3 Ways The Container Store Can Boost Its Growth

An analysis of opportunities for The Container Store that could make the company more successful in the coming years.

Jan 13, 2014 at 6:00PM

Think the Container Store Group (NYSE:TCS) will never become a household name? Think again. The Container Store still has the opportunity to gain greater consumer loyalty, raise traffic through its stores and website, and raise awareness by investing additional resources into three key areas that are sure to generate more sales. Investors interested in the future growth and success of The Container Store should be optimistic. 

Customize your storage
The Container Store has a real advantage over its peers with its Elfa product division. Based in Sweden, Elfa allows consumers to customize their own storage units with drawers, shelves, and compartments that will function in any space within a home or office such as the closets, kitchen, laundry room, or garage.

According to its S-1 filing, The Container Store has been the exclusive distributor of Elfa since 1999, and in fiscal year 2012, Elfa sales represented 13% of the company's total net sales.  Elfa is the crown jewel of The Container Store as no other retailer offers customers the option to personally design their own storage system needs. With the proper tools and strategy in place, The Container Store has the potential to make a huge profit from Elfa products as the public becomes more and more aware of this trendy option.

Increasing marketing efforts
If The Container Store is going to gain a larger consumer base, it needs to market itself more effectively. Because it has the biggest opportunity with Elfa products, The Container Store needs to highlight Elfa's rarity in the industry of organization and storage solutions and note Elfa's customizable features and designs. 

Secondly, The Container Store might want to place an advertisement in the paper that includes a coupon since people love to dig through advertisements to find coupons and the best deals. Almost every week, competitor Bed Bath & Beyond (NASDAQ:BBBY) offers a 20% off coupon in the paper to generate store traffic. Despite its generous offer, Bed Bath & Beyond still manages to bring in a much larger profit than The Container Store.

Overall, The Container Store needs to market its products through television commercials, newspaper advertisements with attached coupons, and social media outlets. If it can boost its marketing efforts, The Container Store will attract more customers to its stores and website, and thus strengthen its brand name.

Expanding its geographic footprint
After 35 years in operation, The Container Store has only 63 stores throughout the United States. In 2013, the company opened six new stores, and it plans to open seven stores in 2014. Its executive management team noted in the company's prospectus that they believe the company has the potential to grow to 300 stores, but offered no time frame as to how soon this could happen.  

Its rival Wal-Mart (NYSE:WMT) operates in over 26 countries and has over 11,000 stores, while Bed Bath & Beyond has over 1,470 stores under five different brands throughout the United States, Canada, and Mexico. If The Container Store can grow to a small fraction of the size of its competitors, it would be a huge boost for shareholders. Put simply, The Container Store has the opportunity to expand its chain to other locations throughout the United States, and possibly internationally at some point. Its expansion is just getting started.

Foolish takeaway
It is understandable to still remain skeptical about The Container Store's future. However, as one can see The Container Store has not taken full advantage of its Elfa division, marketing resources, and means of expansion. Foolish investors should do additional research into the opportunities that still await The Container Store, as any one of them could be game changers. Once The Container Store acts on these opportunities, investors can get excited, but until then, keep an eye on the company's stock and any improvements the company makes to its business.

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Fool contributor Natalie O'Reilly has no position in any stocks mentioned. The Motley Fool recommends Bed Bath & Beyond and The Container Store Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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