These days, it's difficult to keep order in our lives. Many of us juggle work, kids, budgets, and these days, we're even hounded by cavalcades of digital distractions, from emails to social media. In light of the modern condition, The Container Store (NYSE:TCS) has a great mission: "To provide order to an increasingly busy and chaotic world."
The Container Store provides solutions that help consumers organize their closets and drawers, not to mention their offices and kitchens, and while this sounds "nice to have," not "need to have," the benefits are no joke. According to a survey Huffington Post conducted last year, 70% of respondents said that home organization problems jacked up their stress levels . Clutter can make life more difficult than ever and, for some, it can become debilitating. The Container Store's mission seeks to help rectify that kind of avoidable stress.
However, even beyond the noble provision of solutions for tidy, organized homes, The Container Store has another competitive advantage that most consumers don't know about.
It treats its employees insanely well.
Weird in a good way
Times aren't easy for a lot of American workers, and the retail industry is a go-to when one thinks about tough jobs that don't pay well. That explains the heated controversies about living wages, not to mention minimum wage law.
In the last year or so, Americans have increasingly looked askance at retailers and how they treat their employees. Wal-Mart (NYSE:WMT) was once the major whipping boy, but here lately, other retailers like McDonald's (NYSE:MCD) and Amazon.com (NASDAQ:AMZN) have joined Wal-Mart in the bad PR hot seats.
Of course media covers those kinds of dramas, and it should. On the flip side, though, we usually don't hear too much about the retailers that not only respect their employees, but pay healthy wages.
The Container Store is one of those "boring" retailers that isn't, because it's weird in a good way: it pays its employees an average $50,000 per year . That's a major anomaly in retail. The average retailer worker took home around $24,000 in 2013, according to the Bureau of Labor and Statistics.
The silent advantage
When The Container Store went public in late 2013, it disclosed in its IPO prospectus that it was a different kind of company than many modern corporations have designed themselves to be. It follows the tenets of Conscious Capitalism, which is about driving stakeholder value instead of focusing on the single-bottom line of shareholder value. More and more companies are designing themselves to do well and do good -- and some have been executing admirably, and are highly profitable.
Employees are understood to be among the most important stakeholders, and The Container Store revealed its "deep-rooted, employee-first culture" as one of its strongest advantages. In addition to the high level of pay, The Container Store also provides extensive training, spending more than 260 hours training full-time employees in areas such as leadership and operational skills as well as company-specific needs like product knowledge and space design .
Most retailers experience a high rate of turnover; most Americans, whether you're a normal consumer or a business manager, might shrug at that revolving door and say that's the way it is. It's a bad and expensive way to do business, though; retraining new employees over and over and never having seasoned ones is extremely inefficient.
This is not the case at The Container Store. Its turnover is 10% per year, compared to an average 100% in the rest of the retail industry. It has been on Fortune's 100 Best Companies to Work list for about 15 years.
Still, despite this great foundation, The Container Store has its work cut out for it as it navigates its business. Since its IPO, its stock has been a disappointment, having dropped about 50% in the last year. Last week, the negativity continued due to its quarterly results. Although the retailer has been venturing into profitability post-IPO, it has been cutting its sales guidance repeatedly this past year. Its same-store sales dropped 3.5% in the quarter, a poor showing for a key retail metric . My colleague Evan Niu covered the quarter in detail here.
Personally, I haven't felt compelled to buy The Container Store's stock, despite the fact that stakeholder-friendly companies like those that adhere to Conscious Capitalism are exactly the types of stocks I look for, since stakeholder friendliness is a strength.
The company's in a tough market. Consumers can buy organizational products through discounters like Wal-Mart and Amazon.com. And although the company does have loyal customers, many potential customers likely aren't educated on why they might want to pay more money for their storage solutions at a stand-alone retailer like The Container Store.
The increasing numbers of consumers who care about employee treatment need to realize that if they really care, they have to frequent such companies, sometimes make an extra trip for the experience, and sometimes pay more for products. Cheap things are often cheap for a reason -- and sometimes, for an ugly one. You might be getting a dirt cheap price, but somebody else is losing on the deal.
If consumers don't put their money where their mouths are, it's just empty criticism.
Participating in the race to the top
Viewed through the lens of positive business management, The Container Store is a beautiful entity. However, as an investor, I don't plan to buy until I can see a clear indication that it's getting the word out about its true differentiation even beyond its surface mission. Wal-Mart and Amazon currently have advantages by offering low prices and convenience; that's low-hanging fruit, but in the American marketplace, that's still a path that works.
Meanwhile, in a marketplace where Americans are increasingly distressed by low wages and becoming more and more vocal in their complaints, let's also hope that they begin to realize that their everyday consumption habits matter. When stakeholder-friendly companies reap the fruits of their positive, caring businesses because consumers frequent them in droves, other companies will have to adjust to compete in a race to the top.
The Container Store's management is just "crazy" enough to go out of its way to do the right thing by many stakeholders, and that should be just crazy enough to work in our enlightened age. One of the biggest issues, though, is that kind of positive "crazy talk" has to get out.