Starting as an Etsy marketplace seller, Tree Hut’s path to $20 million in sales off of its own e-commerce site hasn’t been easy. Founder and CEO Julia Olson chats with Internet Retailer about juggling sales growth and operation challenges.

Web-only retailer Tree Hut Design knows what growing pains feel like. In the four years since the wooden watch retailer’s launch, those feelings haven’t subsided.

“There were many times I would want to quit,” says founder and CEO Julia Olson. “Truthfully, I wouldn’t wish this on anybody.”

Tree Hut's new office headquarters in San Francisco.

Tree Hut’s new office headquarters in San Francisco.

A lot has changed since Tree Hut started selling on handcrafted marketplace Etsy Inc. in 2014. The retailer, which now sells only direct-to-consumer via Tree Hut.co, generated $20 million in sales in 2017, employs more than 20 people and has a two-floor, 8,000-square-foot headquarters in downtown San Francisco where it manufactures its watches.

But just months ago, during the 2017 holiday season, Olson was eight months pregnant, operating Tree Hut and its 50 employees out of her house. Watchmakers took over her recently renovated kitchen, while her marketing department worked in the attic.

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Tree Hut’s growth path

Two months after Tree Hut started selling on Etsy (No. 13 in the in the Internet Retailer 2018 Online Marketplaces), it opened its own e-commerce storefront with a Shopify Inc. platform. The retailer has made slight changes to the site over time, but today the retailer continues to use its original Shopify theme. Only costing the retailer $200, the Shopify site was a very minimal investment, she says. Tree Hut has not raised any venture capital.

“What Tree Hut has done really well is small, incremental tasks,” Olson says. “It doesn’t matter if we have what we want in the end. It’s always good to have something in hand to test. Without testing or talking to the customer, you don’t know what they want.”

The retailer regularly A/B tests various features on its site, such as the color of the button or the font size. The retailer also tests business practices, such as when to send emails and at what price point to offer free shipping, and how these elements impact checkout rates, she says. Then, after a few months, Tree Hut will revisit those same tests to see if the initial results hold.

Tree Hut’s bootstrapping—getting something in front of shoppers and making it better with time—is part of the reason for Tree Hut’s success, Olson says. For example, the retailer has not spent a lot time making its social media pages and ads “look pretty,” unlike some brands whose social media ads are highly produced and look like full-fledged TV commercials, Olson says.

“In a way, it’s a little bit more authentic of who we are,” Olson says. “Our Facebook and Instagram ad photos are not super polished. People enjoy that.”

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Overall, word of mouth has been the biggest driver of sales, she says. The brand, which offers customers custom engraving, has just “resonated well” with shoppers, she says.

In Tree Hut’s first year of sales between 2014 and 2015 when the business operated in a home office and garage, it generated about $1 million in sales. In 2016, the retailer shuttered its Etsy storefront to control the brand experience on its own site, she says. On marketplaces, it’s difficult for a brand to build loyalty and to cultivate a community, and Tree Hut wanted to easily communicate with shoppers with its own emails and on-site messaging, she says.

Balancing sales growth with challenging operations

As sales accelerated, Tree Hut had to keep pace. One of the largest challenges to Tree Hut’s growth is how operation-heavy its business is.

tree hut“We do everything in house,” Olson says. “Scaling has been challenging on the operations side.”

Each of Tree Hut’s watches is made by hand and often engraved. It takes an average of three to six months to train someone to make Tree Hut’s product to its quality and speed standards. Some people never make it to be a watchmaker, Olson says. However, Tree Hut often tries to find a different position for them, such as in the warehouse. The retailer always starts with the best intentions when hiring a watchmaker and gives an employee a two-week trial. If the retailer sees potential from there, it invests the time to train them, she says.

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“I can’t go out the door and hire a watchmaker,” Olson says. “I have to hire somebody, see if they have the right mentality and skills to be a watchmaker and then train them. Then, after a period of time, have them make some watches. It’s a very difficult scaling process.”

Another challenge to growth is finding a space that works for the business. Olson’s dream is to have a storefront and an online shop. Tree Hut moved into a space that it thought it would be both a back office and retail storefront in 2015, but the store never opened. Tree Hut employees made watches for its online orders in that shop, with paper over the windows. By the time Tree Hut moved out of the location, the “back shelves” had taken over the entire space. Olson could never find the time to open and manage the storefront, while online orders kept streaming in.

“When you walk into the store, maybe one person every hour buys something instead of 10 customers every hour online,” Olson says. “From an effort perspective, it didn’t make sense.”

Eventually, Tree Hut had to move out of that space because its landlord was unhappy with the full-production operation in that location. With minimal notice to find a space, Olson moved Tree Hut’s headquarters into her own home in 2016.

“It was the first home we ever purchased, and I envisioned it to be my forever home,” she says. “We remodeled it for five months before Tree Hut had to make it an office, sort of a home office again. It is really strange to see my house going through a quick transformation over a couple weekends.”

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This was a rough time, as Olson worried about having business meetings at the house with vendors, for fear of what they would think of the business. After getting through the busy 2017 holiday season, Tree Hut moved out of the house and into their current headquarters on Dec. 29. The office is two floors and appropriately sized for Tree Hut.

But Olson still has dreams of opening a physical Tree Hut store within the next three years, she says. The store would be experimental in which shoppers could come in and customize their own watch—down to the grain of the wood for the watch face.

Until then, however, the retailer is focused on growth. New this season, Tree Hut is launching four new collections, including a bracelet line.

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