How I Built This with Guy Raz - The Container Store: Kip and Sharon Tindell

Episode Date: December 23, 2024

When Kip Tindell co-founded The Container Store in 1978, people laughed at him for wanting to sell empty boxes. But Kip and his partners had identified a clear problem—the tyranny of household clutter—and a new category of solutions: metal crates, stackable wicker baskets, sleek lucite canisters. The Container Store’s promise of affordable organization made it an instant hit, and Kip’s wife Sharon soon joined the partnership. Decades later, as online shopping took off, the business faltered; and in 2013, when The Container Store went public, Kip and Sharon came to regret it.This episode was produced by J.C. Howard, with music by Ramtin ArabloueiEdited by Neva Grant, with research help from Sam Paulson.You can follow HIBT on Twitter & Instagram, and email us at [e-mail] 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. July 1st, 1978, the first container store, I guess, is opened. Do you remember people walking into the store in those early days saying,

you're charging for empty boxes? Yeah, a lot of people said that. My father had a birthday party and I was the bartender. And they're like, son, you're going to open a store selling empty boxes. You know, that's going to be really hard, you know. And it was humiliating. And boy, trying to explain it before we actually put the products on the shelves and open the store was embarrassing. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movement.

they built. I'm Guy Raz, and on the show today, how Kip and Sharon Tindall turned empty boxes into a full-on business with the container store, a chain that helped people put their stuff in the right place. Back behind most grocery stores, you will find loading docks, giant dumpsters, pallets of stuff, and, well, of course, rats. And before, say, the year 1980, if you wanted to pack of... your house and move, you would most likely go to this very location behind the supermarket

and grab as many cardboard boxes as you could get. And why would you do that? Because surprisingly, it wasn't that easy for ordinary consumers to just buy flat cardboard boxes. And say you wanted to arrange your spices in an organized way, well, there were practically no off-the-shelf solutions. In fact, if you wanted to organize almost anything in your house, you'd have to make the compartments and the shelves and the containers yourself, which seems weird, right? Like, why wouldn't there be a solution for that? Well, this is what a guy named Kip Tyndall also wondered.

Kip and his friend Garrett Boone were met with a lot of skepticism when they told people that they thought there was an opportunity here, a store even. A shop that sells cardboard boxes? Who's going to pay money for that? Seems like a pretty reasonable question to ask in 1978. That was the year Kip and Garrett opened up their shop in Dallas. They called it the container store, and basically they sold things that weren't available to regular people. Things like milk bottle crates, wire drawers, plastic burger baskets,

and, of course, flat cardboard boxes. And I don't think anyone listening will be surprised to hear that the idea was a hit. The citizens of Dallas flocked to the store. And the container store began a slow and methodical march across America over the next 30 years. Now, the story we are about to tell is amazing and super inspiring, but we are telling it at a slightly awkward time. So let me address the elephant here, if you are not aware.

The container store is, at least for the time being, on a path to bankruptcy. something that was reported after we did this interview. And there are many reasons why, and we'll address some of them. It's important to note that Kip Tyndall and his wife Sharon, who is also a co-founder and who you will also hear in today's story, are no longer involved with the company. In fact, they've been out of the picture for several years. But what they tapped into and what they built

had a pretty significant impact on a whole new, multi-billion-dollar category, loosely called Home Or. organization. Kip and Sharon met in their early 20s. Kip grew up in Texas and Sharon in Louisiana. And for college, Sharon ended up at Louisiana State University in Baton Rouge. I kind of aspired to be an art student. Although my father, he wanted me to become either a teacher or a nurse, something practical. So I went to LSU and I majored in landscape architecture. And while I was in LSU, I took a lot of design courses. Another thing that really influenced me was that people are the product of their environment.

That really resonated with me later on. How did you and Kip Meek? Obviously, you're married today. How did that happen? So I had a summer internship in Austin, Texas. And it was at the Parks and Recreation Department. Actually, Kip can tell this story better than I can because I'm a little bit worse. Yeah, I lived in this wonderful house just off campus, a duplex with some friends and my wonderful

backyard. I think my landlord finally got tired of all the property tax he was paying on the big backyards. So he built a fourplex apartment complex back there, and he announced that I would be the apartment manager. I would help him lease it and take care of it and all of that. He was going to give me $5 a month off my rent. I thought, well, that's ridiculous. Five dollars to, but anyway, my first tenant was Sharon Tyndall.

You know, this landscape architecture student from LSU. You know, my whole family's from New Orleans. That was interesting to me. It was fascinating. I had my future wife living in my backyard. Wasn't really love at first sight. We just got to know each other over the summer. And by the time it was time for her to go back to LSU,

we started going out on dates. Wow. So, all right. So, Kip, from what I understand, you were a long-term student. You were searching and, but probably there was a reason why it took so long for you to partially get through school. Well, I mean, you know, who wants to leave Austin? Yeah. Austin was, I loved it.

So I majored in English. And, you know, I was cramming a four-year program into, you know, seven years, basically. I love that. Cramming four years into seven. I never actually graduated, never actually got my undergraduate degree. I think I'm lacking six hours in mass science. And one of my college roommates, my wacky friend John Mackie, the founder of a Whole Foods, who's been on this show.

He was a college roommate of yours. Oh, yeah. You know, housemate, we shared that house. And he was, I just thought he was the most interesting kid in Austin, and he still is. He's an interesting dude, for sure, yeah. We live there forever together. He never graduated either. And we didn't mind that.

We were almost kind of proud of it. We took the courses we wanted to take, and it didn't particularly bother us that we didn't get that degree. Right. There's a little bit of a backstory, which is. It's sort of we'll go back, but also forward, which is you had a high school friend named Garrett, right, Garrett Boone. And you and Garrett work together at Montgomery Ward in the paint department. This is important because you would eventually start a business together. Because did that happen already in high school?

Yeah. You know, Garrett and I both worked retail all over our lives. I started actually at a Sherwin-Williams paint store at 15. And Garrett Boone had a master's job. degree in history from Rice and he didn't want to teach. And so what do you do with a master's in history from Rice? Well, he's a paint department manager at Montgomery Wards. And I was a high school kid working part-time at Montgomery Wards and he's 10 years older than me and learned a lot from him. And we really, but we made that paint department

at Montgomery Wards the best department in the whole store. We won all the awards. We would hit the sales numbers. We would get the display numbers. We just You know, we loved it. And we started even then talking about doing our own, opening our own retail stores someday. Okay. So, you meet Garrett. And when you're working at Montgomery Ward in high school, he's already out of college in the paint department. And you stay in touch and continue to talk about maybe starting a store together. Tell me about the conversations you were having. Well, you know, Garrett and I were very good friends. And Sharon was this, this girl that was designing. They designed a park for the city of Austin. I thought that was pretty awesome. And so I was just not working very hard in school.

I didn't have to work. Kip, you were working at Storehouse, too. Yeah. And Storehouse, we should mention, I don't think it exists anymore. Maybe there's a brand of it that exists. But it basically was a furniture store that sold these sort of block furniture. Contemporary furniture. Contemporary furniture.

Bentwood chairs, butcher block. Very innovative thing. And they paid me, I don't know, four or $500 a month, which was, you know, for a student and those, I felt like a millionaire, you know, I mean, I had $400 a month to live on. And so Garrett had been working for storehouse. I'm looking it up now and I see the storehouse went out of business in 2006. And he was sort of opening stores and he tapped you to help him open a store in Austin. Yeah. You know, that was more fun than running the paint department, right? And so what that led to, Guy, was at first, we were thinking that maybe we were going to open a really cool handmade furniture store. Yeah.

And we pursued that for a while. But the problem with furniture stores is that they're boring. There's no traffic and you can hear the drone of the air conditioner. You know, there's no people. There's no air of excitement. So that steered us away from furniture into housewares. And tell me how that idea kind of. started to evolve. How did you come? I mean, this is the late 70s. It's a weird idea back then.

Very weird idea. I mean, you know, we had my father's friends that were like, you guys are to open a store that sells what? Empty boxes? And, you know, but these were functional, clean, simple designs that did something for you. They saved you space. They organized you. They saved you space. But ultimately, they saved you time. You know, you have no choice but to be reasonably well organized in today's world. And that was kind of a tailwind that we had. Can you imagine how great a pantry looks when everything in the pantry is clear rather than opaque?

And you can see the almonds in that jar and you can see. Yeah. You know, when I was at the University of Texas, I couldn't study for an exam until I had the apartment completely clean and organized and kind of a zen, you know, then I could sit down and study when everything is in its place, I think your mind works better. I think I think life's a lot better with a little bit of organization. I agree. I have a sign in my office says everything in its right place. Of course, it's quoting Radiohead, but I agree. I hear you. If you're trying to get two or three kids ready for school in the morning and you're disorganized

and they're disorganized, it's a disaster. People are late. People are crying. But if you're organized, everything is going beautifully. There's a love note for mom and the lunchbox and the little girl's uniform is pressed perfectly. I mean, there's a, there's a Zen quality of life to being well organized. It's not saving lives. Lots of businesses are doing things a lot more noble than that, but I think that people are calmer, happier when they experience the joy of being reasonably well organized. And so you guys are talking about, to this idea, which I think is a great idea, It comes to, you and Garrett start to talk about it. But now you've got to figure out there's a lot of things you need to solve when you're going to start a business, right?

First of all, you need the capital to open a shop and to get a lease. Second, you need the capital to bring an inventory. And then you need the inventory. Let's just talk about, this is the late 70s. I'm thinking there aren't, this is a whole industry of companies that are making storage containers. Like maybe, I don't know, maybe there's Tupperware. There is Tupperware. Maybe there's like plastic bins for the garage. No. No.

What existed in the late 70s for storage? I would like to just first of all mention in the beginning when they were researching products, there were no plastic storage boxes as we know them today. There were no corrugated boxes for sale, as we know. No corrugated boxes for sale? No. You couldn't just buy a box if you were a regular store. civilian human?

No. Wow. That's un-American. If you wanted to store something in your attic, you would probably have to go behind a store to find an old-use shipping box to put your things in. That had dead lettuce in it. Right. That's wild.

And also, the idea of plastic in an unbreakable form had really not been invented yet. So most plastic boxes were very, very small like Tupperware. But in terms of a large plastic box, it was unbreakable that resin had not really been developed yet. So you saw that kind of plastic that would crack. Right, exactly. Right. Shatter upon impact. Wow.

Okay. So then a lot of people stored things in trunks. Oh, like big, those big trunks that used like those little steamer trunks. Yeah. Right, exactly. Footlocker. Footlocker. That my kids bring to camp every summer.

Yeah. Exactly. Yep. And then also think about the age, this is not the digital age. So we had lots of videos and LPs and cassette tapes and photos. I'm embarrassed to say. I still pay a bunch of money every month for the storage of them. So first of all, let's talk about how you would solve this problem.

if nobody was making this stuff, what were you going to sell in your store? Commercial products, industrial products. We became distributors for so many of the things we wound up selling in the initial store because nobody had ever retailed them before. Kip, you should talk about the Thomas Register. Well, the products drove the concept. We wrote to hundreds of thousands of different manufacturers from a set of books called Thomas Registry. It's a list of every manufacturer.

And these, what kind of products were these? These were furniture products. Furniture and housewares. Right. Where it evolved was what in businesses considered material parts in handling. Businesses were interested in saving time and space, but nobody had ever thought about saving time and space for consumers. You know, to organize your kitchen, to organize your closet. There were no products to do that.

So the products that we started with were all commercial. commercial and industrial in nature. And I would say 90% of them had never been retailed before. And we were thrilled by that. It was a completely original idea. But when you contacted these companies that made things for, you know, manufacturers and wholesalers and you said, hey, we want to sell this to consumers. Because I'm assuming that, you know, we're talking about what, cardboard boxes. We're talking about plastic tubs. Did any of them, I'm imagining, some of them were like, Consumers, why would consumers want this? Yeah, they all were like that.

And I'd say about half of them really wanted their products to be sold on the retail level to consumers because they love their products. And nobody had any earthly idea what they did when they went to work every day. And this would give exposure to their beloved products. The other half of them were very worried about litigation and consumers hurting themselves on it. So it was difficult to convince them to. sell to us because, you know, it had just never been done before. So it was a matter of comforting. I mean, you know, we'd contact them a half dozen times before we'd finally get them to

agree to sell to us. We're trying to buy from them. But then, you know, their experimentation was rewarded because we, in most cases, wound up being one of their biggest customers. Yeah, I mean, today, of course, it's different because consumers can get anything they want. But it's almost as if, like, I would go to a plastics company and I would just to say, hey, listen, we want to buy, you know, 500-gallon bags of plastic pellets to sell in our store. And they would say, well, we don't do that.

We sell plastic pellets to plastic manufacturers. And I would say, well, but consumers want to buy this. They want to make their own. It was probably that weird. What, Kip, do you remember, I mean, we mentioned cardboard boxes. Do you remember what other products you were trying to to maybe see if you could sell, like if you could put it in the shelves at that time? Sure, you know, I mean, wire baskets that were used in the poultry business for egg collections or gardening, glass jars and bottles that were used for manufacturers to put their salsa in. And we also had to teach these manufacturers how to sell to a retailer.

It's like, oh, we're not going to just buy one time from you. We're going to be buying every month or six weeks from you. So you need to give us this price, not the one-time price. It was leading them by the hand, and they were scared. And so it was really relationship building, which was very instructive later on in life when we were competing against the mass merchants, you know, trying to have relationships with manufacturers. A lot of those items that we had to buy the bases and the tops separately. So we had to create our own manufacturing off-site to create the products. For instance, we would have to buy a jar and a lid in separate quantities.

and we have to put them together to create a product. But we didn't have any money. It was a very small capitalized company. $35,000 was all we had to start with. So we would order a dozen from somebody that was used to selling thousands to a big manufacturing thing. But that again is where the relationship with the manufacturers took over. They began to believe in us, try to help us succeed.

And they were proud of seeing their products in a reach. store. Right. That would come later after you open the store, but you're still trying to source the stuff for the store. Okay. Now you had to find a location. And I would think that your first store would have been in Austin because you say you loved it there and then you went to school there and you met Sharon there. But I guess by this time, the two of you had moved to Dallas and then you wound up opening your first store there. I'm curious about you went to school in Austin and you knew Austin. Well, John Mackie was your how. made at one point started Whole Foods in Austin. Did you ever think about opening up initially in Austin?

No. We opened right here in Dallas where we lived right actually in the neighborhood that we lived. And we weren't actually sure we ever wanted a second location. So the first couple of locations or so were in Dallas and then the first out-of-town location was Austin. How did you have still need capital to do this? You couldn't do with no money down. How did you raise the capital? to lease a store and bring in the inventory? Well, we started with $35,000. Which in what, which in 1978 is not a small amount of cash. Yeah, well, it's certainly not a very, very big amount of cash. No, no. I, you know, put in $5,000.

Garrett put in $10,000, his parents put in $10,000. And then Garrett's friend, John Mullen, an architect in Dallas, put in $10,000. So we had $35,000, which was really undercapitalized, but there was no borrowing. You had to make it. If it wasn't going to work, the $35,000 had to work. We guarded that $35,000 like you wouldn't believe, yeah. All right. So you guys raise this small amount of cash and you identify a location.

I think it's in North Dallas. And before you open the store, you had to come up with a name, right? Great name, simple name, very clear. Was it as simple as I just described? You guys are like containers, container store? We had hundreds of names written down. Boone's Box Company. Garrett like that, Boone's Box Company.

Because Garrett Boone, yeah. Yeah, and hundreds of names, one of those names was the container store. And as we finalized the product mix, the container store made the most sense. there was some pushback on it because some people were saying, well, that sounds a little arrogant, the container store. And I was like, no, it's perfect because, I mean, there's no other container stores. We are the container store. There's no arrogance in that.

You know, we're the only one. So we're the container store. And that's what fit the product mix. And it was open-ended, right? So I heard, maybe this is apocryphal. I heard the story that the name was suggested. by a guy named Bob Wilson. Is that true?

Yes. He suggested probably 50 or 75 names. This was one of those. He was a good friend of John Mullins, the father of his famous sons. Owen and Luke Wilson. Owen and Luke Wilson's dad named the container store. That's right. That's right.

This is like the Forrest Gump episode of how I built this. Everyone's making a cameo appearance. Well, I tell you, we had so much friends. and families support at the beginning. We had no money. We had no experience. You had an English major, a history major, a landscape architect, and an architect in John Mullen, you know, trying to create this thing. And we needed every bit of help and advice we could get from friends and family. We didn't really get the store ready to open until about 30 minutes the morning we opened it. And we had 30 or 40 family members in there working all night to get everything

set up. So, yeah, thank goodness for that name. I think it turned out to be a great name. And I think naming a business is an amazing experience. Yeah. All right. So July 1st, 1978, the first container store, I guess, is opened. And were there any, was it, did you remember people walking into the store in this early day saying, you're charging for empty boxes? Yeah. A lot of people said that. My father had a birthday party, and I was the bartender and all these Texas oil men who were very distinctly not our target customer. These guys were the opposite of our target customer. They're like, son, you're going to open a store selling empty boxes? You know, that's going to be really hard, you know.

And it was, boy, trying to explain it before we actually put the products on the shelves and open the store was embarrassing. When we come back in just a moment, how Kippen's share. Sharon recover from that embarrassment why they eventually decide to take the container store public and why they wind up regretting it. Stay with us. I'm Guy Raz and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1978 and Sharon and Kip have just opened the first container store in North Dallas. And just like they said earlier, it has all the things you wouldn't find in a typical retail store. Popcorn tins, milk, and crates, wire baskets, all of it repurposed for storage.

The store was fully conceptual. You know, Garrett sourced the shelving, which was actually the fixtures that all the products were sitting on. So, and the shopping baskets were also for sale. Oh, wow. So we could literally sell the entire store all the way down to the fixtures if we wanted to. That's genius. It's like the ice cream cone because you're selling the vehicle. the container that ice cream is being served on and you're just eating it.

So I'm looking at a picture right now. It's a picture of Garrett and Kip in that original container store. And it looks not slapped together, but it looks very bare, right? Which is what it should have been. Did it take off right away? Were people, I mean, was it, did you, were you making sales right away? Or was it slow going? What do you remember about the summer of 19?

Well, the first day was comprised mostly of friends and family buying stuff out of heartfelt generosity. Yeah. Garrett's sister bought like a, I think a $500 item, a big trunk of some kind or something. And so we weren't very busy. But sometime during the first week, we had a crude little direct mail mailer go out to parents of the Hockaday School, which is a private school. right down the street from where we opened, and the Dallas 500 Club was 500 leading contributors to the arts. You know, a couple of very good mailing lists.

And it drove curiosity. They left amazed and chuckling and happy and they bought all kinds of things. And the word of mouth took over. And I would say by the second week or something, it was almost scary how crowded our 1600 square foot store is we missed the entrepreneurial terror of wondering. if we were going to make it. Well, we worried a lot the first two, three, four days. But by the second week, we were thinking about giving numbers to let people in the door because the word, you know, word of mouth is it. That's what, that's what human beings do. So I want to, I want to

stay in 1978, 79 timeframe because I know that you got married in 1979. You became husband and wife. And Sharon, you had a career. You were trained as an architect. You had a landscape architect. And You had a budding career, but I guess you started to do some kind of informal consulting for the container store very early on, and within the first several months, which would eventually lead to becoming an executive there. But how did that, how did you go from doing some consulting work to just saying, you know what, I'm going to work, I'm going to be part of this full time? Well, I'm not sure I would call that consulting, but. You were just pitching in. Yes, I was pitching in. I'm using a fancy term like, oh, I had a.

consulting contract. You were literally, it's like the nights and weekends, you were like, yeah, sure, I'll make a sign. Right. I made signs. I helped count the money. I worked behind the registers. Gosh, the store was just all-consuming for KIP, day and night. And I felt that the more time I spent with him working at the store, the more time we had for each other. And probably the less time we had to talk about business, which was great, then we had more free time to enjoy each other. So, Part of it was just enjoying each other. Yeah. But Sharon was working as a landscape architect,

and really the business became so overwhelming. We really needed somebody else whose heart and mind was in the right place. Garrett and I probably thought we were about as good a merchants as there was anywhere, but we've quickly discovered that Sharon could run circles around us when it came to that. Sharon, you, if I'm not mistaken, you were really interested in product in identifying and sourcing interesting products to stock the shelves. Absolutely. The products, to begin with, were very, very innovative, but they weren't as relatable as I thought that maybe they could have been. There were some really out there products.

And I think that's really what created the buzz in energy in the store itself. You know, customers were interested, but they were a little bit. confused, you know, like we were trying to sell mailboxes for bread boxes. They were trying to sell towel bars for tie racks. A wire leaf barrel that was made to burn leaves in. We were selling that for toy storage around the, to keep the soccer balls and basketballs or pool supplies in. You know, everything works. Yeah. But, you know, I think at the end of the day, there needed to be a little bit more focus and strategy to pull everything together and to make sure the customers really understand that we were selling solutions, not items.

You know, it's just that's where I came in. And I guess because of the interest in the store, it was unusual, you had to expand because 1600 square feet is small, especially given that you were selling storage supplies. how are you financing the growth of the store? Because within a year or two, you would have another store in Dallas and then, you know, growing store by store. Was it all just cash flow from the business was financing the next location? Yeah. You know, it's an alien concept, I guess, to the way businesses are developed today. But there's a patience involved to where that's all the money you have. We didn't really want to borrow money, even from the bank. We certainly didn't want to, you know, raise capital and add new investors, and we didn't do that for many decades. We generated a lot of earnings, and then we put that money back in the business. We just incrementally grew, totally financed by the earnings of the business.

We were much more interested in growing the business than we were taking money out and buying a new car for ourselves or something. And we paid each other, we paid each other $700 a month for a long, long time. And then we went to $1,000 a month. We didn't spend money on anything except growing the business. And so that went on for many, many years like that. It never even occurred to us to raise capital by having other equity owners come in. And we were afraid to borrow money from the bank. Why were you afraid to borrow money for the bank?

We didn't want the bankers involved with the business. It seemed like a lack of control over what we were doing. we figured out that we could grow about 20% per year safely and securely without the RPM needle getting into the red without screwing everything up. Wow. Faster than that was a little frightening. And there was enough money for us to grow at 20% a year. 20% of year sounds pretty slow now. In those days, it was really considered fast, you know, particularly for retail.

That'll get you free cash flow enough to expand your business as rapidly as we wanted to almost. So the stores are expanding initially in Texas. Let's talk a little bit about the two of you and how you sort of work together. What were your, I know that Kip, you would eventually become CEO, but initially you're C-O-O. And from your perspective, I mean, you know, a lot of people I've interviewed have said, I'll never work with my partner or my spouse, never, just would never work with total opposites. Obviously, we've had married couples on. the show, I shouldn't say, obviously, we've had lots. But there are plenty of people who have said, no, no, there's just no way we could work together. So I don't think there's a, you know, hard and fast rule about this, but why do you think you guys were able to make this work? Sharon was, she's, in my opinion, she's the greatest person I've ever known. I think she's smarter than I am. I just felt privileged to be able to partner with her. I think a lot of it has to do with having that kind of respect for one another. We're well aware of what the other

does better than the other. And Sharon clearly could do the product selection, product creation, merchandising at a level that even our mentors like Stanley Marcus admired in love. So I wouldn't dare try to tell her how to do that. We gave each other a lot of leeway. I may have been the CEO, but I certainly didn't feel like her boss. In fact, I joked to friends. friends that when Sharon and I disagree, which is not that often, but when we do, I usually find out two years later that she was right. Well, it certainly wasn't lost on me that our products weren't going to sell themselves. So we were highly, highly dependent on the training of our salespeople and also just the

inspiration that they got from Kip and Garrett inspiring the salespeople that being a salesperson was really a noble profession. And they really, really empowered our salespeople to feel good about training and selling the product. And we extended this to working with friends, hiring friends. We didn't have an HR department. We asked our employees to bring us their best cousins and best friends. You know who your good cousins are and who your bad cousins are

and who you want to work with. And so work with the people you love. You mentioned briefly one of your mentors, Stanley Marcus, and he, of course, people may or may not know him. He was the guy who kind of turned Neiman Marcus into what it was, wrote a bunch of books on retail. How did he become a mentor to you? Well, you know, we grew up in Dallas. I think we had met him once or twice, but we didn't know him. He walked into the store the first week or two we were open.

and he walked in and he said, you know, this is the greatest retail store I've ever been in. Wow. And I was like, from that guy who was a legend. What? You know, the mighty Stanley Marcus thinks that what we're doing is worthwhile. What are you talking about? He said, no, I've never seen a retail store that, and I said, well, you know, I mean, gosh, what about your retail? You know, he loved it.

And he was so generous with his time and praise. and we were so early on, first month, you know, and then he wanted to be involved with it. He wanted to mentor us. Did he want anything in return, like to invest or anything like that? No, no. He offered to be on the board many years later, but he might as well have been a board member all along because he was so helpful. But, you know, Stanley Marcus lived into his mid-90s. So we had him as a friend in a member.

mentor for a long, long, long time. Oh, the guy's like a legend in Dallas. I know every time I talk to people in retail in Dallas, his name always comes up because Neiman Marcus was him. And, you know, it's interesting because the 1980s is really the beginning of the storage boom. And it continues to this day, right? With storage facilities, we did it a whole episode on pods, you know, that company that basically stores your stuff a few years ago. Fascinating story, Pete Warhurst. And so, Storage has, you know, over time has become a big business. People just accumulate more stuff. They don't want to get rid of it and they want to store it.

And I wonder whether, and, you know, who knows, it might just be psychobabble or something that I'm about to ask. But I feel like in a sense what the store was, it wasn't about just selling people storage stuff. It was also about giving people a sense of control, a sense of like I can take control over the messiness in my life. Absolutely. It's really more of a matter of being able to find and locate the things that are meaningful for you. You don't have to have your spices organized alphabetically to be organized. You just have to be able to find what you're looking for. You don't have to necessarily throw your clothes away if you haven't worn them in three years. If you have something sentimental, you want to hold on to it.

You can look at it 30 years from now and still love it. And so it's not really a matter of selling items to make people organize, quote, unquote. It's really to be therapist in a way. And once people figured out what we were about, we became more of a problem solution store. Until Maria Kondo came around and ruined it for everybody. Stop storing stuff. Throw it away. Yes, but she came around.

You know what? Yeah. She really did. Yeah, she just, now she stores stuff. So, all right, let's go back to the late 80s because I think a big turning point was when you opened your store in Houston. It doesn't seem like a big deal. Okay, you're in Dallas. Now you're in Houston.

But I guess that store would kind of catalyze a whole series of principles, which would essentially really create the culture that you eventually would build for the company. as it was growing. What was going on with a Houston store? Why did you feel like you had to come up with a series of principles for that particular location? Well, it was an extraordinary location. It was probably the best retail corner in the south. And that store became so, it did three or four times the volume that we expected that store to do. And so it was, talk about organized and control in a sense of order, there was none of that. It was mayhem. Because it was so successful, it was actually overrun with customers. So quickly, we couldn't hire enough people fast enough. We couldn't get the products down. We were flying products down on Southwest Airlines. You know, it was pretty much mayhem. And so in that turmoil, we began to hire people, but we were just hiring just about anybody that came in the door to try to keep up with the overwhelming business,

but we still have to agree on a certain set of foundation principles. And so I reached into my old file, I called it my philosophy epistle file. And these were very almost corny, due into other type principles. Yeah, well, tell me what these principles were. Communication is leadership. That's one of our foundation principles. So we communicated everything to our employees. I think life's too short to deal with opaque people.

Well, what would you tell them? Would you tell your employees about what was discussed at board meetings? Oh, yeah. We would bring them into the solution of every problem. We would share all sales numbers, everything on the P&L. Another foundation principle is intuition does not come to an unprepared mind. You need to train before it happens. you're not really genius unless you're not just using logic at work, you're using intuition at work.

We want you to use your intuition. We authorize you to be brave enough to you. You'll make more mistakes, but you'll also be much more genius by using your intuition. So seven such principles as this. And that started with the Houston store and this foundation principles thing. It was the only way we knew how to deal with the mayhem that we were experiencing every day in that store. I'm curious about, I mean, obviously it became a really important part of the culture there, but were there, was there any eye-rolling or like, what is this hokey stuff or this corny,

these corny aphorisms? What are they about? Was there any of that? I was scared to death to present this to these employees, most of whom I barely knew. I was afraid of being laughed at or eggs thrown at me or rotten tomatoes or something. And they didn't make fun of me as I feared they loved it, you know. Later on, Fortune Magazine's running around saying we're the best company who worked for in America. But the way we measured that was by having single digit less than 10% employee turnover in an industry that had triple digit turnover. People joined the business and they never left. I want to go back to just the expansion of the store because it was slow, but as you say, done very methodically.

It was, did you have enough money in the bank? Yes, we can build another store. And then I think in the late 90s you made a pretty significant acquisition. And I know this because I had one, an alpha, a company called Alpha that makes closets, designs these like build your own closets. I built one in like 2002. I remember going to the container store getting all the stuff and putting it together and falling off my step ladder building it.

But I built it. And that acquisition of Alpha was really a game changer, right? because all of a sudden you get into the business of not only are you selling the storage products, but you're also building or people are building closets. And so, I mean, how are you guys able to acquire that without outside investment? Well, we didn't have much money. We didn't have any experience in acquisitions. It was a David and Goliath struggle.

I remember we were like sweating blood trying to win the acquisition because other better finance people were competing with us. But the employees, the people of Alpha, love the container store. They were really in favor of it being us. And it was the greatest product we'd ever been associated with. It was the ultimate way to design a closet. And it was about 25% of our sales. We were the importer, distributor, marketing agent, and retailer. There were no middlemen.

It was our highest volume and our highest margin product. And that is really a key to business success. If you're best-selling products, also your highest gross margin product, you're going to do well. I guess by, I mean, you're growing, the container store is growing into the 2000s. And 2007, for a variety of reasons, you decided that you were looking for somebody to put some money into the business. I guess your co-founder, Garrett, was looking to, you know, to liquid. some of his holdings. He'd been to, you know, I'm sure your wealth, his wealth had been tied up in the business for so, so long. And apparently he was looking to maybe take some money off the table. Is that why you guys brought in an outside private equity firm? Yeah. You know, Garrett was 10 years older than me and John Mullen was a year or two older than Garrett. And they were looking to sell some of their stock. We were a little Spartan about how we didn't take any money.

We didn't pay ourselves very much at all, and we didn't take any money out of the business. And so at some point, you have to figure out what to do about that. So we interviewed over 100 private equity firms when we chose our private equity partners. I'm told nobody's ever interviewed half that many, but it was the most important decision we've ever made. and then ultimately even went into the public market. Each of those things, each of those steps dramatically changes the business as you begin to worry about things like equity and partners. You know, until then you're able to focus on employees, product, and customers. And Wall Street banks and equity owners are not a distraction.

You know, they're not taking up the key people's time. after the the majority acquisition by the private equity firm i believe they're called Leonard green you stayed on and and you both of you stayed on and continued um building the company um and by 2013 i believe you decide to go public um the company decides to go public walk me through that decision a little bit i mean was it the i mean i'm imagining the private equity investors had an interest in taking it public. They made a significant investment. They wanted to see a return on that. That's a tricky decision, right? Well, you know, the private equity guys were shocked that we wanted to do that. That was our— You wanted to do it. It was your—

Yeah, it was our unilateral decision. They never thought that we would ever agree to that thing. You know, I had been exploring that for 10 years because it's very interesting that even if you have the best partners around. And we have wonderful partners. They were really good people. But it's very hard if you're closely held to get your partners to agree to dilute themselves so that you can get stock in the hands of employees. And Sharon and I were really big advocates of getting more stock in the hands of employees. If you take your best employee, she becomes even better if she's got a piece of the action. If you can look her in the eyes and call her partner, that helps. It's very difficult to do, though, because even a partner that claims they want to do that,

they always have an accountant or a lawyer or a spouse that won't let them dilute themselves. And I'm like, that's the only way you can do it. You've got to dilute yourself if you want employees to have more ownership. If you're public, it's standard operating procedure. There's stock options. Everybody, you know, you're dealing with a more sophisticated level shareholder ostensibly. And they certainly understand. the concept of getting stock in the hands of employees. That's the major reason we did it. Yeah. No, I mean, it makes sense. I mean, it's interesting because at the time you went public, you had about, you know, roughly 70 locations, 6,000 employees, a hope to expand to about 300 locations. What do you make of this assessment by Forbes that they wrote a couple years ago, they wrote that the container store was the best retailer that should never have gone public? Do you think that's a fair assessment or that's unfair?

I think it's fair because we were very long-term oriented. And I love the idea of getting stock in the hands of our employees. And that was the only way to do it by going public. And that was the only way to do it. It's the only way to do it, sadly. And I take responsibility for that. Like I said, our private equity partners were deliriously happy with that decision, but it wasn't them forcing it upon us.

And it fit us like a poor fitting suit. There wasn't anything about it that really worked well for us. I don't think that our company, it was difficult for our culture to be a publicly traded company. It did take a lot of key people's time away. Once you're public, there's not as much focus going into the employee and the vendor and the community. It's primarily focusing on the equity markets. So I think it's a fair statement. You know, I think there's a reason that there's half as many publicly traded companies as there were, you know, 30 or 40 years ago.

It alters your business to go public. When we come back in just a moment, how the container store deals with yet another challenge, competition. Stay with us. I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2015, nearly two years after, its IPO and the container store is struggling. Income has dropped by nearly 70%. I mean, this is post-recession.

Obviously, there's a lot of direct-to-consumer internet businesses that are starting up. Competitors like IKEA are getting into the storage business at this point. What was going on? What would you remember about that time and why growth started, not growth, but even net sales, net income? started to decline. Well, you know, you had kind of a change in retail begin about that time. Most people would say Amazon. Amazon had a lot to do with it.

Our average customer drove 21 minutes to get to our store, 21-minute drive time on average. So we began to lose our under-25 sales because if you've got to buy three sweater boxes, you might as well just buy it online from Amazon. You know, sweater box is sweater box. Now, if you're going to redo your pantry, you know, then you'd drive that you want to come to us. And so everything was more global. Competition was more fierce.

And Amazon-type sales became, of course, bigger and bigger, bigger. So we would hire great people, train them, pay them twice what anybody else would pay them, and then hope that they would interact for an hour with our customers to reorganize their lending. closet. Amazon, there is no human contact. Everything's transactional. It's quick, easy. There's no great locations. It's an opposite form of retail. The American public was surveyed at that time about who provides the greatest service in retail. I expected Stanley Marcus or the container store or crate and barrel, one of those kind of companies to win. It was Amazon. I'm like, they don't provide any service at all. But what they do is their

they make the transactions so easy and so consumer focused. In a way, they're more consumer focused than anybody. So people were saying, well, maybe you're out of step because retail began to change. You had to adapt to it, and it led us to focus more on the high dollar sale and less on the low dollar sale because people still want it to come to us when they were doing something, solving a problem. But if they're just picking up three or four items, they would just take it. the easiest path.

But I wonder whether was there a world where there could have been a pivot that would have stabilized a container store's finances better? I don't know. I mean, maybe the answer is no. I don't know because obviously you're probably traded company. The stock prices by 2016 is down, you know, over 80 percent from its high. And that's a lot of pressure on the business. Well, I want to reiterate that, you know, we had a, you know, we had a.

We had 40 years of being the most successful business around. Right. It was giddy. It was crazy, you know. And then this hit us kind of like a tidal wave, this change in retail. And now I think that the employee orientation and the foundation principles and the selling solutions rather than items still apply. But it's hard to weather that kind of storm, frankly, when you're a public company. You know, Wall Street isn't very patient.

They're interested in this quarter's earnings and this year's earnings. And we were trying to be stewards. If you and I had a farm and we only worried about the productivity of that farm this month, this quarter, it may not be a very good farm in five years. So we were accustomed to being private and patient and long-term oriented. And perhaps we didn't react quickly enough to those changes. It's, you know, I'm not sure. It's so interesting because sometimes.

I mean, things change. Industries change, right? And so, I mean, whether it's apparel or big department stores or even big stores like REI, I mean, the whole model has changed. You know, as you say, Stanley Marcus focused on customer service, on selection. It's very – and I'm just going to say it straight up. It's – when I go into a big retailer today and I get great customer service, I am blown away because it's very – It's very unusual to get customer service. It was then, it's particularly now.

Jim Senegal, the Costco guy and I had a running debate for years. We had 10,000 products. He said, you should have 1,500 products, a different product. So most retailers that carry Advil have 15 or 17 different types. Well, they have 15 different Advils. They have different sizes, different strengths. He has one. He only carries one.

There's a certain beauty and simplicity to that, but Gordon Siegel and Sharon Tindle and Stanley Marcus and I wanted selection. You know, we wanted to have the world's greatest collection of coat hangers. If you needed a trash can, we had the world's greatest collection of trash cans. And the world kind of went to, no, no, no, we're going to just only have, we're going to have a big one and a small one. That's it. Just two SKUs.

And every consultant in the world would. around to all the retailers of the world and optimized their SKU count, their stockkeeping unit count, which really meant just destroying their, you know, their selection. Yeah. Yeah. Well, it's, I think about like, for example, you mentioned trash cans, you know, and simple human, a brand that easily was scaled because of a store like container store, right? Like the container store probably made that brand, but then they could sell on Amazon.

They could sell at Walmart.com. They could sell at Target.com. And so if you discover that brand at container store, you could also just eventually, years later, just have it delivered to your house. Well, it's interesting. I spent a long time on the Whole Foods board, and both the container store and Whole Foods and Crate and Barrel and companies like that, we would be the first significant customer to so many vendors. Yeah. And we would help that little bitty company become bigger and successful. And then, unless our relationship was overwhelmingly strong, we would kind of get cut out of the deal as they began to sell, you know, the mass merchants and whatnot, which you can't really blame them for.

So you almost need to buy equity in these little vendors because as we make them rich and famous, we get squeezed out in favor of the mass merchants. And so you either build a beautiful relationship with those people, or in the case of Alpha, we actually bought the company, or you phase them out as they become sold. at Costco because you can't compete with Costco. What's that happens? Or in the case of Whole Foods, you just, you know, if you can't beat them, you join them and then you become an Amazon company, right? Which has the scale to, you know, grow that business. But I want to stay on this thing for a moment about customer service because you guys spent,

I read something like you would offer more than 200 hours of customer service training to your employees. And I guess the industry standard was like 10 hours. And again, it's just a lot of big retailers. It's just, you know, it's teenagers working there and they're just, you know, they don't really care. It's not their fault. You know, I'll walk into stores and I'll think the store is badly managed because it's just the people seem miserable. Is there a world where this, with an emphasis and focus on customers comes back? Because I feel like even 10, certainly 20 years ago, customer service felt really.

really important. It just felt different than it feels now. Well, for us, we hired employees that were actually customers. And I think that's a big difference. A lot of the best employees that we had actually experienced the products that we sold. And that is way different than just hiring somebody off the street. Yeah, you, the most fanatical customer is going to make your best employee. We're really focused on that. It's a lost art. There's very little of it. You have to compensate people well. You have to train them well.

They have to care as much about the business as you do. And that's a, I hope it's not a bygone era. And as it, you know, pendulums happen in the world. As it goes away farther and farther, I think maybe there'll be more, it'll make more sense for it to come back because people will long for it again. I gather that it made sense for you. You felt like it made sense to step down in 2016 and to retire. I think Sharon, both of you didn't officially retire until 2019, but Kip, you stepped down as CEO in 2016. Let's talk a little bit about sort of the container store post Sharon and Kip. The store, it's no secret, has been struggling. I mean, it, and that in large part, just because the retail environment is shifted. There's one here, and not too far from where I live in Marin County that I go to now and again. And to be honest, it's almost always empty when I go in.

And so I wonder whether when you think about the stores today, and I know you're divested and you're out of that world, but I don't know, do you think that there's a future to what the container store is now? or do you think it has to radically transform and become something else? Frankly, not everybody's interested in what the old founders have to say about how something should be run today. But it's still your kid, you know. If your child goes through a time where it's not doing well, that's painful. And if they're not particularly anxious for you to step in and say, here's how you should correct that. They're not particularly anxious for us to do any of that, and we're not particularly anxious to do it. You know, we did this for 42, 43 years.

I'm not, you know, bring out the violin, but I'm not really bragging. But, I mean, we loved it. We worked, you know, 14, 15 hours a day, six or seven days a week for 43 years. Nobody loved their work more than Sharon and me, but also nobody has enjoyed retirement more than me, the freedom, the lack of stress. And so we're loving life, frankly, more than ever. And they're into new people, new era. And it's very interesting to watch. And half the time, we don't even know what's going on with it.

When you think about the journey you guys have taken, you know, from opening this first store in North Dallas in 78 to, you know, when you left. And obviously, the retail environment had changed, but both of you did very well. You did extremely well. You built a really big brand and a big business. How much do you think it had to do with the work you put in the elbow grease? And how much do you think had to do with luck, the luck of finding the right people, the luck of people buying, you know, liking the idea, etc.? Well, I think there's always a little bit of luck, but I think that staying focused and disciplined to the concept was really, really critical to our success. We really didn't. divert from the idea. We loved it. We found something to do that we were good at. We found other people who we loved, who loved us, who were also good at it. And we worked night and day to make it, you know, to make it happen.

But we certainly had plenty of good luck in spite of all that along the way. I think it takes it all. In order to build something of that magnitude, it takes all of the above. That's Kip and Sharon Tyndall, co-founders of the Container Store. By the way, Sharon wasn't kidding earlier when she said that Marie Kondo had reversed herself on the value of storage. In fact, a few years back, Marie collaborated with the Container Store to release a whole line of minimalist hangers and baskets and drawer organizers, all designed, of course, to spark joy. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast.

so you never miss a new episode of the show, and please sign up for our newsletter at guyraz.com. This episode was produced by J.C. Howard with music composed by Rumtin Ereblewe. It was edited by Neva Grant with research help from Sam Paulson. Our audio engineers were Quasi Lee and James Willett. Our production staff also includes Alex Chung, Carla Estevez, Catherine Seifer, Devin Schwartz, Chris Messini, Kerry Thompson, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built It. This.