Online retailers venture into real world
By San Jose Mercury News
Published: Saturday, Sept. 7, 2013, 9:00 p.m.
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 or tablets, some online-only retailers are adding physical stores to improve sales and attract customers who might 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 for 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 tech gadgets before making the purchase online.
Balsam Hill's outlet and showroom, open 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 develop a destination shopping experience and attract customers who want to pick out their Christmas tree in person, with family, spending 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.
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 one size of each clothing article and are tended by personal shoppers who sometimes spend an hour outfitting a customer with a 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 cost 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.
Seasonal pop-up stores aren't unusual — Microsoft and eBay have put up temporary locations to attract customers during the holiday season, and Balsam Hill set up a temporary showroom its first year at Stanford Shopping Center in Palo Alto, Calif. But the expansion into permanent stores suggests that the occasional pop-up won't suffice for some luxury and niche Internet retailers.
“Shoppers increasingly expect to be able to interact with the retailers and brands they care about anywhere, anytime, any platform, which argues for a presence in both the physical and virtual worlds,” said Mary Brett Whitfield, senior vice president with consulting business Kantar Retail.
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.
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