Segals launched Crate & Barrel in 1962, facing similar pressures of today’s startups
BY SANDRA GUY Business Reporteremail@example.com December 6, 2012 7:10PM
ENTREPRENEURIAL advice from the segals
The Segals offer this advice for today’s entrepreneurs, including those they warn may be tempted to turn a quick million only to see the bottom fall out.
♦ Create a workplace where people love to be.
♦ Give customers unique value that brightens their lives.
♦ Manage expenses, money and accounts with integrity, and buy and sell products intelligently.
♦ Form a company with a mission, and execute that mission by telling people what you, as a leader, want them to do.
“It’s really the drive of leadership that makes a great company happy,” Gordon Segal said.
Updated: January 8, 2013 6:13AM
Fifty years ago, Gordon and Carole Segal launched a startup that changed the way people shopped for home goods, and gave Chicago claim to another national retail trend setter. They opened the first store on Dec. 7, 1962.
The co-founders of Crate & Barrel faced the same tough decisions that challenge startups today: how quickly to grow and when to cede control. They chose to grow slowly, build on a unique concept and create a great place to work.
Their innovation was selling unique, stylish, quality home goods at lower prices. The then-newly married Segals took a gamble that Chicagoans would love a good deal on quality housewares as much as they did.
In an exclusive interview with the Sun-Times, the couple, both age 73, talked almost breathlessly, finishing one another’s sentences, when they described the birth of their business in 1962.
“We were young and idealistic, and we thought, ‘Why not?’ ” Carole said.
“We were very naïve,” Gordon said. “When you’re starting out, you have a lot of passion and energy with no wisdom. We understood only a little bit of what could happen.”
At the time, shoppers flocked to Marshall Field & Co., Carson Pirie Scott and other major department stores to buy mass-market housewares and sign up for bridal registries.
The newlywed couple had coveted fine items offered by department stores for their wedding registry, but the goods were too expensive for their families and friends.
On their honeymoon in St. Thomas, the Virgin Islands, they found durable, beautifully crafted dishes and flatware. The shop’s proprietor explained that he bought the goods directly from manufacturers in Europe.
Back home in Chicago, while washing those same dishes in their Prairie Shores apartment, they came up with the idea of traveling overseas to import the goods with the help of local trade ambassadors.
“We felt we had a big audience for classic designs at very modest prices,” Gordon said. “We thought, ‘There have to be other people with good taste and no money.’ ”
Carole, who grew up in Calumet City, and Gordon, who grew up in East Rogers Park and Evanston, knew something about retail.
Gordon’s father, a first-generation immigrant from Jerusalem, ran Segal’s Kosher Restaurant at Madison and Clark and later, at Clark and Lake.
Carole’s grandfather ran Green’s menswear in East Chicago, Ind., and her father’s cousins operated Maury’s Men’s Store and Kaplan’s Shoes in East Chicago.
The couple started with $10,000 of their own money and a $7,000 family loan for the venture.
“We couldn’t afford many of Chicago’s street addresses,” Gordon Segal said.
So they were careful to choose a site with an affordable lease: space in an old elevator factory at 1514 N. Wells St. in Old Town.
“We were on a limited budget so we used the barrels and the gorgeous white pine packing crates the cookware came in for displays,” Gordon recalled. “We bought crating lumber to hide the holes in the walls and drove nails into the rough-hewn side so we could hang all sorts of products without anyone seeing the nail holes.”
Carole Segal designed some of the glassware herself and gave her creations cute, funny names such as the “saucy apple” vase and the “roly poly” decanter. Both featured a beautiful green glass manufactured by Gullaskruf in Sweden. Back then, the Segals could order as few as 50 units for their small retail chain. Today, an order of red Christmas plates for the entire Crate & Barrel chain totals 10,000.
The Segals bought goods never before imported to America: Palma stainless steel flatware from Denmark, Wusthof cutlery from Germany, Marimekko textiles from Finland, mouth-blown stemware from Poland and specially designed stoneware from Holland.
“There was nothing like it in Chicago for many years, and nothing like it in the United States,” said longtime ad agency creative director Tom Shortlidge. He created Crate & Barrel’s early ads, packaging and black-and-white logo.
The Segals’ store displayed sophisticated products with “a very specific point of view about the products and the way they fit with people’s lifestyles.”
The Segals credit good timing as part of their success. Just as Americans were getting into the habits of eating TV dinners on plastic trays and taking out the good china twice a year, chefs James Beard and Julia Child were celebrating fine cooking, high-quality kitchenware and table settings.
“They raised the awareness of food preparation and better dining,” said Carole.
When the Segals decided to add furniture to their offerings, they did so with a unique twist.
“We made furniture shopping easy,” Carole said. “We would put five upholstered chairs on the floor so shoppers could pick, or do custom. You could walk in on Saturday and have the furniture on Wednesday.”
The store could do so because the Segals took the gamble to have the furniture already in inventory.
The Segals hired salespeople with outgoing personalities — teachers and actors — and trained them to be experts at explaining the difference between stoneware and earthenware, the quality level of 18/8 stainless steel and why a conscientious sauce maker would use a double boiler. Many who started as part-timers joined full time and stayed 30 to 40 years.
“We made it joyful,” Gordon said. “It was a collaborative method where everyone could participate in ideas and discussions. The bright young people who worked for us liked that.”
Former Crate & Barrel CEO Barbara Turf, who worked at the retailer for 44 years before leaving last spring, said the company had a “family culture” in which employees “watched out for each other” and stayed for decades.
The Segals, who met as undergraduates at Northwestern University, said they made their marriage work by appreciating each other’s skills and smarts.
Gordon credits Carole with having “great taste and a great pair of eyes.”
“She was always able to look at something and tell me if the stores or product looked good,” he said.
Carole smiles as she recalls Gordon’s Saturday morning “pep talks” to employees, telling them what a crucial role they played in the business’ success.
They lived frugally for 20 years, raising three children in modest surroundings and never aiming to strike it rich overnight. They describe their first 10 years in business as struggling, the next 10 as doing much better and the third 10 as choosing the right time to reap the fruits of their work.
They were turned off by newly minted MBA graduates who would have been happy to see them open 100 stores in five years. Carole called such hypergrowth a “Houdini” ideal that fails.
“We were more interested in being the best, not the biggest,” Gordon said. “We grew carefully and developed our staff internally.”
Their big break occurred in 1975, when they opened the first Michigan Avenue Crate & Barrel across from Water Tower Place.
“That put us on the map on a national basis,” Gordon said.
The industry changed, requiring Crate & Barrel to invest millions of dollars to expand stores, invest heavily in technology and build multi-million-dollar warehouses. Big manufacturers had replaced the small, European custom producers, and major competition in the marketplace had emerged. The need to grow their mail order and online business posed another challenge.
In 1998, the Segals sold a controlling stake to the Otto Group, a diversified German direct-marketing firm. They sold the rest of their interest in 2008 and their last remaining shares last year.
In 1998, the chain had 71 stores and $421 million in yearly revenues. Today, Crate & Barrel comprises 115 stores, 6,000 employees and $1.3 billion in yearly sales.
Carole said: “You’ve got to know when to hold ’em and know when to fold ’em.”