Making sustainability easy for the retail customer
Making sustainability easy for the retail customer
How many Americans does it take to screw in an LED light bulb? Unless we’re talking about an informed early adopter, it takes two: the consumer and the salesperson who guides the buying decision. Without the latter, the former can walk away empty-handed or at least very frustrated.
I know because I was one of them. My sustainability consulting knowledge turned out to be non-transferable when purchasing my first LED. After staring at the aisle for 20 minutes, I picked the one I hoped would be right, but still got it wrong. Two trips to Home Depot and two hours later, I was finally the proud owner of a single LED light bulb.
That experience encapsulates the behavioral and market barriers inherent in transitioning to sustainable technologies — or what the World Bank calls transaction cost. Not only do transaction costs prevent individuals from purchasing energy-efficient and renewable energy applications, they also prevent suppliers from commercializing them. By helping consumers overcome transaction costs, retailers can play a pivotal role in advancing low-carbon economic growth.
But it also takes informed salespeople to make the process work. For instance, customized support and consistent knowledge transfer from our builder (the salesperson) is what made buying my LEED home seem easier than buying that LED bulb. Alan Hoffmann explained the benefits of high performance in buildings, curated the suppliers, helped us make budget-wise decisions on fixtures and technologies, arranged financing and served as a go-to resource throughout the process.
Austin-based retailer TreeHouse aims to deliver the same benefits to consumers at scale. Since 2011, the store has been shifting the culture in the Lone Star state by helping shoppers decide on LEDs, finish-outs for LEED homes and everything in between. With the recent launch of its new e-commerce platform, TreeHouse now has the capacity to bring "smart home" products into living rooms across America.
But is the market ready? According to a study by Ogilvy Earth, 82 percent of Americans may have good green intentions but only 16 percent are dedicated to fulfilling them. The 66 percent in between, what Ogilvy calls the "green gap," is where the real consumer power lies, if only retailers could tap it.
Investor Garrett Boone, chairman and co-founder of the Container Store, is betting his money that TreeHouse can. He became a major investor in TreeHouse and is now its chairman of the board.
In a recent interview, Boone said he sees the “same kind of retail opportunity for smart homes today as I saw for home organization in 1978.” The Container Store, which established the home storage solutions category, went on to raise $215 million in its IPO in 2013.
“Green retailing hasn’t been done successfully yet, but we want to change that,” said Boone. As a board member, I intentionally hold myself back from drinking the Kool-Aid, but the substance beneath the story makes objectivity easier.
Just as Boone began his business as a family-run enterprise, TreeHouse president Jason Ballard has focused on optimizing the single store before expanding. Three years later, TreeHouse is ready to grow. “We have a concept that can transform retail and change the world,” said Ballard. Now he’s turning his attention to creating a game-changing strategy to pull it off.
TreeHouse branches out
Over the past decade, I’ve encountered only a few spectacular failures (Better Place), but I’ve seen more than a dozen glitzy green ventures fade or go bankrupt. Some were good ideas whose time had not yet come. Others were unrealistic concepts led by highly inexperienced teams. By contrast, the TreeHouse leadership team has deep roots in pioneering new models and the company is relying on traditional principles to build its business.
Ballard favors conservative financial estimates, but in terms of strategy, he is more progressive. “We are not building stores for 2015,” he said. “We’re designing a retail environment that will still be relevant in 2025.” He concedes that like any startup, “we made our mistakes and burned through some money,” but fortunately Ballard’s investors also regard those early funds as an investment in figuring out the formula.
After multiple iterations, Ballard has determined that the optimal store set-up balances both performance and design-related products. Building on the foundation of its flagship store, TreeHouse is delivering products to customers through a blend of lean marketing, education-based selling and process optimization.
TreeHouse’s displays help demystify smart home products by showcasing them in their native setting. Ballard is particularly excited about a display he’s rolling out for his water conservation system. “When it Rains it Stores” reads the slogan, which is bolstered by infographics, installation cost and other features to help shrink the gap between understanding and buying.
Thus far, the bulk of sales are in “home systems,” which increased by 278 percent in the last quarter. But other areas of the store are “gaining on solar,” said Ballard. Kitchen and bath, flooring and tile, outdoor living and homestead all show considerable growth.
However, low margins remain a challenge. Ballard aims to improve the margins by collaborating with vendors to increase sales and put more innovative products in front of more people. Nest, the smart thermostat company recently acquired by Google, will hold its SXSW 2015 activities at TreeHouse’s Austin store. Also, TreeHouse soon will carry the world’s first C2C certified paint.
“We keep feeling around for the walls and when we find them, we push them out further,” said Boone.
Transformation is relational, not transactional
Marketers are scrambling to find consumer patterns in big data and TreeHouse is no different. But as the company continues to define its target customer, employees strive to give every buyer a memorable store experience. “They have to trust you,” said Boone. And according to the reviews on Yelp, some already do.
“This is a wonderful company that very genuinely cares about their mission and doesn't stray away from their values to save an extra buck,” noted one reviewer. “I can honestly say I trust this company, which is a rare, wonderful thing.”
Looking at the reviews, Boone likes what he sees: “We're doing the most important thing right: building a trusting relationship with our customers. If we continue doing that, we will realize the full potential of this concept.”
To prepare sales staff to transfer the knowledge necessary to build trust, Ballard requires 110 hours of training per year per employee. By holding his sales force to high standards, Ballard hopes to create the sort of culture that can inspire sustainable MBAs and environmental science grads to eschew the corner office for the sales floor.
One day it may not take two to screw in an LED bulb; just one informed consumer should be able to handle the job. But educating customers to expert status (let alone fixing our education system) will take longer than the average startup has to wait. Fortunately, TreeHouse isn’t relying on systemic changes — whether legislative, regulatory or cultural — to prove its viability. The financials already bear out the concept.
Right now, TreeHouse is focused on expansion. Ballard sees a future beyond big box retailing and is looking at new concepts in brick-and-mortar while charting a course for e-commerce. These are hopeful developments for his investors, and considering this retailer’s potential to commercialize sustainability, the growth of TreeHouse could be a hopeful sign for us all.