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The Container Store, which emerged from bankruptcy proceedings in January, is demanding price cuts from vendors as it continues to face cash flow problems.
“We know that we have been paying too much for virtually every product we buy,” wrote Martin Schumacher, the organizational chain’s chief commercial officer, in a memo to vendors attained by Retail Dive.
He added, “My advice to you is to take an objective look at your historical profit margin with us, recognize that for most of you we have many choices of where we source similar products, accept that your margin was artificially high because of a lack of strategic sourcing skills on our side, and understand that those days are over.”
The vendor threats come as Bloomberg reported that The Container Store retained Berkeley Research Group to help realign "inventory that’s missing the mark on customer taste and pricing that often remains at odds with consumer demand."
The Bloomberg report also indicated The Container Store is working with A&G Real Estate Partners to assess its real estate portfolio.
Vendors Serving The Container Store Offer Mixed Reports
Vendors speaking to Retail Dive were more sympathetic to Schumacher’s comments in the memo about reworking assortments. He noted that mix had “become fragmented and drifted from our core customer promise.”
However, they were taken aback by his complaints over pricing, noting that traditional negotiations with The Container Store were similar to those enacted with other retailers. Several indicated they regularly gave the retailer favorable pricing given their strong past relationships. One vendor told Retail Dive, “The idea that up until now, Container Store buyers were sitting on their hands and just letting us price gouge them is so ridiculous.”
Some vendors also remarked that the harsh tone also ran counter to the shift toward partnerships in vendor relationships — and The Container Store’s co-founder and former CEO’s Kip Tindell’s message around “conscious capitalism.”
In his 2014 book, “Uncontainable: How Passion, Commitment, and Conscious Capitalism Built a Business Where Everyone Thrives,” Tindell wrote, “It's hard to overstate how crucial these close relationships are to our success — it's why our vendors give us exclusive, custom-made products, fast delivery, and high quality. And it's why they give us great pricing. We can't beat the mass merchants on volume, but we can always beat them on relationships.”
The Container Store’s bankruptcy was caused by heightened competition in organizational categories from Walmart, Amazon, HomeGoods and others — as well as a weak housing market, one that also led to the collapse of Bed Bath & Beyond and Tuesday Morning. As part of the reorganization plan, ownership of The Container Store was transferred to its term loan lenders.
Pricing negotiations between vendors and retailers have intensified in recent years as retailers attempt to offset inflationary pressures, and lately the impact of U.S. tariffs.