Features, Strategy & Operations

Crate Expectations

RR Crate & BarrelIt was the best of locations. It was the worst of decisions.

With apologies to a Dickens mash-up. the news that Crate & Barrel is going to be closing its Michigan Avenue flagship store in Chicago says as much about the state of American retailing as any single business decision we’ve seen in a long, long time.

On the one hand, the 43,000-square-foot showplace no doubt cost a boatload of money to operate. Even though former Crate owner Gordon Segal is reported to still own the actual building, rent ain’t cheap on the Miracle Mile in Chicagoland. In a shopping area dominated by tourists and local sightseers one can imagine there weren’t a lot of shoppers doing serious furniture buying and decorating duty at the location. No doubt the store sold lots of take-with doodads and small entertaining kitchen and table wares but on paper the productivity was probably pretty dismal.

But on the other, you don’t find many locations that are any more high-profile, prestigious and memorable as the one at the corner of Michigan and Erie. With full glass windows from top to bottom, highlighted internal escalators and dramatic lighting that made the building look positively enchanted at night, this store was the very personification of the branding statement that every retailer in America is striving to own.

And yet Crate’s owner, the German-based Otto Group, is shutting it down.Even more telling for the transition going on in retailing, the new tenant for the space will be Starbucks, which will open its third “Roastery,” a kind of coffee shop-meets-amusement park sometime next year.

How ironic that Starbucks chose the location for its own retail branding statement while C&B made the decision it didn’t need this one anymore.

What is it about physical branding that American retailers don’t get? A few years back, Toys’R’Us closed its iconic Times Square store – the one with the Ferris wheel and other assorted destination-driven attractions – saying it was no longer economically viable. Say, didn’t TRU file for bankruptcy last year? No one is suggesting that’s what will happen with Crate. As part of a privately owned foreign company no one outside really has any idea how they are doing financially. And you get it that the return on the real estate investment of the Michigan Avenue store didn’t work for the accountants.

But as the centerpiece of the company’s efforts to reach shoppers, whether they bought that day, the next day at another store or the next week online, that store symbolized exactly the right approach that retailers need. In the end it’s a far, far worse thing they have done. And just another example of the numbers guys having the merchants over a barrel.

Warren Shoulberg is a business journalist who has reported on the home furnishings industry for much of his career. He visited that Crate store every time he was in Chicago and he’s going to miss it next time…a lot.

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