Balsam Hill has enjoyed seven years as a booming online retailer and one of Silicon Valley’s fastest-growing Internet companies.
But in August, the high-end artificial Christmas tree manufacturer opened a brick-and-mortar store just off the highway in Burlingame, Calif. In this part-warehouse, part-showroom, part-discount outlet space within earshot of San Francisco International Airport, Balsam Hill will display its towering and bejeweled artificial trees, which have until now mostly been confined to cyberspace.
Redwood City, Calif.-based Balsam Hill becomes the latest successful online retailer — it has been profitable since its inception, growing more than 200 percent some years — to venture offline and into the physical retail world in a role reversal that seems to defy the booming e-commerce industry. While traditional brick-and-mortar merchants struggle to capture consumers who increasingly shop from their smartphones and tablets, some online-only retailers are adding physical stores to improve sales and attract new customers who may discover the street address before the Web address, say retail industry experts.
“You can’t just stick an ad on Google and hope that you’re showing up first in search results,” said Kelly Pedersen, retail and consumer director with global consulting firm PwC. “They need to differentiate themselves.”
From eyeglass designer Warby Parker to baby gear retailer Our Baby Our World, fashion site BaubleBar and Gap subsidiary Piperlime, online companies are expanding their businesses through brick-and-mortar stores. These are not your average strip mall stores — they are, in most cases, ornate showrooms or intimate retail sites to try on clothes and test out tech gadgets before making the purchase online.
Balsam Hill’s new outlet and showroom, open now through January and likely weekends in the summer, will be a feast for the senses — Christmas carols playing on the loudspeaker, blinking lights and ornaments and even a children’s choir to perform for shoppers — the holiday experience that doesn’t come with a quick online purchase. Each tree will be done up “in all its glory with all the decorations” and customers can buy them for next-day delivery, said founder and CEO Thomas Harman.
“Picking a Christmas tree is actually an emotional decision,” he said. “That’s the tree that you’re going to decorate every year with your family. That’s the tree that’s going to be the centerpiece in your house.”
Harman said he wanted to create a destination shopping experience and attract new customers who want to pick out their Christmas tree in person, with family and spend time mulling over a purchase that will be used for many years.
“This is an opportunity for everyone to actually touch and feel and see the trees that they see online,” Harman said.
Built its brand
The company is in a good place to open a store because it has built up its brand — it’s well known all over the country — and the demand for artificial trees is so much higher than it used to be. More than 80 percent of households in the U.S. that celebrate Christmas put up an artificial tree. In addition, the outlet part of the store gives Balsam Hill a place to sell trees at a discount that have been returned or are from a previous season, which it couldn’t do easily online.
Balsam Hill trees range from a few hundred dollars to about $20,000 for a commercial tree for a mall or business, and are anywhere from four feet to 30 feet. They are made from plastic but are designed to look and feel identical to trees in nature — dozens of species of firs, spruces and pines — although most come with lights. Most household size trees cost from about $200 to $5,000.
Other online stores have moved to brick and mortar as well. Bonobos, a New York-based men’s fashion retailer, existed only on the Web until the company opened its first of eight stores last year. The “guide shops,” as the company calls them, carry only one size of each clothing article and are tended by personal shoppers who sometimes spend an hour outfitting a customer with a new wardrobe.
Guide shop customers spend, on average, twice as much as customers who shop on the website only, according to the company. The most expensive items — which can run more than $600 — sell better in the stores, and the company has started selling bathing suits now that customers have somewhere to try them on, said Erin Ersenkal, vice president of guide shops for Bonobos.
Venturing offline comes with risks. Stores offer the first face-to-face interaction between the company and customers, and a bad customer service experience could send a new customer running, Pedersen of PwC said. And, he said, it only works for online companies that can sell an experience — like Christmas — or an investment, such as a suit that will last decades. For most other purchases, shoppers will stick to the website.
Retailers also could wind up burdened with real estate costs, cautions Sucharita Mulpuru, a retail analyst with Forrester Research. “It’s too expensive for online retailers to do this in a big way,” she said.