crate & Barrel a lot of fun. We had parties for our staff and we did things in order that no one felt they were working for a big corporation. They were working for a nice family group. Not just Carole and myself, but everybody in management was sort of a family, and we all had the same spirit and energy. We knew you had to work long, hard hours to make a Crate & Barrel store successful.
INTERVIEWER: Did you work on a salary plus bonus plan?
SEGAL: For my management, yes.
INTERVIEWER: What about salespeople and store managers?
SEGAL: Yes. We didn’t pay a lot of money at first. The housewares business is a low average transaction business and involves a lot of physical work. In the early days, I think salespeople were starting at about $100 a week, and management was maybe making $200 a week in 1965 dollars. But they’d get a bonus if they exceeded their sales goals and store goals. We got more sophisticated as we grew, and bonuses for store managers were based on a company sales plan and individual store sales plans, the gross margins and profitability of the company, and their individual store's margins and profitability.
For the salespeople, bonuses were based on reaching certain annual sales levels.
INTERVIEWER: As you added stores, the stores got bigger, right?
SEGAL: Yes. They started out at 3,000 to 4,000 square feet in Old Town Plaza and Del Lago, and then we started building our bigger mall stores, which were in the 8,000 to 12,000 square foot range. The first Michigan Avenue store was the largest at 12,000 square feet. They didn't get any bigger than that until we decided to get into the furniture business. That all began in 1970 when we bought a furniture and accessory store called The Upper Story in Cambridge, Massachusetts.
INTERVIEWER: How did that happen?
SEGAL: We had gotten to know an elderly couple at trade shows. They owned a furniture store called The Upper Story in Harvard Square in Cambridge. The husband had a stroke and his wife was desperate to sell, and she called me up. I went out there and I basically bought it for the value of the inventory. In addition to the store, they had a warehouse. We had always loved Boston. We bought it and said, OK, we’ll learn the furniture business. It was only a 3,500- square foot store, and half of it had furniture and half of it had accessories. It was more upscale than our Crate & Barrel stores.
That's how we got into furniture, and that’s when we first started going to the High Point markets to look at furniture and having more than one or two pieces of furniture in our other stores. But we really didn't get too serious about furniture until 1979, when our biggest competitor in Harvard Square, a retailer called Design Research, went out of business. We took over their Harvard Square and Chestnut Hill properties, also in suburban Boston. We moved in our housewares and opened Crate & Barrel stores in those stores. We also renamed The Upper Story the Crate & Barrel Furniture Store.
At first, I had a lady managing the stores, and it didn't work well. I brought in Lon Habkirk, the designer who had helped me early on. He’d gone off after a few years, joined the Peace Corps after he had gotten married, came back, and went into landscape design. When I called him, he was living in Arizona. I said, “Why don’t you come back? I've got a big challenge with the Design Research building in Harvard Square.” After we successfully merchandised that store in 1981, I said, “How about you and Robert Pitt taking over the furniture store?” We had rented a house out in Nantucket that summer. I went out a day or two early with my youngest son, and we sat on the veranda and talked
conceptually about what this furniture store should look like.
We were in a three-story building in Putnam Square in Cambridge, and we were using only one floor and the rest was not being used. We decided to bring in contemporary furniture, but with a more transitional look than some other contemporary stores were doing. We would also carry some nice, clean Scandinavian pine antiques. We decided we’d have some contemporary lines of furniture from some of the vendors in North Carolina. We’d bring in some Italian and Swedish designs and some other Scandinavian designs. It would be a real mix of product, but generally contemporary in look and feel.
Lon Habkirk and Rob Pitt were very talented people and worked very well together. When we started, they had about 3,000 square feet and we were doing about, $500,000 a year. Then we opened the second floor and we had about 7,000 square feet, and business kept growing, doubling and even tripling every year. We also made the basement a sales floor. Now we had 9,000 square feet on three floors. We were doing $7 - $8 million in that store by about 1987. We started asking ourselves whether we should really get serious about the furniture business and expand it.
We knew that in 1990, our lease would be up at Michigan Avenue; they were going to tear down the building we were in. We had to decide if we wanted to build a new building on Michigan Avenue, or find another space on Michigan Avenue. We started looking around, and that’s when we found a site on Erie and Michigan. There was a building on it that I had to tear down, and I paid more per square foot than anyone had ever paid before for land on Michigan Avenue. We looked at building a multi-use building, with apartments and/or offices above and our store below. I decided at the end of the day that just a store would work better there, but it would have to be a big enough store to justify our investment in the land. We figured we would need maybe four or five floors of accessories, housewares, and furniture to fill out that big store. That was the turning point decision that took place the late '80s — getting serious about the furniture business in our Crate & Barrel stores.
The underlying concept was that, if we really got into the furniture business, the heavy traffic we got from our housewares business and brand reputation would transfer to the furniture floors, and with that traffic we’d sell a lot of furniture. Once we made the decision, we decided to convert our second store, at Plaza del Lago in Wilmette, north of Chicago, from a 4,000 square foot store to a 14,000 square foot store and add furniture. And we decided to also expand our store in the Oakbrook Shopping Center. In every case, we doubled or tripled the square footage. In late 1989, we opened the enlarged Plaza del Lago store. In 1990, we opened the big new Michigan Avenue store, and the Oakbrook store. These were our three big home stores, and we were successful in every one of them.
Just what we hoped happened. We were selling a lot of furniture because of our great reputation and we were very heavily trafficked from our housewares business. Furniture stores usually are not in high-traffic areas, and they don’t accomplish high sales per square foot. We were doing $700 to $800 a square foot. We quickly became confident as we learned the business. We built teams of people in furniture around our talented merchants and creative display personnel.
We had a housewares team and a furniture team in each store, and each worked their part of the store. Slowly we built the furniture business, and we tried to open one or two of the bigger home stores a year. Every time we opened them, they were a big success. Crate & Barrel started spending more time designing its own buildings, and we became quite good at architecture. More of our stores became freestanding stores, not inside shopping malls. We were still in major shopping centers, but in freestanding buildings. We designed beautiful buildings developing our own architectural department inside the Crate & Barrel organization. We hired engineers and people to do the working drawings for constructing the buildings, but we did all the design work internally. We had a wonderful design architect named Jacques Verlinden, who had originally worked on the Michigan Avenue building at another architectural firm.
We gradually built these bigger stores, and in ’95 we opened on Madison Avenue in New York City. It was a whopping success. About five years later, we opened in the SoHo area of Manhattan, and then opened stores in suburban New York. We eventually had seven stores in the New York area, every one of them a big hit. That, in brief, is how the company became very successful, growing by a few stores every year.
As the company became very big, our organization did as well. We had to build warehouses for the furniture. We had a housewares warehouse that was doing our entire direct marketing fulfillment for the housewares and tabletop business, and then we added a warehouse to handle our furniture business. The handling of furniture was totally different than the handling of housewares to our stores. It became quite complex, but we had excellent merchants and leadership in logistics. Even with that, it was becoming very big and a bit overwhelming.
All of our money was in the business. We had never taken any money out of the business. Everything was at risk with every big expansion. Then one year — I think it was ’96 — we switched to a new computer system. The associate that had first worked for me in technology left. I then hired a new head of technology that developed a new warehouse computer system. Well, it didn't work, and the whole company just about shut down and almost put us out of business. It’s one of those classic stories about bad computer decisions. The new system wasn’t run parallel to the old system for a while to see if it worked, and it hadn’t been tested properly. It was really naively done, and if it wasn’t for the terrific, hardworking talent and experience of the people in the company, we might not have survived. We had to do almost everything by hand and experience, but we managed to survive the year it took to fix it.
That experience really made me realize how vulnerable we were adding stores and warehouses at such a fast pace. When you're opening stores and adding hundreds of thousands of square feet of distribution space in Illinois, New Jersey, and California, and you’re growing your furniture and housewares business, you have to have a lot of logistics and technology to consider in order to satisfy your customers. We were spending $20 to $25 million a year adding new technology and software, and then the Internet came, exploding our direct marketing business.
We were behind our big competitors in that business. Williams-Sonoma had started as a catalog business and then went into stores, but they were much bigger and better at the catalog business than we were. We felt pretty good about the store business, but then they bought Pottery Barn, and they continued to grow with their stores. We looked at it and said, “Well, do we want to have all the risk of this business on our heads, knowing with any big mistake we could lose it all, as we almost did in ’96 with the computer fiasco?” We decided to look at alternatives to finance the growth of the company.
We thought about going public, but I wasn't sure I wanted to do that since I didn’t want to be criticized when bad years and bad seasons came along. I also didn’t want to be overly cautious. As merchants, we always took a lot of chances, tried new ideas and new products, and we’d have good seasons and bad seasons. I didn’t know if I wanted to have to sit there and explain it all to some young Wall Street analysts. It's also my personality that I just don't want the whole world to see how we’re doing. I didn’t like the idea of going public. We looked for partners. We interviewed a lot of people for a year and a half, and we finally found a partner who was very strong in the direct marketing business, Otto Versand in Hamburg, Germany.
I had met Michael Otto some years before and kept the relationship going. After interviewing many companies and different potential partners, we decided on them, and we ended up selling them two-thirds of the business in ’98. We had a good financial formula for working with them over the next 10 years, and at that point they would buy the other third of the stock that was outstanding. We were able to establish a good stock option for our senior management, and it became a very good transaction for all of us. When we sold the two-thirds in 1998, it was about a $350 million business. When we sold the rest of it in 2008 and I retired, we were near $1.3 billion in sales.
We had almost quadrupled the business in 10 years, and probably increased earnings five times. The stock value reflected all of that. Finally, my senior management became financially successful from all the hard work they put in over the many, many years. I felt very good about that.
We worked out a good partnership with Otto Versand. That company helped us get into the Internet business. We didn’t know what the Internet business was. They taught us a lot about how to improve our catalog business. When we sold them our business in ’98, I think we were doing about $36 million in the catalog business. Now it’s $350 million, with the Internet being the most important and the most profitable of our businesses.
It was probably a necessary juncture for the company to be sold. There really wasn't another option except to go public and raise public capital to do all the things we did. I didn’t think our team was set up to do that, to run a public company. It would have been expensive, difficult and time consuming to do all the public reporting that we would have been required to do and we weren’t oriented towards doing something like that. Subsequent government legislation has made it even harder. In retrospect, I don’t know which would have proved to be better. What we did do ended up being very successful for us.
Now, we’ll see what happens. The deal was for me to work for 10 years, which I did, and then Barbara Turf took over for four years. Since May ’12 there’s been a new management team in place, headed by Sascha Bopp and Marta Calle, and we’ll see how they do in the next several years. They've already changed many things. By the time I left, I think we had about 105 stores, and we operated the furniture and housewares businesses as two separate units, with two separate management teams, because we thought the learning curve and everything about these businesses was quite different. It worked very well. They are seeing if single management teams can run the stores, and we’ll have to wait and see the results.
It was a very big company, with 7,000 employees spread across the United States when I retired. We were in 28 cities, and during the last few years, we had been building seven or eight new stores a year. Remember, we were opening one every other year in the beginning, and now seven, eight stores a year. We had a big real estate department, a big construction department, a big architectural department. We had our own graphics department to design our packaging and our store displays. We really focused on doing things in a first-class way, with real style and quality. Most retailers, especially in the furniture business, don’t spend a lot of time and effort on lighting, presentation and design in their stores.
INTERVIEWER: Before you sold the company to Otto Versand, were you financing all your expansion out of cash flow?
SEGAL: Yes, but we also borrowed a lot from banks. We had good banking lines. But that bank debt was also a lot of pressure because it involved borrowing a lot of money, and of course paying back a lot of money every year. At least, after selling the company, all that debt wasn’t on my head; I could sleep at night.
INTERVIEWER: Were the bankers difficult to deal with?
SEGAL: No. Bankers loved us. We had really good banking relationships. We’d keep them informed every month as to how we were doing. We’d tell them what we needed, and we lived up to our agreements and paid back the loan on time. We just developed very honest, good relationships. We were a perfect banking client — a growth company that projected accurately, performed as promised and paid their interest rates. We were a loyal, quality company. We had great banking relations, mainly with the LaSalle Bank and Harris Bank.
We probably could have remained independent another couple of years, but as you get older and you don’t know how your health is going to be, you become more conservative. I was worried about the transition and the risk of getting older, the risk of the company being able to survive if we ran into another big crisis like the ’96 computer system crisis. I retired at the end of April ‘08, and then of course the world collapsed in September ’08 when the economy fell off the cliff. As everybody says over at Crate & Barrel, I’m just one lucky guy. I have been my whole life, even at the end of my career.
INTERVIEWER: Let's focus on the furniture aspect of your business. You really got into the furniture business by accident.
SEGAL: Yes, we did when we bought that little store in Cambridge, Massachusetts.
INTERVIEWER: Out of compassion.
SEGAL: Right. I liked the people, it was a nice company near Harvard Square, it was a nice location, and it was a contemporary store. I thought, let's buy it and see what happens.
INTERVIEWER: Was the look of the store in line with the Crate & Barrel look?
SEGAL: No, we were more casual, fun, bright colors, crates. Theirs was a much more typical furniture store, with formal furniture displays on one side of the store, and walls of glassware, dinnerware and flatware on the other side of the store. It was only about 3,500 square feet. They were more about what you’d furnish an apartment or house with, but without the kitchen wares.
INTERVIEWER: What sort of price points did they operate at, and who were their suppliers?
SEGAL: They were a mid-priced to a higher-end store. I want to be very careful about suppliers, because I’m not sure I remember the vendors they had back when we bought them. One of the big vendors and main sources we had then and still have was Lee Furniture. Then we met Bob McCreary of McCreary Modern, and he became a very big, if not the biggest, upholstery resource. We were one of the first people to find Mitchell Gold, when all he was making was a few upholstered chairs, and then Shenandoah became a major supplier of very beautiful contemporary upholstered furniture.
We kept adding vendors as our furniture business grew. There were several dozen others who had wonderful product, which both Rob Pitt and Lon Habkirk had a great eye for. They developed relationships with the vendors and built the business. I’d go to High Point twice a year with them, but it was truly their relationships, their expertise, their working with these vendors that brought together a beautiful furniture collection. And together, we learned how to market it, and sell it.
Like with everything else we did, we were into the details. We had beautiful displays with beautiful signage, and we tried to have unique products. We started with some Swedish and Danish and Italian designs, but we found that the bulk of our customers were more transitional, and not as contemporary as they would be in housewares, kitchenware or tabletop. They wanted grays and browns and beiges, not bright yellows and bright reds. We had to adjust to what the consumer wanted. But Lon and Rob did it in a beautiful way, and I’ve always been very proud of the way they put together this great collection of furniture.
It’s important to state here that it wasn’t Gordon Segal or Barbara Turf doing it; it really was Rob Pitt and Lon Habkirk who set the direction for our furniture division, and built the business for us. Now, of course, there are new teams buying furniture, and they’ve also done a wonderful job of finding great new vendors. The interesting thing about our furniture, other than some imported Danish pine antiques, is that we were mostly domestically sourced. We weren’t buying much furniture from Asia.
We had a little bit of European product, but the big part of the business was from North Carolina and surrounding states, and from other companies in New England and elsewhere. The furniture business was really American based. In housewares, we did almost everything from overseas, mostly in Europe and then eventually in Asia, but not in furniture.
INTERVIEWER: You didn’t get really immersed in the furniture business yourself?
SEGAL: I don’t want to mislead you. I did spend a lot of time with our furniture business, but it wasn’t Gordon Segal who did it as much as the team. Just like in housewares, it wasn’t Gordon Segal who eventually evolved the great collections we had. Carole and I did it during the first five or 10 years, but then it was Barbara Turf and all the ladies and gentlemen around her who were the merchants that built the business.
Eventually, we bought a company called Land of Nod from two young men who’d started a children’s furniture business, and they did a great job expanding and growing under our tutelage. We bought the company when it was doing $8 million, and now they’re doing about $68 million. We opened a few stores that didn’t really make the sales goals, but our direct marketing catalog and Internet presence made it a substantial business.
In 2000, we opened another company called CB2, which stands for Crate & Barrel’s second time around. We wanted a younger, less expensive, more modern look than Crate & Barrel had. We launched CB2, and that’s grown into a $125 million division, much of it through catalogs and the Internet. Again, we had a team of people who did a very good job. We’d spend time with them, but you've got to give credit to the merchants who we gave the overall direction to. Marta Calle, who’s now president and head merchant of Crate & Barrel, built the CB2 division into the business it is today.
We were very much against controlling every bit of merchandise that went in the store. We had good merchants, we had a good philosophy and we had good customer policies. If anything was ever wrong, we’d take care of it. We’d take it back, we’d fix it or we’d replace it. The customer was always right, and we never disagreed with a customer. We trained our people to treat customers in a very positive, responsive way.
Whether it was a warehouse with a million square feet, or a store with 10,000 square feet, we always had the same family culture, the Segal family culture, the Crate & Barrel culture. That was important and everybody knew it. They knew the level of expectations were high. They knew the stores had to have clean windows and swept sidewalks. When you walked in, there was nice music, the temperature was comfortable, the staff was smiling and helpful, and the displays were beautiful.
Visual displays were a very important part of our culture. How you made the merchandise look was a very important part of it. All the glasses had to be clean; all the mugs had to have their handles turned to the right. We made all of our store associates understand this and act in a disciplined way. We used to say it took three years to make a person neurotic enough to become a store manager, and it took two years for them to become a good display person. It wasn’t easy, but they had to know that I and other supervisors would be coming around to look at the store design, and our expectations were that the stores look first class.
INTERVIEWER: When you got to the 100-store level, did you still visit all the stores at least once a year?
SEGAL: Yes. I usually visited all the stores once a year. I’d visit the bigger stores in New York, Los Angeles and San Francisco two or three times a year.
Again, we developed people internally. The culture was, if you joined us, worked hard, learned the culture, learned the job, and had leadership skills, you'd get promoted. Store salespeople would become assistant managers, store managers, store designers, visual display persons. If they were really good, after a number of years they could become an area manager and supervise seven or eight stores, and they could grow from there, to become a regional manager in the Chicago, Midwest, Northeast, Southeast, Southwest, or the West Coast region. They would report to the head of store operations and that person would report to me. I’d go through the stores with the regional and area managers. The visits would sometimes be unexpected, sometimes expected. We also had regional designers who worked with the individual store visual display people.
Some people could never understand how we could keep our displays so consistently good. It’s because we put a lot of money and time into them. We invested a lot of personal time into that. We believed we had to make our stores different from everyone else’s. We never used corporate planograms and other things that some big chains used. We let the individual stores and their regional designers and area designers work with them to create the best floor plan and the best displays in that store.
INTERVIEWER: What do you remember about the first furniture market you attended?
SEGAL: Actually, very little. I remember going there with the Upper Story furniture manager and the store manager, Jerry Kallman. This was soon after we bought The Upper Story. It must have been around 1972. I remember we went to High Point and walked through the show, and I remember thinking, it’s not like Milan or Frankfurt. It’s not like I’m buying housewares. I’d go through a housewares trade show in Europe and I’d write purchase orders and the merchandise would get shipped a couple months later. Furniture was very different, a totally different selection process. You had to worry about all sorts of other details. I found it very unlike the kind of quick decisions I would and could make in the housewares or the tabletop business.
INTERVIEWER: How deeply was your wife involved in the furniture part of your business?
SEGAL: Carole was not really much involved. She started working part time when we had our first son in ’65 until we opened the store in Plaza del Lago in ’68. We moved to Wilmette, where the store was, and she worked full time for about a year, or a year and a half, then she semi-retired, coming in to work a little bit less. Of course, we’d always talk at home about the business. She was very involved in that sense. Then we had two more children and she basically stepped away from the business.
In 1980, she wanted to come back into the business, but we decided at that point it was probably best to start a new business. She launched a food store called Foodstuffs in Glencoe, Illinois, and now there are four or five of them, and they’re the best food stores in Chicago. They are fantastic boutique food stores. They make their own breads and make their own salads and prepared foods every day. The store was a big success and still is today, and we’re very proud of it. She sold it in the early '90s. Again, she created and ran it for the first 11 years.
It wasn't always easy, especially when interest rates were 18 percent and she was paying as much in interest as her total profit. She borrowed money on her own. She didn’t want to take our money or Crate & Barrel money. She wanted to do it herself.
I remember at one point we were talking about whether to open more Foodstuffs stores as part of Crate & Barrel or to expand into the furniture business. At that point we had one furniture store and we had one Foodstuffs. We needed to decide on our direction. Should we be in the food business or the furniture business? We decided the food business was harder to expand than the furniture business, and that the food business didn't relate as well to the housewares business as furniture did.
She sold Foodstuffs to an investor, who later sold it to the chef he had brought on board. He’s done a great job. Many of the products that Carole developed with her chefs are still being prepared there today. She brought in unusual ingredients and very special vinegars and olive oils. Nowadays you see them everywhere, but hers was the first place in Chicago that had 20 different vinegars, 20 different olive oils, unusual jams and other ingredients needed to be a great cook.
It was a fun business, and we traveled a little bit in the buying of those products. The stores looked and smelled good. Food is very emotional; we loved to eat, and Carole is a great cook. We were very much into food. We very much enjoyed the creation of Foodstuffs, although I did very little. Most of that was Carole, and she made it a beautiful operation.
Carole’s 90-year-old mother got sick in the early '90s. She had never been in a hospital, but had two strokes, and Carole was taking care of her. The kids were getting into high school, and between the demands of her mother and the kids, she decided to sell Foodstuffs. She took care of her mother for a number of years, and after her mother passed away, she started getting involved in a lot of philanthropic work, especially in the medical field.
Carole is also the president of the Segal Family Foundation, and sits on quite a few of Chicago’s philanthropic boards including the Lincoln Park Zoo; Chicago Shakespeare Theater; University of Chicago Council on the Biological Sciences Visiting Committee; The Field Museum Women's Board; and Rush University Medical Center. Carole is also very active on several religious boards. She's my age and works much harder than I do.
I’m active on the board of Northwestern University: the University of Chicago Medical Center; the Chicago Lyric Opera; The Art Institute of Chicago; WWCI public radio; and the Chicago History Society. When we left our business careers, we got more involved in the community. At Mayor Daley’s urging, we built the Michigan Avenue planters that started the beautification of Chicago’s landscaping. Chicago has probably had the biggest renaissance in the last 20 years under Mayor Daley. He was absolutely horticulturally neurotic, and put plants and parks and trees everywhere. We started on Michigan Avenue in 1990 and helped make Chicago one of the most beautiful cities in the country today.
People think of Chicago as a place of old stockyards, Al Capone, Union Station, or O’Hare Airport. But if you go to downtown Chicago today, it’s a magnificent city to live in — Lincoln Park, Millennium Park, Grant Park, and the Museum Campus with three of our country’s best museums. Now we have a new mayor, and Chicago’s going to continue to grow as a great city.
Carole helped us develop two beautiful businesses, Crate & Barrel and then Foodstuffs. Her eye, her tastes, her attention to detail made them what they became. Now that same aesthetic and energy is going into a lot of philanthropy. That is just as important to us.
INTERVIEWER: What kind of personal and business relationships did you develop with furniture manufacturers?
SEGAL: I think we were always known as a very consistent customer. We would start with a particular vendor, and we would try to evolve products with them. Many of the vendors we have today, we started with more than 20 years ago when we first got into the furniture business. Obviously, the loyalty was based on the vendor being consistently innovative and price competitive.
If we could work with people who really understood what we needed, we’d usually have very long-term relationships with them. We very much valued the friendships, the relationships, and their flexibility in doing business. As we got bigger and had more and more buyers working with these suppliers, senior management couldn't spend as much time working with the vendors as we once did. Perhaps our new buyers had more pressures and priorities placed on them as the company got bigger, but for the most part, as a company philosophy, we tried to stay loyal to our key vendors. Our biggest upholstery vendors today have been with us now for 25 to 30 years. That's also true of our case goods vendors. Like I said, most of our furniture is made in America.
We also search for great product all over the world. If we find it in Italy or Denmark, we bring it in. If we find it in Vietnam or Indonesia or China, we bring it in. We don’t go to a foreign country to buy cheap. We want innovation, high quality, and a good design in order that our product always has real value for the customer.
Maria Yee is a Chinese lady who had lived in Palo Alto, California, with her husband. She went back to China some 20 years ago and started making furniture. We found her at the High Point Market in one of those halls where they put small vendors. She was making some small tables the old Chinese way, with no screws or nails, just tongue and groove, pinned with wooden dowels and put together with very tight notching. We started buying product from her, and she started making some beautiful bigger pieces, and high-quality chairs with beautiful leather. They were higher quality at better prices than we could find in Europe or here. We became a very big customer of hers, and we still are.
In the housewares business, you can find all the typical cookware lines everywhere. You can buy them in department stores, in Bed, Bath and Beyond, at Williams-Sonoma, at dozens of other places. We’re looking more and more at how we can differentiate product. That holds true for furniture too. How are we going to develop innovative product that's really warm and comfortable and useable, practical, and affordable? We don’t want to be very high end, and we don’t want to be cheap and low-quality.
We want good quality at a great price. That was always our aim. We never looked to sell full-lead crystal glasses. We wanted what we called potash glass or half crystal, which gave you almost the same feel, but was not as expensive. We wanted good stoneware and good porcelain. We didn’t need it to be bone china, highly decorated and expensive. We wanted our product to be of a certain price and quality that would appeal to most of our customers. We always thought of ourselves as an aspirational store. But I’m sure most of our customers today are upper middle class, and we’re happy with that, and hopefully we can reach some people in the middle class. We don’t want to cater to the one or two percent, we want to cater to 10, 15, and 20 percent of the population.
INTERVIEWER: Who have been some of the most important people to you personally and to Crate & Barrel in the furniture industry?
SEGAL: We are very close to some manufacturers like the Lee family. We’re very close to Bob McCreary. We were very close to Mitchell Gold until he started opening his own stores; we decided we would not aid and abet a competitor. But, we learned a lot from each other and helped each other for a long time. We found Mitchell when he had a High Point showroom half the size of my office. Shenandoah in Virginia is a very big vendor for us. We had very nice relationships with Vermont Furniture, which makes a lot of beds for us, and with Wright Furniture, which made many of our beautiful tables for a number of years.
The point is that we’ve developed these relationships with four or five furniture manufacturers, and they’re still our manufacturers 20 years later. They know they can count on us to pay our bills and to buy the goods and display them beautifully and to help them grow.
INTERVIEWER: Have you gone to overseas furniture markets?
SEGAL: We used to go to Copenhagen and to Milan. Some of our buyers may have gone to Cologne a couple of times, but they have European-oriented furniture that's very beautiful, very ultra-modern, very avant-garde, and that’s not what our customer base wants, therefore, we didn’t buy a lot there. We found maybe one or two items. We’re not selling ultra-modern furniture at Crate & Barrel. What we sell is a transitional look, a very comfortable look that’s clean and modern, but not ultra-modern.
INTERVIEWER: Have you gone to a furniture market in Asia?
SEGAL: Yes, most of our outdoor furniture is from Southeast Asia, not China, although CB2 has developed some furniture in China.
INTERVIEWER: I think some people would say you were crazy to go into furniture at all, since it’s such a different business from housewares and tabletop.
SEGAL: Yes, they would. But today, the furniture business accounts for half of our business. Furniture is more profitable because it’s a higher average ticket and has a lower in-store labor cost, although warehousing and delivery costs are higher. Still, it’s about half our volume.
Maybe we were crazy. I thought about it for years. I talked to my wife about it and she encouraged it. I got my YPO forum group together and they said not to do it. Other people told me not to do it. At the end of the day, my instinct was that furniture was more correlated than anything else with the housewares and tabletop business, which was labor intensive with a low average ticket. We needed something to balance that off and help grow the company. With furniture, we could have bigger stores, free of the mall rents. In a separate building, the rent might be $40 per square foot, not $75, $80 like in the malls. We became a bigger, more important tenant in the shopping centers, and many considered us as almost an anchor tenant, replacing department stores.
INTERVIEWER: I know you were involved in the National Retail Federation, a broad retailing trade group.
SEGAL: Yes. I chaired that group for a couple of years, and was very active for 20 years.
INTERVIEWER: Were you active in the National Home Furnishings Association, the furniture retailer trade group?
SEGAL: No, I wasn’t close enough to be involved there, particularly as we were just getting seriously into furniture during the '90s. It’s a wonderful organization, but we didn't get involved. When people wanted to nominate me for the American Furniture Hall of Fame, I said, “Why me? I’m just a small furniture player who came along and entered the business in 1990.” 20 years later we had certainly built a position for it in Crate & Barrel, but I never really thought of myself as a furniture person. I saw myself much more as an overall, general merchant.
INTERVIEWER: You're certainly a big vendor in furniture. You’re No. 12 on Furniture/Today's current list of Top 100 U.S. Furniture Retailers, with more than $717 million in furniture, bedding and accessory sales in 2011.
SEGAL: Like I said, it’s a good part of our business today.
INTERVIEWER: Yes. Of course, Crate & Barrel was never a pure furniture store. But you’ve become a big furniture vendor.
SEGAL: It started with that little store in Harvard Square. Before I opened the Michigan Avenue and the big Plaza del Lago stores, which had furniture, we just had that one furniture store, which Rob Pitt and Lon Habkirk were running and growing. I’d go out there once a month and spend a day or two, but they did all the creative work and essentially created our furniture business. I want people to understand that my skill was mainly in finding the right people, motivating them and giving them some overall direction. It was not in saying “Buy this table” or “Buy this sofa”. I did a little of that, when walking around the furniture market with them. I might say “I really like this”. We’d price it, and they’d sometimes buy it, sometimes not.
My talent was in creating the overall image and feel of the company, the culture of the company, choosing the right people to be the merchants of the company, giving them a free hand, giving them the financial backup, the logistics backup and the technology backup, in order for them to grow the business. I WAS excited by the whole business. I was excited by the tabletop and housewares and gift and glass as well as the furniture business.
If you asked me what my favorite business was, I’d say the glassware business. In fact, that was the one department I held onto the longest as I was transitioning out of merchandising. I would travel with our glass buyer to Eastern Europe or Germany or Sweden. I just loved glass as a product; there was just something about the feel of it, the touch of it. When we got to know the furniture business, I liked it, but maybe not as much as glassware, textiles and accessories. The furniture business moved slower than housewares and tabletop. You have to make your decisions more carefully, and you have to plan much more in advance for it. You have to do floor layouts. When I'd buy accessories, I could buy a product and then we'd figure out how to display it when it arrived. I didn’t have to do big floor plans. You can't do that in furniture. With a 72-inch table, you can have only so many of them on the floor at one time.
INTERVIEWER: Who would you consider your major competitors?
SEGAL: Every city has its own great stores. I think the world of Room & Board. I think they do a marvelous job and I love their products. If I had to start out in the furniture business again, I'd probably do what they do. Gary Friedman has transformed Restoration Hardware into a great store. I love the work that he’s doing now; he’s doing a very different look. Arhaus has come on as a big competitor, although they’re a lot more traditional than we are. They’ve done a remarkably nice job and they’re very creative in what they’re doing. In every city there's usually a good merchant that I respect. When I see their stores, I think a lot of them are very good merchants.
Especially in furniture, even more than in housewares, it’s the way a store looks and feels and how it is handled that makes the difference more than anything else. In housewares, every store you walk into has pretty much the same merchandise, and it's all sitting out there for everyone to see. A lot of furniture stores have pretty much the same products also. The sofas might look the same, but there's a lot more to it than that. What about the cushioning, the springing, the wood framing, how it's put together? You can't see those things so easily, therefore, you need good, well-trained people to explain the differences to customers and thus elevate your store in their mind.
The main criticism I have of most of the furniture stores we've looked at, is that they're very boring, very dull. They haven’t changed much in years, haven’t evolved. That's what Crate & Barrel was always trying to do — evolve new product, new merchandise, new looks, new styles. We’re very much like that in housewares too, always searching for the new and the different. Some years we succeeded, some years we failed.
If you've been in a Crate & Barrel store in the last year, you may have seen some tables and cabinets made of reclaimed wood. There's been a trend toward reusing beautiful wood from old buildings to make different things. That's a theme we've picked up on. We have always given the buyers the freedom to look for new things that have the unique look and feel they can put into the stores and keep them fresh, different and appealing. I think that’s very important. When I see things that are ordinary, I say, why does that belong in the store? I can buy that in three other stores. It might be built a little better, might have a little better cushioning or a little better fabric, but what’s distinctive about it? What’s unique and fresh and different and great about it?
INTERVIEWER: One reason that’s been a problem in the furniture industry is because it’s been very price-oriented.
SEGAL: Right. We’ve tried not to be price-oriented. We’ve tried to be fresh and different. You can bring in a sofa that’s royal blue or red, something you think people would want. But they'd rather buy the grays, the beiges, the browns. Even with interior decorators, not many of them want a bright yellow sofa or a bright red sofa or a bright blue sofa, things that would freshen up a home and make it more colorful and fun. You wish people would have more courage and buy furniture that's more adventurous. We tried to be a little more adventurous and imaginative with our furniture offerings, but we didn't always succeed in selling product with a different look or color.
INTERVIEWER: What have been the furniture stars for Crate & Barrel?
SEGAL: It's mostly been living room upholstery. Roughly 50 percent of our furniture business is upholstery, which mostly is living room, family room. I’d say the second category is tables and dining, and the third category is bedroom furniture. That’s where the big dollars have come from. Then there’s a bunch of accessory categories that help make it go. But we haven't been able to grow the other categories to reach anywhere near that.
INTERVIEWER: What about leather upholstery?
SEGAL: We've done very well with leather upholstery from all of our vendors. They all have many different leather options and qualities. American Leather out of Texas led the trend. They have wonderful chairs, sofas, and a very special foldout bed technology. We found them when they were a small company, and continue to do a great deal of business with them.
INTERVIEWER: How about casual dining?
SEGAL: We do some smaller-scale dining, tables and chairs. But it's something you can get everywhere, therefore, it's not a big part of our business.
INTERVIEWER: Have you seen any major shifts in the kinds of furniture people bought at Crate & Barrel?
SEGAL: I used to know all that detail — our best sellers, our best looks, what was going on and where it was going and what was happening, but no more. It’s been five years now since I retired. I’m not that close to it anymore. I see sales numbers, of course, but I don’t see the details of what's really selling.
INTERVIEWER: What have been the greatest challenges you've faced in the furniture business?
SEGAL: I think finding the right vendors, keeping their prices reasonable, pushing them to evolve, asking them to create new product, new models, getting their deliveries on schedule. One vendor in Virginia we worked with made wonderful product, but the delivery times were horrendous. They have finally gotten better at it and our volume has sky rocketed.
In upholstery, finding beautiful fabrics is the hardest part — unique, beautiful fabrics that have a look that’s distinctive. That's difficult.
Perhaps the most frustrating thing in furniture was what happened when sales really took off. When we started to offer, say, a sofa from a particular factory, we might buy three or four sofas per store, thinking we’d sell one or two a month. But if it really proved popular, and you needed six or eight sofas a month per store, then it could take months for the factory to catch up with demand. That was frustrating. In housewares, you could get delivery faster and not be out of stock for as long. Our best furniture vendors did learn to deliver more quickly.
We always had a custom upholstery sale in September, and we wanted to deliver the goods before Thanksgiving. But sometimes the vendors couldn't deliver till the end of December or even January, and that was not a great way to build customer relations. I couldn't always blame the vendors, because it often wasn’t their fault. Most of the time, especially when demand proved greater than expected, they could have increased production, but they had run out of fabric, and fabric buying cycles were every three or four months, therefore, they couldn’t make that fabric available to us. The fabric was usually the biggest hang up. You can make the frames faster if need be, and springing and stuffing isn’t typically an issue. It’s usually the fabrics that cause the delays. By the time you got the upholstery to the customer, they were frustrated with you, and that didn’t help customer relations.
INTERVIEWER: Have you ever bought from Canadian furniture vendors?
SEGAL: Some, but not a lot. It hasn’t been a big part of our business. We still buy a little out of Denmark, and some product out of other countries in Europe.
INTERVIEWER: Did Crate & Barrel ever consider doing any manufacturing itself?
SEGAL: No. I know companies like Ethan Allen have done it successfully, but I just don’t believe in vertical integration, in one company doing both manufacturing and retailing. I think Williams-Sonoma built a furniture factory in North Carolina and it has been successful. But I believe you should be in one business or the other. You can’t be an expert in everything, and manufacturing and retailing are two very different things. I’ve seen manufacturing guys go into retailing, and vice versa, and it hasn't worked out too well most of the time. If you’re a manufacturer and you go into retail, you’re in conflict with your other retail customers, which I hate. Whether it’s a housewares or furniture vendor, we don’t believe in buying from competitors, no matter how much money is at stake. We walked away from a lot of business with Mitchell Gold when he went into retail, and he had a very distinctive, beautiful line that we really liked. But philosophically, that’s not right. You don’t feed competitors trying to take your business away by buying from them. I don’t believe in that.
I’ve seen two or three people in retail try to do manufacturing, and they usually lost control. Retailers in big cities in America just don’t know how to run a factory in North Carolina. There’s a different culture in manufacturing, and you have to live there to know the way it works, know the job market, and know how to buy the fabric and organize and motivate the staff.
Manufacturing is a totally different thing, and I didn’t believe we had the experience, the organization, nor the wherewithal to do it even if we'd wanted to. Suppose a factory's prices are getting out of line with the marketplace. If I'm a customer of that factory, I can tell them to bring their prices in line or we'll have to go elsewhere. That’s his problem. But if it was my factory and I've got 50 or 100 workers there, it’s my problem. I wouldn't want to shut the factory down or lay off a bunch of workers who we directly employed.
I didn’t think you would save much money at the end of the day by running your own factory, as opposed to buying from a really good furniture manufacturer. Could I run it more efficiently than they could? I never had the ego to think I could be as good a manufacturer as our vendors are.
INTERVIEWER: How would you describe your management philosophy and techniques?
SEGAL: First, I think it is about making sure that everyone in the company understands what the goal is. At Crate & Barrel, we wanted to sell beautiful product at prices people could afford to pay. Sounds simple, but it's not as simple to do. It’s not hard to buy product that’s beautiful but expensive, and it’s not hard to buy ugly product that’s inexpensive. But how do you buy affordable, beautiful product that a broad spectrum of customers can and want to buy?
Second, we wanted to instill in every single person in the company that we had to provide the kind of service that made every customer understand that we really cared about them and about their satisfaction with our products. That went for everyone, from a stock guy to an office person to a salesperson to a store manager, everybody. You’ve really got to take care of that customer, and there’s no excuse for not doing so. If you don’t, there’s no reason they shouldn’t go buy at a big-box store or a discount store or on the web. The only advantage we’ve got, is our personality and our ability to guarantee good product, good delivery and good follow up service, and that’s what we intend to do.
Third, be very loyal to your vendors who are creating for you really unique and differentiated product. That doesn’t mean you give them all your floor space or everything they want, but you’re loyal to them, you work with them, you go back to them if you've got a new idea, you go back to them if you've got a problem. You don’t give a resource a big order one year and then forget about him the next year, because they get excited, they build product, they build teams, they make product for you, and then what do they do if you turn off the switch? On the other hand, if their product doesn’t sell, there’s nothing you can do about it. Be loyal to your vendors, just like you would want loyalty from your customers. It’s safe to say that during my reign at Crate & Barrel, we were very loyal to most of our furniture vendors for many, many years, and that was important to us.
I think the thing that’s most important is to hire people who enjoy what they’re doing, that you hire people who are the right people to work in your environment, to sell your product. Then, you need to put together a management team that will carry out your inspiration and vision, and who have the same feelings about your social contract with your sales associates and store managers and all your employees.
I believe Crate & Barrel had a kind of unwritten agreement that if you’re smart, you work hard, you learn, you serve customers well, and you give it your all, then you can be promoted and grow and have a long-term job and a long-term commitment from the company.
I hope that continues with the new management team. But times are different and the Internet’s taking away store business and competitors are getting better. Now you've got to watch your overhead. We always had to, but today watching your overhead is very important to survive in retail. Retail is going through a great metamorphosis because of the Internet business.
By the way, it amazes me that people will buy furniture on the Internet without touching, feeling, sensing what it's like. In fact, it bothers the hell out of me. A picture can make the furniture look very pretty, but what's it really like, what's the quality like? I’m just amazed that people want to buy furniture like that. We sell a lot of furniture on the Internet! It just blows my mind. I don’t know why I’m surprised. They buy everything on the Internet today. But I just don't understand how you can buy furniture without going to a store and sitting on it, touching it, feeling it. What about the shade of the wood, the feel of the leather, the comfort of the chair? Does it hit the back of my knees right, is the cushioning correct, how does it feel on my back? I mean those things are all very important when buying furniture.
INTERVIEWER: What was the percentage of Crate & Barrel’s Internet sales when you were closely involved in the company?
SEGAL: Internet sales moved from eight percent to about 28 or 29 percent of the company's sales. I don’t know what it is today. It’s probably the same or a little higher.
INTERVIEWER: That’s total sales?
SEGAL: Total, yes.
INTERVIEWER: But in furniture, it would be much lower, surely.
SEGAL: I don’t know what it is, to be honest. I think when I left, it had grown to $60 or $65 million on the Internet. I bet that’s now close to $80 million.
INTERVIEWER: Even before you went seriously into furniture, you must have had end tables and cocktail tables.
SEGAL: We did. We had a vendor in New York, in Brooklyn, making beautiful oiled oak side tables and cocktail tables for us; not dining tables, but small side pieces. They were reasonably priced. It was a wonderful product line and we sold it like crazy.
INTERVIEWER: Could he make enough of them to satisfy your demand?
SEGAL: Yes, he could for a long while but, then his costs went way up and he eventually went out of business. I don’t know exactly what happened, but I don’t think he’s around anymore. We did a lot of business with him in those early days.
INTERVIEWER: How do you see the future of brick-and-mortar stores playing out?
SEGAL: In the broad spectrum, brick-and-mortar stores are going through a very difficult time right now. More and more people I talk to just love to order over the web and get it delivered to their door. A guy I know and respect a lot, a very astute young businessman, said, “Oh, I buy everything on the web. I buy toilet paper, paper towels, everything.” I said, “You've got to be kidding.” He said, “No. I just order from Amazon. Everything is delivered to my door. I don’t have to worry about anything. I don’t like going to stores. I don’t like shopping.” As you can imagine that’s hard for me to understand.
INTERVIEWER: But that’s a man’s perspective.
SEGAL: Yes, but I think a lot more women are doing the same thing, other than in fashion perhaps, where they want to go try on the shoes or the dress or whatever. But even there, we've got growing fashion websites, and people are willing to say, “Send me four dresses. I’ll try them on and I’ll send back the two or three I don’t want.” The return rates are hideous. But young people are very busy, and trust the Internet so much, they don't seem to care about the touch and feel of the product, or the service they could get in a store.
I’m in shopping malls a lot, and I walk through a lot of stores. The only time you see them really busy is when they’re having a sale or there’s some promotion. It really bothers me because more and more young people just want the convenience of doing everything on the Internet. They really know how to use the iPad, the iPhone, or whatever. Or, they come in the store and they scan your product code, especially if it’s a name brand that sells elsewhere, and then they try to find out where they can buy it for less, including on the web.
Now they can’t do that much in furniture, because name brands aren't very prominent in furniture. It’s not like buying an appliance or some other standard items that you can buy at Best Buy or Costco. But everybody can walk into a store to look for the best products — a sofa, say — then check on the web to see who else has it. They don't even need to go and shop at other stores. “Oh, this website has it cheaper. And, there’s no sales tax and free shipping. Why should I order from this store just because they've got good service and a beautiful atmosphere? I can order a sofa just like it, and they’ll deliver it free.”
Our ski instructor, who is a very sophisticated, educated fellow, was telling me last year how he wanted to buy a big TV. He went to a Best Buy store and chose the model he wanted, then he went on Amazon and ordered it. They delivered it, installed it, it’s perfect and it was $300 or $400 less. He didn’t even scan the product code. He just took down a model number, looked on Amazon and got it.
It's one thing to save $5 or $10, but if you can save $300 or $400, people say, “Why not?” If you're talking about a television, if it’s a Sony or an LG, you know what you’re buying. But with a sofa, you don’t know what you’re buying. You should go in and feel it, touch it, sit on it, look at it. From that standpoint, I can’t imagine why they would not want to visit stores to check out a wide variety of products. But stores on all levels are going through difficulties because of the web.
Look at Ooh La La and Gilt and three or four other women’s fashion houses on the web that are doing very well, competing with Saks and Neiman Marcus and Bergdorf and Bloomingdale's. It’s amazing to me that younger people trust their electronics more than they trust a salesperson. Furniture is less susceptible to it, but I know in the housewares end of the business it's a real threat. I’ve got friends at Bed, Bath and Beyond — a well-run company, very successful — and they say their biggest threat is Amazon, because they carry a lot of the same name-brand products. I think 80 percent of their products are branded. We carry very little branded product at Crate & Barrel. If someone asks who made this sofa, we’ll tell them, but we try to put everything under the Crate & Barrel label.
INTERVIEWER: You pretty much demand exclusivity from your furniture vendors, right?
SEGAL: Yes, and I don’t mean a change of a color or a fabric. Of course, they've often developed a piece just for us. We obviously have exclusivity there. If we buy it off the floor at a market showroom and other stores already have it, then you can’t demand exclusivity. We try not to do much of that. Sometimes we'll see a beautiful item at market, and they'll tell us they've sold it to other stores. If they’re not a major competitor, or right in our face, we might buy the item anyway.
INTERVIEWER: You see the Internet as both a bane and a blessing?
SEGAL: I guess that's about right. We do a terrific business on the Internet and we make good profits from it, but it’s hurting the brick-and-mortar stores. Their labor costs are going up and up, and they’ve got all the other costs of running the stores; payroll, utilities, rent. There's a big fixed cost, and you need traffic to cover those costs, and we’re seeing less of that today, and we’re seeing the Internet sites grow. We see folks come in the stores with their smart phones, and we see them enter the product information, then go home and order. I guess we're pretty fortunate when you think about it, because they seem to be coming to our Internet site pretty often. We're probably not losing as much business in that way as some other stores.
INTERVIEWER: What can you do to combat something like that?
SEGAL: I just don’t know if you can.
We live on the north shore of Chicago between Evanston, Highland Park and Lake Forest. It's one of the wealthiest, most sophisticated areas with beautiful big homes and a lot of money. Along Green Bay Road, in Winnetka, Wilmette and Glencoe — we have all these little shopping districts and areas. And I’d say 20 percent of the stores along these roads are closed; little individual storekeepers who didn’t have the wherewithal to survive. On the other hand, we have a great bookstore that’s done very well, despite Amazon and all the other websites where you can buy books. We have a great Foodstuffs store in Glencoe, and a few other great stores. I think the point is that, these days, you can’t be half good; you've got to be fantastic, you've got to be really terrific, like Foodstuffs and the bookstore. They are doing very well. If you are just so-so, you'll soon be out of business.
I was meeting with a real estate person yesterday who does a lot of strip malls. It’s a dicey business today. Strip malls have had a very difficult time recently. The best upscale malls are doing better. But if you’ll notice, they’re putting in a lot more restaurants, and entertainment. They’re not finding a lot of retail merchants who are itching to get into them. It’s hard out there. You walk along Michigan Avenue, and there’s not as many unique stores as there used to be.
INTERVIEWER: Chicago obviously is a very diverse city. Have racial and ethnic attitudes affected Crate & Barrel?
SEGAL: No, we’ve always had a very ethnically diverse staff. Some of our best leaders have been African American and Hispanic. We’ve never had a problem that way or with customers. For many, many years, almost half our staff was African American. When we started in the '60s, three out of our seven people were African Americans. We’ve always been very open and diverse, in every city we're in. You still try to choose the right people that are just absolutely fantastic, but you can’t have an all-white staff today, not an all-white buying team. Those days are gone forever. We’ve always been diverse and always believed in it morally; we’re absolutely conscious of it. I’m proud of some of the people who have risen to the top spots at Crate & Barrel.
INTERVIEWER: I think you’d probably say much the same thing about women and women’s issues.
SEGAL: Well, the company is mostly women. We started out as a largely female company, first of all because my wife and partner was a woman, obviously. We hired a lot of women school teachers from the beginning, because in those days women had very few career choices. They could be a nurse, a secretary or a school teacher. There were only a few bankers or lawyers or accountants. Most women just didn’t do those things in those days. If you had a smart woman, she was teaching school or she was in medical care or nursing or she was a secretary. Those are all fine jobs, but not always very exciting. My wife was a school teacher, as was Barbara Turf, Barbara Reimann, and Judy Everhart, who all joined us early on and became leaders in our company.
We were able to convince them that retail is a hell of a lot more fun than teaching school. Besides, you’re educating your staff to educate your customers. Therefore, you're really still in the education business. It didn’t pay as well, but you’re going to go to work happier every day without the frustrations of being a teacher. Our company’s leadership has been probably 85 percent female and 15 percent male, even today. It's also women who tend to relate more than men to home furnishings, tabletop, kitchenware and housewares.
INTERVIEWER: And you’re marketing more to females than you are to males.
SEGAL: Absolutely, males don’t do much shopping. The only time we’d see a big male crowd would be on the weekends, or in the weeks before Christmas. But 80 to 85 percent of our customers tend to be women.
INTERVIEWER: Do you think stores will have to become smaller in the future?
SEGAL: We’re building stores that are smaller now. Obviously, rents aren’t going down, overhead isn’t going down. I know our current management is thinking that our new stores will be smaller. I’m saddened a bit by that. I walked into one of our new stores in Annapolis a couple of months ago, and I was happy to see that it was big enough to show all the variety and choices that we offer. As a merchant, I’m saddened by the fact that new stores are going to be 25 to 30 percent smaller, especially in the furniture areas.
I don't think you can show your variety of options as well, and you can’t show some of the goods at all, in smaller stores. We’re buying all this unusual merchandise and we can’t display it. I’m very saddened by that, and that’s probably wrong, but I think that’s the fun of retail — making the selections and showing them in a way that makes your customer want to buy. Much is changing. Much of our business is coming in over the Internet, and we don't know whether they saw it first in the store before they decided to buy. They could've seen it in the store, then gone home and shopped the Internet for something similar, and ended up buying it from us. We have almost everything in stock and they can have delivery within five days. Its high quality and we stand behind it. We still give the very best customer service
INTERVIEWER: Were there any particular individuals in the company that led you into the catalog business and then the Internet business?
SEGAL: I drove us into the catalog business in the late ‘60’s. My son Chris Segal worked in the company for a number of years. He heard me talking about the Internet, and he picked up on that and helped lead us onto the web after the Otto Versand transaction. Chris was the person who brought us into the Internet world. I remember when the Otto Versand people first came in and started talking about the Internet, I said, “What’s the Internet?” That seems like just yesterday. Chris built our first website and got us into that business.
INTERVIEWER: Have all your kids been involved in the business at one point or another?
SEGAL: Only Chris, my son, was involved in Crate & Barrel. My daughter is a lawyer who’s taking time off now to raise three beautiful children. She eventually wants to go back to work and practice pro bono children’s law or work for a foundation. My younger son and his wife are both textile designers. They have their own textile design company called Unison which has a website. They’re all raising children now, as it turns out, and they’re all happy with what they’re doing.
INTERVIEWER: Have government regulations and environmental regulations ever posed significant problems for Crate & Barrel?
SEGAL: Government safety regulations especially have affected our children’s products. We’re much more careful about bringing in kids products now. As I mentioned, we bought Land of Nod, a children’s retail business. One of the founders of that business told me he wasn't too worried about competitors very much anymore. He was more worried about the legal bills and testing laboratory costs that go into certifying the safety of many children's products these days. I recently heard that Chicago had banned certain types of crib bumper guards because kids had suffocated in them. They had to toss out a whole bunch of bumper guards that had been designed and manufactured before the law was passed. There's also a bunch of regulations concerning cribs and bunk beds. It makes for real challenges in the children’s business.
Some 15 or 20 years ago, we saw some crazy legislation regulating ceramic ware. The federal government came up with a regulation that reduced the amount of lead permitted to two parts per million, or something like that. All of a sudden you couldn't sell a lot of colorful earthenware that people have been eating off of for centuries. Then, California passed an even more stringent standard; it was unbelievable. If you sold something that had two parts per million of lead instead of one part per million, you had to post a sign saying something like, “This is bad for your health”, or, “This exceeds the limits of the California standard”. Some of this crazy stuff continues. Too many people have nothing to do but find things they think are wrong.
Then there are the lawyers — I call them extortion attorneys — that find little work rules you're allegedly violating, or something else that you’re doing wrong, especially in California, and they threaten to sue you. It’s just sheer extortion. We see it all the time in business. I’m on two hospital boards in Chicago, and we see it there too. The plaintiff’s bar in Illinois is just terrible; almost as bad as California.
Barack Obama came into my office one day, back when he was the Democratic nominee for Illinois state senator. This was at least 10 years ago; he was a complete unknown then. He was a very charming guy. He wanted to know what some of my problems were as a businessman and what might be done to alleviate them. I told him that my biggest problem, both as a businessman and a hospital trustee, was that there is just too much legal extortion going on, and it is costing us millions and hospitals tens of millions every year. These lawyers come along and nitpick us by threatening to sue us over this or that so-called illegal practice.
Getting back to Barack Obama; he was very candid with me, and told me frankly that the plaintiff’s bar provided 37 percent of his financial support, and he just couldn't go against them. I said that I understood his situation, but that I needed to tell him these lawyers were hurting businesses, hurting jobs, raising hospital costs, and these are things he should be aware of.
He got the Democratic nomination and won the election for state senator. We supported him. He was a smart guy. I said to my wife when he got elected president, maybe now he won’t have to worry about financial support from the lawyers and can put caps on medical damage awards. I haven't seen it yet. It wasn’t in Obamacare, his big health care program, but it should’ve been.
Those kinds of things hurt every business, not just our business. Not just retail. There are regulations that states and the federal government have on the books that hinder business growth. Mostly, you've just got to live with it. At least it’s not as bad here as it is in Europe. In Asia, government regulation is almost totally lacking, but they have a different philosophy about that.
INTERVIEWER: Talk about some of the things that happened towards the end of your career. Apparently you were very satisfied after the sale of the company to Otto Versand. They were a financial resource but didn't meddle in management.
SEGAL: That's right. They were very good partners, and I ran the business the same exact way for another 10 years. They didn't meddle at all. We had two board meetings a year and we’d have a phone call every month, or every three weeks, and talk about issues and what was going on. They let us continue to grow and do what we did best. But I had agreed to retire when I reached 70, and I did. They have a rule in Germany that you've got to retire when you’re 60. I had it a lot better than CEOs over there. Barbara Turf just had to retire because she’d reached 70. We knew this would happen going into the deal.
You might wonder if it was difficult leaving the company. Well, it left a void, obviously, since I'd done it nearly all my life, 46 years, building Crate & Barrel from an idea into a big business. You miss the grief, the aggravation, and the everyday pressures. You definitely miss the good times, and you miss the family of people.
But I had good relations with Otto, especially during the first few years after the sale when I went over there every month. I spent hours with the management people, and had some serious discussions in which we exchanged views. I was generally okay with leaving, but it doesn’t feel the same after you’ve been driving the bus for 46 years. Then that stops, and someone else is driving the bus. That’s not easy. On the other hand, with some health issues I’ve had in the past year-and-a-half, there’s no way I could’ve been running the business. I did what I did because I believed it was the best thing to do to keep growing the business, and to also secure my family's financial future at the same time. I don’t believe good management transition happens when they carry you out on a gurney.
INTERVIEWER: You kept an ownership stake in the business, I believe.
SEGAL: I kept a third of the business for that 10 years, which I sold when I retired.
INTERVIEWER: It was difficult, but you didn’t find it impossible to back away. Did you?
SEGAL: You do miss it. You do miss the authority, giving the speeches, being out there with your staff. But you go home at night without any stress, and every day it gets better and the good and bad memories fade.
It’s like Buddy Hackett once said. He joined the Army, and after three weeks of basic training he went into the medical station and said, “I’m dying, I’m dying.” They said, “What’s wrong?” He said, “I don’t feel my heart anymore. I don’t have a pain in my chest anymore.” He had been eating all this New York food. Now he had started eating bland Army food and he didn’t have the heartburn anymore.
But you do miss the heartburn sometimes. There was always aggravation, always issues, always difficulties, and you sort of miss that too. You worry a lot. Are the next people going to run the business the way you did? Barbara Turf had to cope with the downturn. And what about the new team? How are Sascha Bopp and Marta Calle going to run it? I know it’s not mine anymore, but it’s my child and I’d like to see it continue successfully.
INTERVIEWER: Are you still consulting with the new team?
SEGAL: I still talk to them every couple of months. You’re less and less able to see what’s right or wrong, and you’re less and less in the stream of information, so you’re less effective at commenting because you don’t know all the facts.
INTERVIEWER: Would you describe yourself as a workaholic?
SEGAL: Oh, I was, for sure. I’d always be working 65 or 70 hours a week. You've got to in retail, especially when you’re building something from the ground up. I'd get to work at 7:30 or 8:00 in the morning and get home at 7:30 at night and work some more at home. Until about 10 years ago, I worked Saturdays. I was working six days a week. The only nights I’d go home early were Friday and Saturday nights. On Sundays I’d usually read the paper and spend time with my family during the day, but Sunday night I’d do three or four hours of paperwork.
INTERVIEWER: What did you do for relaxation?
SEGAL: My wife and I would take vacations with our family. We did do that. We own woodlands and a farm up in southern Wisconsin, an hour and a half from here. We got up there quite a bit. We have a home in Florida, but didn’t use that very much. We ski in Colorado. We would all get away for that. We traveled quite a bit to Europe and Asia. We belonged to the Young Presidents’ Organization, now the Chief Executives’ Organization, and the World Presidents’ Organization and the Council on Global Affairs, and we traveled a lot with them, and did a lot of foreign travel. We still do. I can’t say I have had a hard, difficult life, nose to the grindstone every day. The first years, yes maybe, but not the last 25 or 30 years.
INTERVIEWER: You've described some of your civic involvement. Could you briefly recap that?
SEGAL: I’ve been on the board of trustees at Northwestern University for about 22 years, and for 18 years I’ve chaired the Educational Properties Committee, which decides on the architects and the buildings that are going to be built on campus. That’s the thing I probably spend the most time on, and that’s probably the board I enjoy the most. I just retired from the Chicago Lyric Opera board. I’m active on the board of the Art Institute of Chicago and at the University of Chicago Medical Center. I spend a lot of time on that.
I’m very active in the Chief Executives Organization (CEO), and until recently, I was very active in the National Retail Federation; I chaired that for a couple of years. I’d say the majority of my philanthropic time now is spent at Northwestern and the Art Institute. I’ve been on the board of Children’s Memorial Hospital, but I've turned most of that over to my son.
INTERVIEWER: Did Crate & Barrel as a company have designated charities or engage in charitable activities?
SEGAL: It involved itself very much in charities, especially in the Chicago area since this was our home base. Crate & Barrel was very involved in a lot of charitable giving to many institutions, giving several large donations and many minor ones. I think the company still does some of that, but they cut back somewhat after the recession hit in late 2008.
INTERVIEWER: How much were you involved with the company when the economy went over the cliff in 2008?
SEGAL: I was there a couple hours a week talking to Barbara Turf and other management people about what was going on. I was advising them on what I thought should be done, and sometimes they'd listen and sometimes not. I’m not a believer in pounding the table and screaming. I’d tell Barbara and the others my opinions about what they should cut or add or change. I knew I wasn't in charge any longer and couldn't control what they did. I still gave speeches, and looked at new retail locations once in a while. I was very involved in the opening of a franchise partnership in Dubai. Now I meet once every other month with Sascha Bopp, Crate and Barrel’s new CEO.
INTERVIEWER: Has Crate & Barrel ever had to close a store?
SEGAL: We have never closed a store before a lease ended. But if we weren’t doing good business, if we were not profitable in a store and the lease ended, we closed the store. We closed the original Old Town store once we had opened several other Chicago stores. We closed Plaza del Lago a couple of years ago because it took them two years to repair the road in front of the shopping center, and business fell by half and never came back. That was our second store and we had been there since ’68. That hurt. I’d have to say we made a few poor choices for store locations. When the 10- or 15-year leases came up, we closed them.
INTERVIEWER: But you stuck it out as long as you could.
SEGAL: Yes, it was usually too expensive to buy out a lease. Sometimes you could go to a landlord who had another tenant at hand and he would let you out of the lease at a reasonable cost, but as we built bigger stores it became harder to do that. When the lease ran out at the store in the Galleria in Dallas we moved to the new freestanding mall across the street to what we thought would be a newer, better store layout. We also did that in Raleigh-Durham, North Carolina.
There was a California mall we went into called Victoria Gardens; east of Los Angeles, maybe halfway to Palm Springs. I must have surveyed this location three times. My staff and I thought it would work, but when the store opened there it turned out to be a dog. I think they just recently closed it. We didn’t make good real estate decisions every time. When you build 120 stores, not every one of them will be right. Maybe 10 percent will be wrong. When you can get out of them, you do.
INTERVIEWER: Retailing is a dynamic business. You can’t be right all the time.
SEGAL: True, but if you have six or eight stores in a market and really know that market, you can dominate it; like Art Van in Michigan, or Jordan's in metro Boston. But, when you are nationwide and you've got 100 plus stores, I guarantee that you’re going to make five or 10 mistakes.
INTERVIEWER: Given Crate & Barrel's market niche, I assume you couldn’t have opened more than a certain number of stores in one urban area.
INTERVIEWER: I have no idea what that number would be, of course.
SEGAL: It varies. Our best markets were Boston, New York, Washington, D.C., Chicago, Los Angeles and San Francisco, where we have six or eight stores in each city. Most of the other markets have one or two stores: San Diego, two; Seattle, two; Portland, one; Denver, two. Minneapolis had two stores, now it’s got only one. We opened downtown because the city council promised us that they had big plans for growth there. We opened downtown and it was a disaster. Redevelopment never happened, and everybody left and went out to the big malls in the suburbs. When you look back you say, “Wow, we were very naive. Why did we do that?”
Most of the time we made money in everything we did. Very few of our stores lost money; they just didn’t make as much money as we would have liked. When we made a mistake, we could usually run them in order that they at least broke even. Then maybe later, when the lease ran out, we would close them.
INTERVIEWER: Looking back, are there any big decisions you would do differently?
SEGAL: Sure, I wish I would have made some personnel decisions differently, and planned differently earlier on. I sometimes hired people because I liked them and their personality, more so than for their competence, and then it took way too long to find out their competence wasn’t at the level I needed. But we were young. We were 23 when we started this business, and between 23 and 33 you don’t have much wisdom. You've got a lot of enthusiasm, a lot of passion, a lot of energy, but not much wisdom or good management skills. We treated people right almost every time. Should I have been more critical of people? Sure, but we had a great run. We had great people for the most part, as good as anybody in the business. I look at fellow retailers I know who are running good retail shops today and they manage their people and policies better than I did. But one of our strengths was our people policies, and the way people thought of us, and the way they worked for us. They worked incredibly hard to make the stores run well and look beautiful day in and day out.
INTERVIEWER: When you got too big, did you have a human resources department?
SEGAL: Oh, sure, with eight or 10 people. They were people who had been with us for many years. They understood the underlying philosophy that Carole and I had started the business with, and they carried out that philosophy. We believed that any employee with a new idea should bring it up, and we’d consider it and sometimes say yea and sometimes nay.
If somebody wasn’t a competent leader, or wasn’t honest, or wasn’t a hard worker they did not stay with Crate & Barrel. The social contract was: work hard, be honest, be a leader and we’ll reward you. You couldn't be lazy, be dishonest or be a poor associate and stay. We had people we liked, and who seemed to be good sales associates and good assistants. I put them in a store manager’s job, and it turned out they didn’t know how to manage people. We had to let them go.
Maybe there were some people I should’ve let go much sooner than I did. But, eventually I saw what needed to be done and did it. Every business leader I've talked to has told me probably the same thing if they’re honest - you always wait too long. You see it, but you don’t want to admit it.
We weren’t naive or soft, but we were very fair to the people who put their heart and soul into our business.
INTERVIEWER: What do you think are the essential qualities for a good store manager?
SEGAL: First of all, understand our expectations of how a good store is managed, starting with how the staff is hired, how they dress, how they approach customers, how they’re trained. Store managers have to educate their associates and make sure they’re executing properly, that they address the customer issues properly. If they aren’t, the store manager should step in and make the right policy happen for the customer. It all revolves around the customer and how that customer is dealt with in the store. It is about honest conversation and executing properly for the customer; that it’s handled correctly and shipped and delivered on time — whatever the customer wants within reason. That’s their most important job, because this is their store, this is their market. They have to build a reputation based on hiring the right people and managing them to do the right things.
The second thing is that they have to know and adopt our neuroses - like keeping the windows clean, the sidewalks swept and the air conditioning working. The music volume should be pleasant and the displays need to be beautiful. The signage has to be proper and the merchandise clean and well displayed.
The third thing is that the stockroom has to be well organized. It has to be easy to find the merchandise you have there. One of the things that would really aggravate me is when we’d have well educated new staff walk in the stores and say, it’s hard to find things in the stockroom, or, things weren’t well organized in the stockroom; because that hurts sales. If a salesperson runs back to the stockroom and can’t find the merchandise that is there it obviously hurts sales. They had to make sure the stockroom was neat and orderly. If that was the assistant manager’s job, they had to make it very clear what was expected, and oversee that it was done properly every time.
When store managers lived up to these expectations, their job would be secure and they would be on our list of stars and considered for promotion. A good manager is someone who is an extension of you. They are like one of your arms, and they have to function like you want them to if you're going to be a success in a multi-unit operation. They've got to deliver what you've promised the customer.
One of our commitments to our customers was a promise of quality merchandise at a fair price with good delivery. If you get something home and you don’t like it, we would take it back. We’ll be happy when they bring it back. We would smile with a return as much as we smile for a sale. Those philosophies had to be carried out by individuals on our sales staff. Did we have problems with some customers? Sure. But for the most part, the store managers did a really good job satisfying our customers.
If the customer could sense the personality of the store, and if the staff was friendly, warm, and honest and could sell the goods well, we knew that store had a good manager. I believe a store manager can make a difference of 10 percent plus or minus in a store's performance.
INTERVIEWER: Did you ever hold focus groups or do any kind of formal consumer research?
SEGAL: No, not really. Maybe in the last decade we did a little bit from time to time concerning our catalog or website, but not in the growth years, not in the first 30 or 40 years. It wasn’t even a part of our thought process.
INTERVIEWER: Did you have a fairly formal, company wide sales training program for beginners, or did you pretty much leave it up to the store managers?
SEGAL: We had a training program, but not as formal as we probably should have had. Some companies I know spend well over 200 hours training their salespersons. We spent about 50 to100 hours, and it wasn’t ever formalized. We took everyone through training, but in retrospect, I don’t think we did as good a job as we could have. However, I think our furniture people were very well trained. It takes a long time to get a person up to speed in furniture. Housewares, you can learn that pretty quickly.
INTERVIEWER: Has there been any aspect of your career that we haven’t talked about, or something that you'd like to say more about?
SEGAL: No, except that I think I was really lucky to end up in retailing. It’s wonderful, and probably one of the best businesses you can be in. I enjoyed every minute of it in retrospect. The passion and emotion and the touch and feel of the retail business is marvelous. And the people are mostly marvelous and the complexity of it is wonderfully challenging.
Now, I’m in a business that’s totally different — investing. A friend of mine, one of the most successful apparel retailers in Chicago, once said to me, “When I was looking around trying to decide what I wanted to do, I looked at retail and there weren’t a lot of smart people in it, and I said ‘That’s the business for me.’” Now that I’m in the investing business, I'm meeting all these people in the investment world, and there are a lot of smart people in the world of investing. He was right.
My point is that retail is a business where, if you have passion and energy, it’s not all that complicated. It’s not brilliance you've got to have, it is passion, it is personality, it is the ability to work hard, it is taste, and it is getting people to follow you. I was very good at those things, and that’s why I was successful. Not because I did it all myself, but because I had a terrific team of management leading the 7,000 people in the company.
INTERVIEWER: Where do you think the next generation of retailers will come from?
SEGAL: I don’t know. There are companies and organizations that have some good leadership, but it’s harder now because you don’t have the department store training programs that you used to have. Abraham & Straus, Bloomingdale's, Macy’s, Dayton’s, Marshall Field's and other department stores around the country all had great training programs with great merchant teachers back in those days. Macy's still has one, but not like in the old days. There are some retailing schools; Arizona has one, Texas A&M has one and there's one in Boston. Are they producing enough retailers for the marketplace? I don’t believe that they are.
At Crate & Barrel, we never wanted to bring in too many department store people because we wanted to develop them ourselves, to instill in them our own philosophy. We did train people, although it took us longer and wasn't as formal as the department store training.
INTERVIEWER: Describe briefly what you're doing now at Prairie Management Group.
SEGAL: Prairie Management Group is basically the Segal family office and the Segal Foundation. We invest the capital the family built up over the years. We have a team of seven people working there now.
INTERVIEWER: What sorts of things do you invest in?
SEGAL: We invest in traditional stock funds, hedge funds, bond funds, private-equity companies, real estate, and commodities; everything you can think of. We have five or six investments in small entrepreneurial businesses that we hope will grow and prosper. It’s not as much fun as retail. It’s not as visual and you don’t control events as much as you’d like, and you’re not selling product, you are buying it. But, I’ve got people who are good at thinking through these different investment processes.
Again, I've surrounded myself with good people, and that’s why the office is quite successful. It’s been great for the family. We have partnerships here with all three of our children, and we do a lot of things as partners that we couldn’t do as separate individuals. It works well and it will be here for generations. We also give them tax advice and generational transition planning. If you don’t do this well, it can have a really negative impact on your family’s long term wealth.
INTERVIEWER: What would you consider your greatest personal contribution to the retailing industry?
SEGAL: I think in the beginning, in those first 10 or 15 years, we showed that you could build an independent store selling housewares, glassware, tabletop, and make money. You could have beautiful stores in a field, which up to that time, was a relatively unimportant strictly department store business. You bought your glassware and china and flatware in department stores when you got married. You bought your housewares in drab housewares departments on the eighth or ninth floor of department stores because they weren’t a very important business compared to cosmetics, apparel, shoes, or lingerie.
We showed that you could open a store selling housewares and tabletop and glassware and other things for the home, and make it not only visually exciting but also profitable. We generated a whole number of competitors, like Williams-Sonoma, Pottery Barn, Sur La Table and dozens of others in every city.
Then, in the latter part of my career, in the past 20 years, we took the furniture retailing business and helped make that exciting too. When we looked at it in the late '80s and decided to go into furniture, we walked maybe 20 different furniture stores. We saw most furniture stores were very dull and boring and uninteresting. When we looked around in Chicago, we found that many of the long time furniture companies like John M. Smyth had gone out of business. We decided we could make furniture both visually exciting, and we could select and edit a collection of furniture like we did in the housewares business. And we could add to that exciting advertising, catalog and Internet media.
In short, we could make it a much more exciting business and do very well, using the same principles of visual display, well-trained staff, nice looking stores, pleasant atmosphere, and well-designed products. I think we paved the way for a great number of other stores in our wake. Room & Board wasn’t in the business like they are today when we started in furniture. Pottery Barn, Mitchell Gold, Arhaus, Restoration Hardware and a lot of other people looked at what we were doing and opened furniture stores with a lot more pizzazz and style than had previously existed.
As in anything, if you do it right in a capitalist society, you get competitors. We did, and we prospered enormously from it. I think the biggest impact we had is that we showed you can run a quality retail business, not only in housewares but in furniture too, and do it in a beautiful way — sell quality product, invest in nice stores, spend money on great sales associates and on visual display— and you can have a good business by doing it right. That’s what our success was all about.
INTERVIEWER: Thank you very much. It’s been a great honor to speak with you, and we appreciate your time and your insights.
SEGAL: You’re welcome.