Imagine this: You run a self-service store where customers walk the aisles, help themselves to oversized packages of batteries, cereal, heaping mounds of strawberries. They heave onto their carts electronics, clothing, massive plastic-wrapped cuts of meat. And all by themselves, they rummage through stacks of shoeboxes, tearing through sizes, here an 8, there a 9, trying to find the one that fits. By the end of the day, tissue paper litters the shoe aisle and the chances of a left shoe dwelling with its intended right partner are slim to none. Everything has been mixed and matched with such sustained shuffling that you have to pay your employees an extra few hours to right the mess, which will all be repeated again tomorrow, in any case. So, what do you do? Well, if you’re Costco, you turn to Jeff Green, who has become the go-to guy for everything from retail matters to distribution to manufacturing to packaging to in-store organization. And after sitting down with Jeff for a few hours last week, it’s clear that his success is not just due to his creative approach to all things business, his attention to detail, or his confidence. If it were possible to grow an entire empire on one motto alone, Jeff’s would be: your word is your bond…and his word is as good as gold.
The first takeaway lesson I learn from Jeff is that to be a successful entrepreneur you have to be a good listener, you have to be able to hear what people are asking for, even when they aren’t aware of asking for anything. So, let’s rewind a bit.
Back before Jeff was the business mogul that he is now, he was a tennis instructor. He ran a little shop in Los Angeles, where he taught lessons and helped his customers buy rackets, shoes, whatever tennis paraphernalia they needed to improve their game. One day, he was approached by a customer who wanted to purchase items in bulk and asked Jeff if he’d be interested in facilitating the buy. As it turns out, Jeff was interested, and slowly, on the side, a small business took root, whereby Jeff would help retailers get access to the products they needed.
In the meantime, the wholesale club market was just getting started. It ran on a new and innovative business model: offer membership to customers and then sell them products at a very low margin. The club would profit so long as there were enough people willing to buy memberships in exchange for near-wholesale prices. But there was a problem. Because this approach was so new, so unfamiliar, and so full of potential risk, many big suppliers were hesitant to do business with them. Fortunately for Jeff, he was not a big supplier who had to move cautiously into new accounts. Instead, what he had cultivated over the years was an excellent working relationship with the big suppliers, which meant that he could be trusted to pay for whatever products he purchased. One day, he was put in touch with a small wholesale club, just starting out, its first two stores barely open. The tiny operation was the then-unheard-of wholesale club, Costco, and they found in Jeff what they couldn’t find with the big suppliers: willingness to engage in risk. Of the small company, Jeff asked for a letter of credit, and in exchange, he helped them gain access to the bulk products they needed to stock their stores.
Flash forward a handful of years into the shoe-strewn aisles of the mega-store, pairs split up, tissue paper all over the floor, employees working late nights to clean up the mess. For a business that runs on super tight margins, everything must be streamlined. Any extra expended energy is a drain on resources and potential profits. So, how to handle this situation? How to keep the store clean and keep the shoes together? Jeff is not a designer; he’s not a product engineer, and he’s not a manufacturer by background. He is, however, one uber-organized human being. And he also happens to be someone who immediately begins looking for solutions whenever a problem presents itself. In this case, the solution he came up with was so simple, so clear, so obvious in retrospect. All Costco had to do was find a way to tie the shoes together with a small piece of binding that couldn’t be easily ripped apart by hand. (Of course, trying the shoes on becomes a clumsy affair, as you shuffle down the aisle in search of a mirror…but well worth it from a business perspective!) As soon as Jeff pronounced the solution, he simultaneously created a demand for this small piece of binding, as well as a manufacturing job that he himself was in a position to fill. And fill it he did. He kept prices low, working on the model that Costco itself followed. As always, top quality, competitive prices, and excellent service were the driving principles of his business. Jeff’s goal has always been to exceed his customers’ expectations, and this was no exception. So, as the shoes passed through Jeff’s doors, awaiting the small string that would unite lefts and rights en route to Costco, he added the extra perk of removing all the tissue paper that would otherwise litter the floor.
As I’m talking to Jeff, it occurs to me that the secret to business is making yourself relevant. It’s a huge thing to find a solution to a problem, but if you become critical to the process—if you become the link between problem and solution, if everything must pass through your hands on its way to a better, more efficient, more manageable future—well then, you’re money! Although the simple act of creating the shoe bind already established Jeff’s relevancy, he had more innovation up his sleeve.
As mentioned earlier, a wholesale club is only sustainable if it runs a tight ship. Any lost or stolen items, as well as any damaged goods, which industry parlance refers to as “salvage,” can significantly cut into profit margins. So, one of the challenges for a wholesale club, which is a profoundly self-guided experience, has to do with how the store makes its products available to customers without risking theft or damage. This challenge is compounded when the product is a small, expensive item. Think: Mont Blanc pens, designer sunglasses, women’s fragrances. Traditionally, the way Costco handled this challenge was to place these items behind a jewelry case. If someone wanted to purchase a nice pen, she would get a piece of paper with an item number written on it, and continue along her shopping journey. Once she reached the cashier, she would pay for the whole cart, including the piece of paper, and only then would an employee retrieve the item from the back of the store. But, because shoppers are a fickle lot, and because a shopping cart now filled to the brim with groceries, can suddenly make a piece of paper (even if it does represent a luxury item) seem much less desirable, often shoppers ended up foregoing the expensive purchase. Needless to say, Costco had trouble moving these kinds of products.
Enter Jeff Green. He asked himself: how can we present these items to customers in a more compelling way, without increasing the odds of theft or salvage? His answer would revolutionize packaging in North America. Today, his packaging concept is so ubiquitous, so standardized, that it’s hard to remember plastic packages before they were the impossible-to-open fortresses that they have become because of Jeff.
His idea was simply to place these items between two pieces of plastic, slip in a piece of cardboard that displayed the product and described its virtues, synch the plastic together so tightly around all edges that no one would be able to tear them asunder without compromising life and limb, and then simply stack or hang them in the store so customers could grab a package as they passed by. And who better to develop and manufacture the packages than Jeff Green himself. This changed things forever. Now that these once-hard-to-move items were front and center in their brand new, impenetrable packaging, sales skyrocketed. Almost immediately, Costco (and countless other stores) refused to stock products unless they passed through Jeff Green’s company, now called U.S. Merchants/Diversified Repackaging. When he first started fielding these initial requests for repackaging, he was still located in his tennis shop, wearing his tracksuit and tennis shoes in the office. Today, his is the single largest packaging company in North America. And to complete the total verticality of his operation, to keep prices as low as possible, and to limit his dependence on any outside sources, he now owns all the trucks that ship the items he repackages.
In spite of the tremendous success the last three decades have brought him, when I ask Jeff about his business prowess, his answer is simply: integrity. He believes that strong relationships are everything, and in his own words, “you’re only as good as your track record,” so he sets out to have the most pristine track record around. He lives by certain immutable tenets: he values craftsmanship and a job well done. He never wants anyone to be forced into doing business with him, but rather wants people’s business because they believe he can deliver the best service at the best price. And he never, ever talks down the competition. He believes in promoting the virtues of his own company and his impeccable standards, but then says, it’s up to the client to decide whom they want to do business with. I can’t imagine he’s often turned away.
One last piece of advice from a man who has built his company from the ground up: know every painstaking detail that affects your business. And, as someone intimate with the details of shipping goods, Jeff can’t help but get specific: for those of you that ship your goods anywhere, for God’s sake, read the fine print of your lading bills because Section 7 directly affects your liability. You’ll thank Jeff Green later for alerting you to it!
–by Jacqueline Abrams