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Container Store IPO Shows Retailer Still Spry

Shares double in market debut, COO Melissa Reiff weighs in


Today’s The Container Store (TCS) IPO made the retailer look more like a dot-com high-flier than a 35-year old store.

There was huge demand for The Container Store stock, as the company increased the price to $18 — up from its original range of $14 to $16. So far in today’s trading, TCS is up a sizzling 102%.

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While it might seem odd that The Container Store has pulled the IPO trigger after decades, management seems to think there is still plenty of upside for the company. Not only does TCS have plenty of room to expand, but it sets itself apart with unique offerings and an employee-first approach.

“We are originators of the concept of retailing products for organizing your life,” Melissa Reiff, president and chief operating officer, explained in an interview this morning. “People’s lives are busy, busy, busy. We provide a way to get organized.”

A typical location of The Container Store is 19,000 selling square feet and offers about 10,500 unique stock keeping units (SKUs). Some items include countertop organizers, cabinet storage, shoe racks, canisters, hampers, cleaning tools and so on.

At the core of The Container Store business is “elfa” — a component-based shelving and drawer system. It represents nearly a quarter of sales and is also the highest-margin category.

On top of having a niche, TCS also prides itself on being an employee-first company. It provides over 260 hours of training for first-year hires, which results in a turnover rate of just 10% vs. 50% to 100% for a typical retailer. In fact, The Container Store has actually landed on Fortune magazine’s “100 Best Companies to Work for” list for past 14 years in a row.

This is certainly an important part of the business model. With motivated workers, productivity is certainly higher. And the knowledge base helps too … especially considering TCS products require solutions-based selling, which means having a strong understanding of a customer’s needs. This is something broader retailers like Target (TGT), Walmart (WMT) or Staples (SPLS) cannot really provide.

This employee-first approach didn’t end with the shift to the public markets, either. “We set up a directed share program for employees to participate in the IPO,” Reiff explained. “About 40% participated.”

Of course, none of this matters unless people know about The Container Store. The good news: TCS has become a marketing machine, thanks in part to great word-of-mouth marketing from customers. Some avid fans include Oprah Winfrey and Ellen DeGeneres.

For the cherry on top, the company’s store launch strategy is also innovative. “The objective is for new stores to be successful from day one, not just after one or two years,” said Melissa. “To do this, we hire great management and get involved in the community nine months before launch. We also have a unique approach to get non-profits involved. For this, they get 10% of the grand opening sales for the weekend. But we also have an ongoing relationship with them.”

The grassroots marketing has helped to build an iconic brand and strong customer loyalty … even though The Container Store is still fairly small. There are only 63 stores in 22 states.

But while the company has been around for decades and is still an underdog when it comes to scale, The Container Store has big aspirations.

“Our goal has always been to dominate the market,” Reiff added. “There’s lots of runway left.”

Judging by today’s IPO, investors seems to agree.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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