Custom Spaces Core to The Container Store's Growth Strategy

Satish Malhotra is approaching his two-year anniversary as the CEO and president of The Container Store (TCS). During a fireside chat at the ICR Conference in Orlando, Fla. earlier this month, Malhotra answered questions on a variety of topics, including his feelings on his current job, how TCS is evolving in a post-pandemic market, long-term growth opportunities for the retailer, among others. Here's a recap of that conversation.

On Being the Leader of TCS

Malhotra noted that he was blessed to inherit such an amazing company. He cited TCS's fanatical employees, loyal customers and strong foundation. His goal is to take TCS to next level, which he referred to as TCS 2.0.

"Our employees love to spend time with customers, but there were operational barriers to making that happen," said Malhotra. "We've removed those barriers, added greeters [at the company's stores], created a sense of discovery and engagement, and our NPS really started to take off — they're almost at 80 percent."

Furthermore, Malhotra noted that TCS is making enhancements to its e-commerce site as well as launched a new loyalty program. Not forgetting its brick-and-mortar roots, TCS has opened a remodeled store prototype in Colorado Springs, CO that offers an edited general merchandise assortment and a custom space that it believes will help attract new customers to the brand.

On the Acquisition of Closet Works

In January 2022, The Container Store acquired home storage solutions and closet organization company Closet Works. The move was made to help TCS better compete in the custom closet space, which has an estimated $6 billion market value.

"Our customers were looking for choices as it related to premium wood, and the acquisition allowed us to do that," Malhotra said. "There's a lot of emphasis on the closet space business. Our customers were really appreciative of the products we had for organization and storage, but we knew to deepen the engagement we needed to double click and expand on our custom space business. Today you go into our stores and you will see a completely transformed custom space. A whole new branding dedicated to custom spaces. We've gone beyond custom closets into living spaces, garage spaces, as well as those primary closets."

According to Malhotra, TCS currently has roughly 5 percent of the $6 billion addressable custom space market. The large portion of that market lives in spaces above $2,000, which was above the threshold that the TCS typically operated in. The acquisition of Closet Works will help TCS be a more formidable competitor in the $2,000 and above custom space market.

Operating in a Post-COVID Market

The pandemic awakened many customers to the importance of organization, Malhotra told the ICR audience. Customers had to learn to make the most of their homes, whether that was for work, school, exercise, among other activities. As we emerge from the pandemic, Malhotra doesn't anticipate a significant shift in the way that consumers view their homes.

"I think customers will continue to want to live an organized life," Malhotra said. "We're able to offer them solutions for that. In the current [economic] environment that we're in, we certainly see customers thinking twice about certain expenditures and perhaps taking on less custom spaces. For us, they're still spending to a larger degree on that one space. When it comes to custom spaces, we talk to our customers and those that are destined to get a custom space done will get it done. We see that time and again, and we're happy to be there for them."

Expanded Merchandise Assortment to Drive Customer Acquisition, Retention

TCS is moving into additional product categories, including home fragrances and plant-based cleaning supplies, as it seeks to become a complete solution for its customers' home needs.

"I always like flexing our muscles when it comes to the categories that can play with our customers and utilizing that surprise and delight," noted Malhotra. "Our customers never thought we would carry those items [fragrances, cleaning supplies], but they tell us how happy they are that we are starting to offer them. We're also doubling down on our private-label offering. These are the types of items that we love to be able to introduce that solve problems and allow us to think about how we can best serve and engage with our customers."