Getting Really Into Your Closet

Neil Balter's closet was a mess. A 17-year-old college student, Balter was sharing an apartment in Los Angeles with two friends back in 1978. To help his tiny closet better accommodate his stuff, he bought sheets of particleboard and replaced the standard single-bar-under-a-shelf setup with a customized stack of shelves, adorned with hanging bars at different levels. Then a friend's parents hired Balter to redo their closet. And then he did another. Before long the teenager had founded California Closets, the pioneer in the better-living-through-neater-closets company.

A quarter century and countless cubbies later, the concept has caught on--big time. From cramped urban apartments to sprawling suburban manses, Americans are hiring professionals to fill their closets with laminate shelves, drawers, wicker baskets, nooks and other storage accoutrements worthy of Imelda Marcos. Though estimates vary, custom closets are at least a $1.5 billion industry. Add in do-it-yourself products and the organizers now being sold for pantries, garages and home offices, and you've got a growing $10 billion business.

That kind of growth draws competition. Though California Closets remains the industry's biggest player, it now goes head-to-head with ClosetMaid, Closet World, Closet Factory, Closets by Design and a host of single-market players. "They had very little competition--now they have lots," says Helen Kuhl, editor in chief of Closets magazine, which launched in 2003. Their challenge is one that's faced first-movers from Xerox to Atari to TiVo: when you've invented a category, how do you continue to dominate it once competitors swarm?

Today that problem belongs to California Closets' chief executive Anthony Vidergauz, a South African lawyer who joined the company in 1986. For the past decade, his team has shifted away from simply selling the product to touting the benefits of organization. Old ads showed before-and-after photos of closet make-overs; the latest ads, launched last month, focus on stylish models, with the closets discreetly in the background. "It isn't about the wood--it's about the customers' lives," says marketing chief Edward Leaman. Today the company's franchises also install "storage systems" in garages and home offices; the company expects 2005 sales to hit $239 million. The average job costs $2,900, but some run as high as $30,000. For customers who aren't as well heeled, the company has begun selling storage units at Target.

For Boston franchisee Ken Cleary, the company's size remains his key advantage. Since 2000 he's seen nine new rivals enter his market. But none can touch his $1.4 million advertising budget or his four showrooms across the state. While many buyers meet with designers in their own homes and never visit showrooms, "when we funnel them through here, they're much better customers [because] they understand the possibilities," Cleary says, standing amid closet vignettes the size of college-dorm rooms.

More competition is coming. Home Depot, a huge seller of do-it-yourself closet organizers, has begun offering custom installations in several stores and may expand the service nationally. And other closet companies say that as the category becomes more commoditized, consumers will naturally migrate toward players offering lower prices. "People in the industry would want to tell you [every company is] different, but we don't have a cure for cancer here--we cut and edgeband particleboard," says Balter, who sold his share of California Closets in the late 1980s and since 2000 has worked as a consultant at rival ClosetMaid, which he says undercuts California Closets' pricing by 30 percent.

Still, as long as the industry's fast growth continues, everyone could be quite happy getting smaller shares of a far bigger market. And future generations may need to be told of a quaint time when Americans didn't require a consultant to tell them where to store their underwear.