How I Built This with Guy Raz - Crate & Barrel: Gordon Segal

Episode Date: February 20, 2017

In 1962, Gordon Segal — with his wife Carole — opened a scrappy Chicago shop called Crate & Barrel. That store turned into a housewares empire that has shaped the way Americans furnish their homes. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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It had tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.com slash host. Every store we open between our opening in 62, our first built store in 65, our Plaza de Lago store in 68, our Oakburg store in 71. every time was betting the company.

Every time. Every time. And every time we knew if we failed, the company might go down. From NPR, it's how I built this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on today's show, the story of how Gordon Seagull and his wife Carol built the Houseware's Empire, crate, and barrel, from one little scrappy storefront in Chicago.

and how that single shop helped change the way we furnish our homes and apartments. So there's probably a good chance that you have a piece of like IKEA furniture somewhere in your house or apartment. And it probably looks pretty good, right? You know, nothing fancy but functional, well designed, kind of European-looking. And the main thing is, it's affordable. But back in 1961, if you wanted vaguely European-looking furniture or plates or whatever, In America, you had to be rich. And in 1961, Gordon Segal and his wife Carol were definitely not.

We got married in the summer of 61. Now, for our wedding gifts, we really didn't get any of the kinds of things we loved. We'd shopped at department stores and see beautiful Dansk designs and the new Danish look and whatever. And none of our relatives had the money or the taste to buy us those kind of wedding gifts. So you just figured we just can't afford that, so yeah, so we'll just move on. That's right. So we got married in, like I say, in June of 61, and we went on our honeymoon to the Caribbean. And in the Caribbean, we noticed there were some really nice stores.

There was one Scandinavian store in the Virgin Islands. My wife picked up some of the items and said, how can you have Danish 188 stainless at the 295 a place setting? You know, it's so much more expensive in America. And the Danish merchant there said, we have salesmen from Europe come here and we buy direct from factories. And the very essence of that common stuck in our minds as we bought a whole bunch of things, we got back to Chicago and I was in the real estate business. She was teaching school. We were both sort of bored. And then about in February of 62 one night I was washing dishes and I was these dishes we had bought.

I said, you know, Carol, there had to be other young people like ourselves with good taste and no money. We should open a store. And what did Carol say? Well, she looked at me sort of like I was crazy. I said, no, no, I mean it. We should open a store. And you were young. You guys were like, what, 20?

We were 23. And you just thought, you know, we bought these beautiful things, these plates and cookware, the store in the Caribbean. And if they can do it, why not sell it in the U.S.? Exactly. That's right. And what gave you the confidence that you could pull off running a business? Because, you know, we had grown up, her family had actually been in the retail business, apparel business, and we were both very good at selling. My family had been in the restaurant business.

And in all of those businesses, it's all about service. It's all about selling. And in a sense, my, you know, I grew up with an immigrant father and mother. And the whole family on busy days had to work in the restaurant. So there was this background that we both had and was we loved beautiful things. Obviously, the motivation of going into business was to find beautiful things for other young people. But if we could buy things from Europe directly and just mark them up normally as if you bought them domestically, not take a big margin, but take a short margin, we could offer dramatically better pricing at more unique product, you know, that people had never seen before. So, I mean, how did you even start?

We thought about it and visited trade commissioners and we found out all sorts of factory references. You went to trade commissioners? How did you find it? Well, the Danish government would have a trade commissioner in every major city. The Swedish government would. Wait, you went to like their offices in Chicago and you were like, hey, we want to open up this Danish shop and can we talk to you? That's right. That's exactly what we said.

Wow. And they had books about, you know, factories in Europe. that made specific items like glassware. And they referred us to some people we might want to visit and gave us names of factories. And then we started, you know, where are we going to find a retail space? And we were driving around looking for anything. And finally, it so happened. My father mentioned to us there was an area in Wells Street, North Wellstreet,

where there was an old dumb waiter factory that was actually moving. and I rented a space for three years for $350 a month. So at that point, I mean, after you visited these trade reps and you decide, okay, we're going to open a shop, how did you come up with the cash to do it? Did you have any, did you guys have any money? Well, we had saved, made a little money, we had some wedding gifts. So we had about $10,000. And we figured, well, we really need $20,000.

And I spent six months running around. to everyone I knew who had any wealth and offering them half to business for $10,000. There was no such thing as venture capital in those days. There was no such things as startups in those days. And I literally couldn't find anyone who'd invest $10,000. You could have bought half of crate and barrel for $10,000 in like 1963. That's right. At the end of the day, the only person who gave us the money was my father who lent us $7,000.

Probably all the money he had in cash. Wow. So you have 17,000, which of course, I'm assuming you need to like order stuff to sell in that store, right? So we needed $10,000 for inventory and we only had $7,000 to build the store. And consequently, we had to come up with a clever way and taking this dirty old elevator factory and turning it into a Scandinavian feeling place. and the walls wall torn up and damaged and we couldn't afford someone to sheet rocket. So we went out and found a lumber yard where we found crating lumber, which we knocked up vertically on the walls and covered the walls. And we literally did it ourselves. And how did you guys identify the stuff that you wanted to sell? I mean, did you just go through the catalogs?

That's right. Each factory, a glass factory, would have maybe an inch and a half, two-inch catalog or a ceramics factory or whatever. And we were just ordering from these catalogs and having them ship the stuff. Maybe we had four dinnerware patterns. We had a very narrow selection of merchandise. We only had $10,000. And what? You were just like getting these huge crates of stuff delivered, like shipped you in Chicago and you weren't even open yet?

Still not open. It opened the 7th of December of 1962. But we didn't get into the space till. like November 15th. We only had about three weeks. So you were like hammering boards to the wall. Hanging light fixtures, ordering a sign. Were you working all night? We worked from early in the morning to late every night. And we were just enthusiastic. I mean, the value of being very young is you have a lot of energy and passion and no wisdom. And so being that young was a great advantage. And we had no children.

We were 23. We had all the energy in the world. And because we had no money for fixtures, we basically turned over to packing crates. The merchandise was coming in. We came up with a way of stacking. We found some importer who had some more uniform crates. We had some big barrels full of China. And about two weeks before we were to open, we still didn't have a name.

And a friend of ours walked in and looked around. And I remember I was in the basement doing some paperwork, and my wife came down and said, our friends suggest we call this place barrel and crate. But Gordon, maybe we should call it crate and barrel. I think that's better. And approximately two weeks before we opened the store, we named the crate and barrel. So on opening day, what happened? How to go?

It was the opening weekend. And this area called Old Town had developed this over. a decade, this sort of week, the first week in December, they called it the Christmas Walk. And we opened that Friday of the Christmas Walk, and we'd forgot to buy a cash register. And so we actually used a cigar box. And it wasn't until the following Monday or Tuesday that actually my father found an old, old NCR cash register, the ones you used to have to crank up to open the amount. Was business pretty good, like right away? We had calculated that, We needed to do about $100,000 to take out $100 a week to live on.

And at first Christmas, we did $8,000. So you're thinking we're well on our way to a $100,000 year. Absolutely, because eight times 12 is 96. Yeah. But then January of 63 came along, and we did $4,000. We got a little scared. And then February of 63, I remember, was probably one of the snowiest months in Chicago's history. And we had one day where we did $8, and the whole month was only,

$2,000. Oh, man. So were you freaking out? We were very scared that we would lose my father's money in our savings. But you know what? When you're young, you know you could start over. Slowly that spring came around. Old Town became more popular. They put gas lights up on the street. And people said, boy, did you see that counterculture store down on a well street? They're selling nice things out of crates and barrels. And it was nice merchandise. And we had ended up because we didn't know how to price merchandise. About half the product we sold, we sold at cost. You were selling your product at cost?

Yeah. So not only were we importing it directly, the fact that we didn't know what we were doing and we were mispricing the merchandise also made it even more exciting. How did that happen? We had some major vendors who hadn't gotten us the proper invoicing. You were just guessing the price? We were guessing the price. And our customers loved it.

My best. Hey, stay with us. We're going to be back in just a minute with more from Gordon Segal and how he took Crate and Barrel National. I'm Guy Raz and you're listening to How I Built This from NPR. It's How I Built This from NPR. I'm Guy Raz. And on the show today, we're talking with Gordon Segal about how he and his wife, Carol, built the retailer, crate and barrel. So it seems that the business kind of took off pretty quickly, right? I mean, even though you had some tough months, it kind of took off. Well, the first year we did 100,000, that we did end up at the end of the year doing 100,000.

The second year, 200,000, the third year, 300,000. What was it like that in those early days that was making you guys successful? I mean, did you have to kind of create a market for this stuff? Or did people just come in and say, oh, this is cool. Let's buy it. Well, what happened was we were very fortunate. One, you know, America was then getting wealthier in the early 60s, 70s. Two, there was a lady named Julia Childs that came along and made cooking fashionable.

Three, jet travel was beginning, especially to Europe, and many more people were doing it. These events started all of a sudden making people aware of French cooking. And it was a big difference in the way, you know, they looked at dining and food was very important, chefs were important. America in those days, cooking was at sure. It wasn't something people loved. to do in dining and serving in a dinner table. You know, I remember in Chicago in the early 60s, we had maybe three good restaurants. Boston, I remember Craig Claiborne was once asked when he was up in Boston. He was the food critic for the New York Times. Yeah, for the New York Times.

Where do you go when you want a good meal? He says, I go to the airport and I get on the first flight to New York. So, you know, it's hard to believe that today because Boston and Chicago got great restaurants because people now, there's a major food culture and dining culture. And that didn't exist when we were starting. And did you, because I think I read that at a certain point, you and Carol decided that instead of like just ordering from catalogs that you should actually go to Europe and visit factories. That's right. The first year were in 1963, our first full year in business, we didn't have time to go to Europe. But 1964, we went to Europe for three weeks. By then we had two or three staff members and we left the company to them. And we went and

we traveled all over Europe. We started in Belgium and found a great glass factory. We went to the German trade fairs in Cologne and Frankfurt and found all sorts of interesting products. It was incredible. Nothing like that existed in the United States. We spent a lot of time walking to streets and seeing special stores and looking at stores and seeing what were they doing in Europe. Why were we so excited? What was it? It was the visual display. It was the way to use color.

It was the way they did the storefront. It was the way they did their lighting. And we became students of retail. And Carol, by the way, the company never would have succeeded without her efforts. She was not only talented in helping select product, but she was very talented at visual display. And we were both very good at selling. So when you were in Europe, were there any, like, were there moments?

Because you were like in your mid-20s. Did you ever have situations where these factory owners looked at you and said, well, you guys are, who are you know, right? There were many people had doubts, but, you know, we had letters of credit. We had ability to buy. We found us an agent in Sweden who knew a lot of people who helped us introduce us to factories. And I don't, you know, they believed in us. Or we met Torben Orskov in Copenhagen who introduced us to Marimeko.

and introduced to us a lot of Danish factories. And he sold us beautiful product also, wooden things and textiles and leather goods. And this guy influenced our lives. He and his wife, we remained friends for the next 50 years. So how did you guys start to, like, really grow the business? Because you didn't have outside investors at this point, right? We never had outside investors until, you know, many years later. So how are you guys able to expand without any outside money?

Well, we basically, in those days, you'd go to a bank and you'd borrow money. I remember the first loan was $10,000. The second loan was $25,000. When we opened the store in 65 through 68, we still had only one store. We were doing $500,000, which today is like a little store doing $2 million. So it was profitable by then. So when you guys decided to open that second store, this was 1968, is that right? Right.

So then you got a bank loan. And in a way, you were, I mean, I guess you were betting the company, right? Because you, I mean, with that leverage, if the second store failed, the whole thing would go under. Every store we opened between our opening in 62, our first built store in 65, our Plaza de Lago store in 68, our Oak Brook store in 71, every time was betting the company. Every time. Every time. And every time we knew if we failed, the company might go down. And then in 1975, we got the opportunity to open our first Michigan Avenue store.

And if we failed here, that would certainly, we had to invest a lot of money, take a big risk. But that store opened in 1975. And after three months, we knew it was very successful. And from then on, the pressure was a lot less. Then it wasn't betting a company because by then, you know, we were doing enough volume and creating enough profits. But we didn't want partners. We didn't want investors. Why not?

Well, because we felt they would have different motivation. We love being merchants. We love talking to customers, loved inspiring staff, and we love searching for the product. Our goal wasn't to build a chain store. Our goal was to find the best merchandise at the best price that would excite our customers and excite our staff about what we were doing. So I was reading about the expansion of the company, and I guess it took like 25 years for you guys to go from one store to 17 stores, which was in 1985.

Correct. But then by like 1995, you had expanded to 60 stores. So what happened? How did you guys, why did you decide to grow so much faster? Well, we reached a different error where it was important to have scale to do the things we had to do with buying merchandise. So you had a guarantee to a factory you'd buy a certain amount of a product to make sure we were the only people in this, States that would be carrying it. And you got a sense that you needed scale to get there.

And that's what we started doing. In 1990, we built a flagship store in Chicago, which really helped launch our expansion because then every landlord, every shopping mall, wanted a crate and barrel building. And we were a big attraction because we drew in a lot of customers. And what happened starting in that big expansion was landlord started paying for a lot of the build out of the store, the building of the building and whatever. So we didn't have to take as much of our financial risk ourselves because the landlords built these stores, a lot of these stores for us. So it sounds like things were going pretty well for you without having any

outside investors. So what made you decide to eventually bring in outside money? Like, what was your thinking when you made that decision? I had thought by the time I was 65, I was then about 60. I said, I'd probably want to retire. And some intelligent guy had said, you know, if you're going to, you know, sell your business, do it five years before you retire. So you can help the transition and whatever. And I own the responsibility to both my family and to my staff to make sure the company was well financed and could take risks and could go through trauma and survive. And I also realized that at that time, the company was relative.

very strong at retail, but relatively weak in direct marketing, which at those days was catalogs. Catalogs, yeah. And we actually spent a year and a half looking around the world for a partner. And we finally found the auto group in Hamburg, Germany. And they were the second largest mail order company in Europe. And today, after Amazon, they're the biggest internet company in the world. And in 98, we sold them about two-third-third-year-old. of the company. And 10 years later, and the contract was for 10 years, we sold them the rest of the

third. So in 98, you agreed to stay on for a fixed amount of time and to continue to run the company? Exactly. And their basic philosophy was to acquire businesses like ours and let the management continue running it. And our success was we tripled the size at a company. We contripled the profits at a company. And we were able to grow. but more important, they, after we were with them a year or two, they said, you got to really look into this internet. This was, what was it, 99, 2000? We said, what's the internet?

And then they started telling us. And early on, then we started developing our internet business, which today represents about 38% of all the sales at Creighton Barrow. And customers buy an enormous amount of furniture on the internet, which is hard for me to, you know, believe. So when you had to step down, was that hard for you? Like this thing that you built? Well, of course it's hard.

You know, I didn't realize I'd have that much energy left at 70, but I had enormous energy. But in the last two, three years, I've been doing things in our family office of finding new young entrepreneurs we could support. And when I advise young people today, I said, look at the job and say, are you going to love it? And is it going to be something you can devote your life to and work 10, 12 hours a day? and work six, seven days a week. I mean, then you'll be a success, but don't go to do something because of a salary or a title. And I think that's the thing we picked up from the European friends of ours who, you know, have a different pace of life and a different focus.

And, you know, that's how it should be. It shouldn't be, I want to make a lot of money. How do I do it? It's what do I love to do? And if I do it really good, then we will make money. How much of your success do you attribute to just your talent and your smarts and your hard work? And how much do you attribute to luck? Well, the lucky part was our timing.

It was just that the appropriate time to be going to Europe to find new contemporary design and tabletop and furniture and things. I think it was a talent of attracting people and making them feel like we were all in it together that I didn't realize I had. nor did I realize I was good at for many, many years, but I was. And I think that had a lot to do with it. I was lucky to be married to Carol Siegel, who had this enormous talent. And, you know, we started out to create something that was going to be different and beautiful and wonderful. This is still in the culture, the company in great depth. And they're still doing very well.

You know, could you ever have imagined, like when you opened up this thing in Chicago in a disused elevator factory with boards that you hammered under the walls, that this company would be doing sales of, what are Crane Barrel's numbers today? It's about $1.2 billion a year. And we went from one employee and out of $7,000. Could you ever have imagined that? Never, ever. We didn't have a plan.

We had no ambition to do that. We just had ambition to love what we were doing. I still have, from when I graduated college, I moved to my first apartment, my mom bought me a set of flat white crate and barrel dinner plates. They were made in Japan at the time. I still have them, still served dinner on them. Well, that's our problem. You replace cars every two, three years. You have dinnerware for 20 years. People tell me they have product they bought in the 60s and 70s, and I win, you know. Gordon Siegel officially stepped down as CEO of Creighton Beryl in 2008. But two years ago, the company actually brought him back to help out during kind of a run.

patch. Gordon stayed for a year, things became more stable. Now he's doing mainly philanthropic work in and around Chicago. Oh, and in a few months, Gordon and Carol will celebrate 56 years of marriage. Please don't turn us off just yet in a moment. We're going to hear from you about the things you guys are building. Hey, thanks for sticking around because now it's time for how you built that. And here's the story we got from Alec Avedesian, who kind of stumbled on his idea a few years ago when he was just out of college. He was working and surfing in a fishing village in El Salvador. And one of my friends that was living in the community actually showed me the roofing on one of the homes. It was colorful and bright. And so it made us just look at it again and be like, wait,

I think that's a billboard. And it was. The roof was made from part of a billboard that you'd see on the side of any road. And Alec remembers thinking, how could that work? I mean, billboards are just paper, right? That that roof is going to fall apart in a day. But then he started to do a little research. And I was like, wow, I didn't know that billboards were made of PVC, so it's a heavy-duty vinyl material. So they're actually UV-protected, waterproof. So then I started realizing, well, hey, if they're using these as roofing and they're durable enough to last and to keep the water out, then they could definitely turn into some sort of product. Alec figured all of that bright, heavy vinyl could be made into really strong duffel bags and

backpacks and things like that. So after he left El Salvador and moved to Southern California, he started to make a few calls. I didn't know anything about billboard companies, but I just started calling and once I told them, hey, I think I can save you guys some money. Can I have a few of them? They said, yeah, sure. It turns out the ad companies were happy because they didn't have to pay to dump the vinyl in a landfill and Alec was happy because it didn't cost a lot to get the stuff, pretty much the cost of shipping. And when he had his very first, first sheet of vinyl to cut up, he designed something he actually knows something about, a carry bag for his surfboard.

I figured a surf bag is like a pancake. There's just only two sides to it, so it'd be the easiest thing to make. Let's start with that. But it took him a while to figure out how to actually get it made. So my first bag I took to a car upholstery manufacturer, because I didn't know anybody that did sewing. And that first bag actually looked good enough for Alec to want to make more. So fast forward a couple months, and Alex starts selling these surf bags in sports.

sports shops around L.A. And then he starts to branch out into other products like backpacks and phone covers. From one billboard, we can get upwards of 150 backpacks and probably around 1,000 phone covers at least. And almost every one of their products is unique. Different shapes, different splashes of color, because each item is cut from a different part of a giant highway advertisement. You name it, Virgin Airlines, Alaskan Airlines, Gucci, Pepsi. The vinyl from the billboards is washed and cut at a warehouse in LA County, and Alec eventually found a factory in Mexico that does all the sewing. Any billboard that you've ever seen, we've turned it into product.

The bags and phone covers are now in about 300 small retailers across the U.S., and the company just started to turn a profit. But, you know, we're not there yet where I'm like, oh, this thing was a sure success. This thing is definitely still a hustle and a grind, but that's also the fun piece about it. You know, we love coming up with new marketing and finding ways to really tell the story. That's Alec Evadisian. He and his younger brother, Eric, own the company Rareform. That's Rareform.com in L.A. County, California.

And please keep sending us your stories. We love reading about them and sharing them. You can tell us all about what you're building by visiting build.n.npr.org. That's build with ad.npr.org. And thanks for listening to the show this week. You can write us directly at hibt at npr.org. You can also follow us on Twitter. It's at How I Built This.

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