Canadian e-commerce companies increasingly taking their businesses in-store
Shopify CEO Tobias Lutke, center wearing hat, is celebrated as he rings the New York Stock Exchange opening bell, marking the Canadian company's IPO, Thursday, May 21, 2015. (AP / Richard Drew)
TORONTO -- When Edmonton-based sisters Kendall and Justine Barber launched Poppy Barley, a made-to-order footwear brand that has become a perennial budget day favourite with federal finance minister Bill Morneau, they envisioned they would operate solely online.
But that all changed within 30 days of the business's launch, when the sisters started getting calls from potential customers, saying "I am really interested in your boots, but I need to see them first."
To appease the callers, the Barbers set up a table of their cowhide leather boots in their building's lobby once a week. It led to them opening a small showroom within their office and then, their first store in August at Edmonton's Southgate Centre mall.
The location placed Poppy Barley in a growing group of online retailers that have opened bricks-and-mortar spaces or announced plans to do so in recent years, including Montreal-based apparel brand Frank and Oak, Vancouver suit retailer Indochino and Ottawa-based e-commerce company Shopify, along with American stalwarts such as Uber.
Kendall Barber said e-commerce companies are drawn to physical locations because many shoppers still prefer to see products in-person.
"There are a lot of products that look dazzling online and then we receive them and we are very disappointed," she said. "Once you have had the chance to touch a product, feel a product and know your size, it is easy to then have the confidence to order."
Despite predictions about the gradual death of bricks-and-mortar retail, a 2017 study from Montreal research company CROP found 68 per cent of the 26,502 Canadians surveyed preferred to shop in-store, 19 per cent preferred making purchases online and 13 per cent chose to visit a shop to try out the product in-person before heading online to buy it.
That last scenario supports a trend Barber has seen with Poppy Barley's first-time buyers and is a big part of why the company has hosted recent pop-ups in Toronto, Vancouver, Calgary, Saskatoon, Regina and Winnipeg. While the company doesn't stock every style of shoe at the pop-ups, Barber said 65 per cent of customers leave with a pair of shoes, while the rest make an order that will later be shipped to them.
The success of the pop-ups and the Southgate Mall location convinced Poppy Barley to split its attention equally between e-commerce and bricks-and-mortar -- a dynamic Barber admits the company first resisted, in part because opening storefronts requires more capital.
"We wanted so badly for the e-commerce model to work," said Barber. "We definitely thought that people were moving more online."
Such beliefs are a common misconception, said Ryerson University branding instructor Brent Barr. He's found that most people don't realize that online sales still only account for 8 per cent of the retail purchases made in Canada. Online retail sales are growing by about a percentage point a year, but right now, Barr said 92 per cent still come from storefronts.
"The majority of people still buy in-store because retail is a contact sport," he said. "People like touching and feeling and holding and... there is an immediacy which comes with a store."
In hopes of luring consumers to e-commerce, brands have increasingly been offering free returns and begun toying with augmented and virtual reality to allow customers to try out clothing, shoes, makeup and home furnishings without leaving their home.
Footwear brand Converse has a mobile application that lets users see what a pair of shoes would look like on their feet, IKEA offers similar technology for consumers to virtually test furniture in their home, and Paris-based cosmetics giant L'Oreal recently purchased Toronto-based startup Modiface, which 100 brands are using to let customers try beauty products or complete skin diagnoses via mobile app or online.
However, the technology hasn't become ubiquitous enough to wean customers off bricks-and-mortar just yet.
That barrier is precisely why Toronto-based dress rental company Rent Frock Repeat shifted its plan to be an e-commerce business to include a bricks-and-mortar location about six years ago.
When the business first launched, co-founder Kristy Wieber said Rent Frock Repeat only allowed customers to book outfits or accessories for borrowing online. The items were shipped out to customers and to attempt to mitigate issues around sizing the company offered precise measurements for the dresses, one-on-one video chats with a stylist, a $10 option to receive a backup size and a $35 option for another dress in another style.
At the time, the company was running out of co-founder Lisa Delorme's basement, and they were overwhelmed by the number of people who wanted to try the dresses on.
"We didn't want to say no to customers so we actually had women coming to her house and trying dresses on in her bedroom," Wieber remembered.
Eventually they realized that arrangement wasn't sustainable, so they ended up experimenting with stores in Ottawa and a quiet downtown Toronto street, before setting up at Commerce Court in the heart of the city's financial district last November.
Weiber said they were surprised by how many new customers they were finding because of foot traffic in the store's neighbourhood, but also excited about some of the customer connections they were able to build that would have been tougher to make online.
"Talking to people face-to-face really does change something," said Weiber said.
Relationship-building also appears to be part of the fuel for a handful of technology companies that are opening centres to connect with clients. While they don't aim to sell products to shoppers, they instead use bricks-and-mortar to connect with clients.
Uber, for example, has nine centres in areas including Scarborough and Mississauga, Ont., where visitors can get in-person assistance with signing up to be an Uber driver or find support for issues they have on the road.
E-commerce platform Shopify will follow suit soon, opening its first space later this year in a-yet-to-be-disclosed city.
Chief operating officer Harley Finkelstein previously revealed the space could be opened to merchants to showcase products and will be used by the company for events and connecting with developer partners or new companies wanting to use their offerings.
"It is kind of weird that a company that was forged in the fires of internet commerce is having a physical store, but it is a bit of a canvas for us to do some cool experiments."