:
Hello, everyone. My name is Jason Hamilton. I work for S-Trip. We're a student travel company located in Toronto. I am officially the director of marketing for S-Trip, although since S-Trip is a small to medium-sized enterprise, my title includes web technology, communications, brand partnerships, and everything in between.
We offer travel to both university and high school students. We target a market that is very much within the digital space, both mobile technology and computer technology.
I would like to give you a brief history of S-Trip to bring everyone up to speed on what we do. In 1976, a man by the name of Inder Handa started a travel agency here in Ottawa called Handa Travel. Out of Handa Travel, Inder's son, Alex Handa, began selling student travel to his friends and to other students within the Ottawa region. In 2007, he moved to Toronto and started S-Trip as its own unique brand. Since then we have developed into one of the largest student travel companies in the country, focused on university and high school students.
That growth has come in large part from some technology improvements that we have been focusing on. I'll tell you a bit about the customer focused IT strategy that we have that has allowed us to succeed in the marketplace, particularly in recent years.
Our IT strategy could be put into a very simple formula. We leverage existing technology solutions to be efficient on the back end, and spend our development time and creativity to create real value on the front end. Recognizing our core competencies in running a small to medium-sized business are not in back end development. We do not have back end developers on staff. That's not something that we focus on. We hire back end developers who have those skills. We also use technologies that exist in the marketplace such as CRMs and content management systems.
Those technologies allow us to have a strong back end, but then we focus more on the front end. By focusing on the front end, we're able to offer a digital experience that reaches directly to our customer, something that reaches them on their terms, something that enables them to experience our product, experience travel in a way that they want to. Obviously, our customers, being between the ages of 16 and 24, are very adept and in tune with technology.
I'd like to highlight three parts of our IT strategy that I think are important for any small or medium-sized business. Number one, we are 100% on the cloud. All of our servers, all of our software, all of our documents, and anything that we would use within our business, all exist on the cloud. That allows everything to be accessible from anywhere. That allows our technology to be shifted easily. It's very easy to add somebody new into the business. Anybody new to a team who needs to find a document can easily find it through the cloud, through a search functionality that allows them to find it in an easy manner. That is one thing that certainly has allowed us to succeed.
We're also very customer focused in the way we manage our web properties. As I mentioned before, we focus very much on the front end of our website and our web properties in order to offer our customers a simple easy experience when they're online. It's amazing how many small businesses I see where you go to their website and you want to find something very simple, maybe a form that you need to download or a phone number that you need to call, and it's a nightmare even to get to that place to find that.
We focus very much on what the customer wants. We do a lot of research and a lot of focus groups with our customers to understand what they're looking for when they're on our website, and how we can best service them. It's amazing to see those businesses that are doing that. They are able to have those much quicker interactions and customers don't need to call us anymore. We certainly encourage customers to find their solutions online themselves before calling our customer hotline. We've seen as a result of that a definite decrease in the number and the length of calls we receive as a result of that focus online.
The last thing is that we have an efficient back office. We have central services located in our head office in Toronto, as well as those services that we do outsource. Once again, we focus on our core competencies and outsource those things in which we do not have a core competency.
There are a couple of business challenges to tell you about that I think are unique to any small and medium-sized business. One is communication. Technology has the amazing capability to enable faster and more efficient communication. However, being a small or medium-sized enterprise, we don't have the funds to invest in the larger IBM enterprise solutions that can often allow bigger businesses to communicate better.
We've done well with Google Enterprise as a strong solution. Google Enterprise has a much lower cost base. A simple thing like Gchat is something that all of our employees use on a daily basis to communicate with each other. We see fewer and fewer of our employees picking up the phone to call each other and more and more of them communicating over Gchat and sharing documents over Gchat. As we've grown nationally and have had to open offices across the country, it has allowed those new employees to have access to all of our resources. It also allows us to communicate with them.
We have also utilized a lot of video technology as we've grown. We have a large part-time contract team, about 500, that we hire every year. Since we are in travel, they go on our trips and run our trips. Hiring those from across the country is obviously a challenge when you can't meet them all face to face. So we have utilized Skype and other video technologies as a way to complete those interviews and trainings. Video technology has become a big part of our business from our staffing side, in terms of training, all the way through to our sales side.
Finally, the last part of our business challenge is communication. This challenge has grown as a result of international challenges. Being a travel company that sends students internationally, the technology and the web infrastructure that exist in some of the countries that you go to are a little bit slower than we experience here. So that was a bit of a challenge that we've faced, and we've been working towards overcoming that by working with local suppliers and trying to build Wi-Fi hotspots and whatnot in the places where we go. But that's a somewhat unique challenge to us because we do operate mostly in an international environment in a lot of countries that just don't have the infrastructure that we have. But as we've been able to grow, we have been able to overcome that through various Wi-Fi hotspots and whatnot.
I think that pretty much wraps up everything that I would share with you.
:
Thank you for having me.
My name is Harley Finkelstein. I'm an entrepreneur and a lawyer here in Canada.
In 2005, I was attempting to build a snowboard shop online with some partners. We found it very difficult to sell a product online at that time. We decided we would build our own piece of software to help retail these snowboards online from Ottawa. We very quickly realized that selling snowboards was a good idea, but selling software was a great idea. Ever since that point, we've been in the business of selling software to help other people build online stores.
Seven years later, Shopify has 180 employees based out of four offices. Ottawa's the primary office; after that it's Toronto, Winnipeg, and Montreal. We have 55,000 customers, that's 55,000 active stores that last year sold approximately $750 million worth of product. This year their stores will sell $1.5 billion worth of product.
The reason I'm interested in talking to you today is that I believe Canada is lagging drastically behind in online commerce and what I like to call the “new retail model”.
Currently, about 10% of total retail sales in the U.S. are transacted online; it's about half of that in Canada. That being said, our growth rate for e-commerce penetration over traditional retail is actually higher in Canada than it is in the U.S. So we're getting better, but we are very behind.
A study came out a couple of days ago from Forrester that I want to cite a few metrics and data points from, to give you some context for why I'm concerned. Of online spending by Canadians, 25% is not happening at Canadian online stores. Of the online shoppers who were surveyed, 68% say they currently shop online outside of Canada. Of Canadian consumers, 72% say that they shop outside of Canada because they could not find what they were looking for from a Canadian online retailer. When they did shop in Canadian stores, the biggest complaint from Canadian shoppers, according to Forrester, was shipping prices, and 68% of those polled found Canadian online stores' shipping rates to be exorbitantly high.
There's a lot we can to do to help Canadian merchants to move online. My view of the future is not one where online and offline are separate, but it all being commerce. Whether you buy it in a store and have it shipped to you, or you buy online and pick it up in a store, I believe the future of retail is going to be in commerce in general, not a separation of online and offline. So far, Canada is certainly lagging behind.
When I look at our growth rates in online stores in other parts of the country—and Shopify currently has stores in more than 100 countries—our growth rate is much slower here even though we have 5,000 online stores here in Canada. The risk aversion is much higher here, and people's propensity to try out new technology is much lower. This is ironic, because we are a Canadian company, and we are currently considered to be the smartest company in Canada by PROFIT Magazine. We've been the fastest-growing company in Ottawa for three out of the last four years. So we have the motivation, and we are very much interested in helping this change happen in Canada.
We're working with great organizations like the Retail Council of Canada and Canada Post to help encourage and inspire other Canadian retailers to move online. I provided all of you with four examples of online stores that have recently joined Shopify. One of them is a local store here called La Bottega. It's a local grocery store that's been in Ottawa for the last 50 years. Until last year, they sold their products in a geography that was basically Ottawa and Gatineau. Today, because of their online store, and because they're able to retail and sell their products coast-to-coast, their business has expanded dramatically. They're selling olive oils and balsamic vinegars from P.E.I. to Vancouver.
The other store I want to profile for you is a jewellery store, Biko. This is a girl out of Toronto who had a passion for designing jewellery. The problem was nobody wanted to buy her jewellery. No retail buyer wanted to purchase her jewellery for sale in a retail store. What online retail and commerce have provided her with is an ability to go direct-to-consumer. She didn't have to convince any buyer to accept her wares; she was able to sell directly to the consumer, which is very democratizing.
Right now 5% of retail sales are done online in Canada, and that's going to grow very rapidly. The question becomes, what's going to happen to these Canadian stores? Are they going to take the plunge and move online? Are they going to close their doors? We know that over the last 10 years the labour market for retail has slumped quite a bit. Or are they going to be a little bit more ambitious, and a little bit more inspired, and try to expand their businesses in other online fields?
In October 2011, the Canadian Federation of Independent Business stated that 56% of SMEs responded that the cost of implementation does not justify the investment, as an obstacle for accepting online payments and commerce. Shopify is $29 per month. I'm going to repeat that: Shopify is $29 per month. There is no way that the cost is prohibiting them from moving online. The problems are education, inspiration, and risk aversion.
There was one more study. In 2011 CEFRIO came out with a study that said 70% of Canadian small businesses had a web presence, but only 18% were selling online. We as Canadian business owners understand that online is important. What we don't understand yet is how online is going to help our business grow.
I want to contrast that with a program that I understand is currently being undertaken in Ireland. Ireland created something called the e-commerce website development fund. They've set up this fund to provide Irish small and medium-sized enterprises—or microenterprises—with e-commerce supports to encourage these SMEs and micro-businesses to make greater use of existing web technologies. They've put $150,000 per quarter into this fund to allow these small businesses to use the tools and to learn more about how to build or expand their businesses online.
Currently we have brick and mortar and we have “click”. I believe the future is “brick and click” whereby retailers sell online and off-line. Best Buy is shrinking their stores right now with something they're calling “showrooming”. Showrooming is a fad in which people go into these large retailers; they play with the devices, but they don't make the purchase in the store. They leave the store and they make the purchases online where it's more convenient, and they can do it in the comfort of their own home.
Retail is changing very rapidly. The next couple of years will be a very exciting time for retail. I believe that right now most Canadian and small businesses are doing it alone. Shopify is trying to be the evangelist of that here in Canada, but I believe there's a lot that we can do to help.
Thank you.
:
I'm François Bouchard. I'm the owner of The Country Grocer and OnlineGrocer.ca, so our store is a little bit different. We're very much a brick-and-mortar store that decided to go online to expand our marketplace. Our shop is here in Ottawa, in the south end. We have 10,000 square feet, 26 employees, and the grocery store has been there for 50-some years.
Back in 1996 we decided that to expand our business model we should actually go online. At the time it was more from looking at predictions of what was going to happen and what we were going to do to keep our market share. In the grocery business we run on a margin of 1% to 2% as the net bottom line, so anything we could do basically to increase our revenue stream without increasing our overhead cost was the way to go.
We were the first to launch in Ottawa and the third grocery store to launch in Canada, which we did in 1997. Interestingly enough, our marketplace has now grown, with 96% of the customers we serve online being outside of our trading area, meaning an area of more than five kilometres around the store.
We now service customers across the country and in the States. We work with Foreign Affairs for expatriates who are posted abroad, and we do a tremendous amount of business up north in Iqaluit, Resolute Bay, and other remote communities.
For us, the key was to really offer that expansion to other customers—and to do it. It hasn't been easy. Obviously, we started in 1996 when it was all dial-up and we had to go through it. We're a small store, with 26 employees. We don't have resident IT people, and we had to grow the business as we went along.
We continued to grow that business, and that business model is unbelievable. Interestingly enough, one-third of the people who actually shop online do so for someone else. For example, we have two universities and two colleges here in Ottawa and we have a lot of parents who actually shop for their children who are here. The benefit of that is that mom can be in Halifax and shop for her children who are here. The disadvantage is that when we technically show up at the dorm with the groceries they say, “I guess mom is not sending money”. So we get a lot of that.
Some hon. members: Oh, oh!
Mr. François Bouchard: Interestingly, in the marketplace we work with the hospitals here. Hospitals are actually forcing people to go back home a lot sooner. Obviously, the biggest concern for someone is, “I've had a hip replacement, a knee surgery. How am I going to get groceries?” We partner with the establishments to say that this is an offering that we do.
We partner also with a lot of people, with seniors and baby boomers who are getting to a certain age. We have customers in New Zealand ordering for their parents and doing it online from New Zealand. We actually deliver the groceries and have become more than just a shop or a grocery service. As we've discovered, on Monday the cleaning lady will show up, on Tuesday morning we will show up, on Wednesday, the VON will show up, and now every day somebody is checking on mom, who is 82. So it's become more than just a grocery shopping.
Interestingly enough, too, what we've found at that store level is that grocery shopping is an emotional thing. You've all been grocery shopping. It smells nice and it looks nice. Apparently, a lot of people said that online grocery shopping wouldn't catch on and that people wouldn't buy produce online, because there aren't these impulse things. Our average basket online is eight times bigger than it is at the store level. People are actually online, they have the time to do it, they're trying to justify the delivery costs, and on a Sunday afternoon, they have time to do it, and do it properly.
A lot of our customers are small businesses. Who is going to go out and get the lunch or the drinks, or whatever else? That is now all done online.
As I said, we have a lot of Canadian expatriate customers in the States who are homesick. They're looking for specific products, and we've partnered with different companies to be able to offer those products to them, and have gone through all the hoops and channels to be able to ship those across the borders. We're certainly able to do that on a regular basis.
We've partnered with First Air and Canadian North to actually ship groceries up north on a daily basis as well.
One of the challenges we have faced is actually keeping up with technology, because obviously customers move on. We still have some of those customers from 1996 who, I wouldn't say, are still on dial-up but are certainly on the old computers that aren't as quick and reactive. We have all these people who want to think that grocery shopping, basically, is like a video game and that they can go click, click, click, and everything falls in. We have to measure all those things.
We're also trying to get more information to our consumers because now they want ingredient listings, they want allergen listings, and they want all those things that actually matter to them.
As to consumer nutritional facts, we're working with GS1 Canada to capture all that data, to actually include it on our website as part of our service. That's key, and that's where we're certainly improving it. We're in the process of doing so.
As to some of the challenges, obviously, transportation is a big thing. To ship it up north, it's not the cost of groceries, but actually the cost of shipping the products up north to them. Obviously, it's the same thing to the States.
Payment is a big issue—Internet fraud and credit card fraud—so being a small business we have to put all of those parameters in place to try to keep ourselves....
What we see, as well, are barriers. I've talked about shipping to Iqaluit and shipping down to the States. I can't ship to the province of Quebec. We have a lot of people here in Gatineau who are requesting items, but because of barriers—milk quotas and all kinds of inspection reports and different things—we cannot ship there, unfortunately. So there is an untapped market for us to be able to ship there because it's easier for us to get to Gatineau than to Stittsville or Kanata.
Certainly, we have a lot of push-back, but we're working through those changes.
Up north it was the same idea; we had a great following, and then they changed the program from food mail to Nutrition North. No retailer in Ottawa is allowed to actually ship through the Nutrition North program.
Internally we work with all of those challenges. We see a lot of opportunity. We're very excited about the future. As my colleagues have said, there is a tremendous amount of growth; the customers do want that.
We're early adapters, and we've been there all along. We've moved along with all the technology. We're actually responding to consumer needs to try to get more information. We believe, as my colleague here has said, it's “brick and click”, not brick and mortar. Our credibility was having a store when we first started, where customers could actually come in and see us, and see that we weren't shipping out of a warehouse: we'd get produce seven days a week, everything was fresh, and we'd be there to service them.
We now have loyal customers who have been shopping with us for 13 or 14 years, and yet most of those customers we've never actually seen face to face. Our customers from up north will actually fly to Ottawa, and I'll meet them at the airport and have a discussion, but they have never actually set foot in the store.
It's a different way to do business, for us, and it's huge. That is where the growth is. We want to continue doing that. We see great opportunities with the baby boomers along the way.
I thank you for the opportunity to be here today.
:
Thanks very much. Again, thank you for inviting SaskTel to speak to you.
What I will focus on today is essentially rural infrastructure. Your other presenters have talked about the slower communications and about online. Again, online purchasing in rural areas could be very advantageous. We have something in the order of 65% of our small businesses in Saskatchewan located outside of Regina and Saskatoon. They're spread over something in the order of 660,000 square kilometres.
We have a number of items, and I was hoping that we could describe how we have to try to serve some of those areas. We have wired Internet in every town of over a hundred people. We have full-fibre backbone. We have over 400 towers with 4G, and we're doing satellite in remote regions. That sounds like quite a bit, but it's still not enough. We have a population density that can only support one facilities provider. There really isn't a business case to go out there and do various facilities-based providers. So what we're trying to do in Saskatchewan, with our providing the facilities, is that there is competition in telecom, in other online services, or in other services—not in the infrastructure but in the services themselves that go with that communications infrastructure.
One of the things I'd like to point out today, though, is that some of the new decisions.... For example, mandated roaming ensures that there only be one service provider in most of rural Saskatchewan; there's no longer a business case for someone else to begin to build there.
I said all those small businesses are in rural areas, and they really do need connectivity if they're going to continue to do that. Satellite will reach most of the places, but satellite doesn't always meet all of their needs because of the latency. As you heard from the Federation of Canadian Municipalities, we also need some other kinds of speed, and again they mentioned some of that latency as well for some of their businesses as they go forward.
Rural businesses also lack some of the ICT expertise. They have an option now with infrastructure that they use cloud-based kinds of services, services that can provide them with the kinds of base that they need to begin to do business.
I talked about all of the wired Internet and other kinds of things in small-town Saskatchewan—and it doesn't matter, it can be small-town Saskatchewan, Manitoba, or Alberta and most of B.C. Most of the medium-sized businesses do not live or reside right inside the town itself. They are on the peripheral because of taxes or environmental or they get the space to do that kind of thing. In many instances they are just outside of where we can provide this wired Internet. It's just because of the technology called DSL technology. When we put in fibre, it will be just outside of those areas.
So we have a real problem in reaching those medium-sized businesses, and it's very expensive to meet them with fibre or other kind of wireline. I have in our presentation that it costs us something in the order of $18,000 per kilometre to plough fibre. If your business is four or five kilometres outside of a town, that can get to be very expensive. So we're looking at other kinds of new wireless options.
As we go down these new wireless options, we need spectrum. As I said, everyone, every company, every service is running over our infrastructure. We need access to that kind of spectrum to provide that for those businesses. There was a recent decision by the federal government on the 700-megahertz spectrum, one of the most valuable rural spectrums just because it reaches very far: 30 kilometres away from a tower. A tower can cost us a $1 million to build, so we don't have a lot of people we can meet in that way. With the 700, we can meet that. We can provide the new technologies with LTE over what our entire footprint is and meet the needs of a lot of people.
The problem with those decisions that came with 700 megahertz is that the auction format favours national providers. It maximizes revenue for the country as a whole, regardless of the bids of the individual licences. So if a national provider provides a bid for all of Canada, that bid will supersede what might have been just a larger bid for Saskatchewan or that of some of the other small providers like Eastlink in the Atlantic and Vidéotron in southern Quebec.
After all the dust settles on the auction, much of that spectrum will go unused in rural areas for at least 10 years. People are buying that spectrum for urban areas. They can go...and now they have mandated roaming on SaskTel's towers. They don't have to build any more towers; they're using our spectrum. They're not going to use that spectrum. Right now, we have no way to go to Industry Canada and ask to either use that spectrum or share that spectrum at some sort of reasonable cost as we go forward.
For policies to stimulate some services in rural areas, we've got to recognize in our policies that rural can only support one infrastructure. We've got to support that rural infrastructure. The U.S. has recognized this, and it's developed policies to ensure that the rural-based infrastructure is healthy and expands in the new areas. With everyone using our facilities, we can't necessarily expand because we're not getting any revenue, or any substantial revenue, to go out and expand those services. Scarce spectrum resources shouldn't be allowed to lie unused. We should be able to share this unused spectrum until the owner wants it, and then we will go.
I'm sorry; I'm almost taking too much time.
Lastly is that national companies using existing rural infrastructure to reach businesses have to contribute to the real cost of building in rural areas. We can't leave it just to the rural providers as we do that.
With that, I think my time is up. I apologize if I've gone over.
Thank you very much.
:
I think everything is working now.
I will share with you two concerns I have regarding a very important aspect of some recent decisions. You will all be able to comment afterwards.
Mr. Hersche, you spoke about the upcoming auction of the 700 MHz spectrum. You fear that it will not be a real benefit for a number of rural areas. I would like to tell you that, in southeastern Quebec, in the mountainous areas, we share your concerns.
Could you perhaps tell us a little more about possible solutions? You started to speak about it. You had some very interesting ideas.
Another component that I found fascinating in your presentation was the concept of…
[English]
bricks and clicks.
[Translation]
Based on that approach, if retailers don't ride the wave—in other words, they do not adopt online sales—they will simply be victims of it.
I do not agree with the 700 MHz spectrum. I think it should be rented, not sold, but it is being sold. It is expected that the proceeds of the 700 MHz sale will go into the consolidated revenue fund. However, no specific program is dealing with serious problems like that.
Since we are talking here about a sale that will generate hundreds of millions of dollars, Mr. Finkelstein, do you think it would be relevant to use the funds for initiatives like the Irish one you mentioned?
The idea is to avoid having our main street merchants be completely overtaken by the new technology. We need to help them address these major challenges. I think that is the idea here.
[English]
bricks and clicks.
[Translation]
I would like to hear your comments on these two major concerns.
What you said is really interesting, because a lot of what's happening right now in the retail space is that people are assuming that if big retailers don't take on the new technology, they will become dinosaurs, they'll become extinct. I disagree.
I think it's an amazing opportunity for traditional retailers to expand. The reason I brought up La Bottega is that this is a company that only sold in a 35 kilometre radius for 50 years and now they're selling across Canada by adding one new layer to their business in a very simple way.
The other thing you'd mentioned in terms of spectrum was whether this precluded certain businesses without access to Internet connectivity from participating in this? Absolutely. Having Internet connectivity is a non-starter: if you don't have that, none of this makes any difference whatsoever.
In my world, most people are connected. I have an 82-year old grandmother whom I love very much, who FaceTimes me every single evening before bed to say goodnight. I only bring it up because this is someone who didn't grow up with the Internet in her hands. She lives in the Laurentians; she doesn't live in a city, but she has access to it.
So I think before we can get at some of the sexy stuff of what technology can do for retailers, it goes without saying that connectivity needs to be something that is of primary concern.
:
Foot in mouth, foot in mouth.
There's an app, for example, it's a real app. It's called RedLaser, which allows you to take a picture of any bar code you want and tells you where you can buy that product more cheaply within a certain geographic radius. So you can go into Best Buy, play with the camera, take a picture of the UPC bar code, and you may actually be sent to a different store to purchase it. But Best Buy is the one that's actually showing it to you.
The other thing I would say is that in terms of keeping inventory in these stores, most of these big box stores like Best Buy have a ton of inventory in them. The truth is that I want to go in there. I want to ask questions. I may want to feel the weight of the camera. But I personally don't need to walk out of the store with a camera. I may want to go on a bike ride after that. I prefer to have it show up at my door.
A company was just purchased by Google a couple months ago named BufferBox out of Waterloo, a Canadian company. What they do is that they create these boxes all over Toronto where you can basically send things to your box and pick it up using a little code. It tells you which box to go to grab it from. I think that's the future.
Now some people will still want to pick it up in store. Certainly people who are used to doing that traditionally will still want to do that. But that's why I don't think the separation between online and offline are going to stay the same. I think the “e” from e-commerce will be dropped and no matter how make transactions, that's going to be commerce—the farmer's market, trade shows, online and offline.
But because of showrooming, I think we're going to see these big box retailers looking a lot more like Rogers stores in the future, where you just go and play with one thing and then you leave.
Thank you to all the witnesses for being here today. You're providing us with lots of information for this report and lots of information, I think, to what we can do to support the small and medium-sized enterprises right across the country.
I know, Mr. Finkelstein, you were talking about telling the story and saying that it was really hard to talk about Canadian companies that have been hitting home runs. Well, I do think that you're one of those companies, from hearing what you're saying. So congrats on being one of those companies.
It's interesting that you brought up the Forrester Research report. I'm going to quote the report a little: Canadian retailers who have delayed launching a robust e-commerce website are running out of time and face “their last wake-up call”.
Furthermore, the report states:
In the eyes of the consumer, the downsides of buying from a U.S.-based retailer rather than a domestic Canadian retailer are diminishing. Canadian retailers should be shaking in their boots.
So given these statements and your record of servicing clients in Canada and abroad—and I should mention the Foo Fighters website here, which I know we talked about as well—do you believe that Canadian businesses are lagging behind our international counterparts in establishing e-commerce or, as you even called it, the “new retail model” opportunities?
:
I'd say that the first thing is competition. There's a lot less competition here, which means that companies can charge more. They have this great thing in the U.S. called the “one box”. Basically, you're given one box. If you're a small business in the United States, you can put anything you want in it, no matter what weight it is. If it fits in the box, it's a set price.
As a small business that may not have any more employees than just him or her, having that type of ease of use on the performance side is very, very important.
To put myself through law school, I sold T-shirts online, and I had to go to the post office on Friel at the corner of Rideau Street every day after class. I would sit there and try to figure out, well, what's the best rate for these two shirts? Do I send them separately or do I bundle them together? I'm a pretty savvy guy and I had trouble figuring it out. What does that mean for all other small businesses that are trying to ship?
I think Canada Post has done a good job of improving on that, and I've worked very closely with Mr. Chopra, CEO at Canada Post, to help that, but it's still not great. It's still pretty complicated, as a Canadian small business, to ship things. For example, the fact that we have HST in certain provinces and not in other provinces is confusing. The fact that if I'm selling children's clothing so I don't have to pay certain taxes is additionally confusing. I don't think it's just the shipping or the [Inaudible--Editor] on its own, but I think they do have an easier time in the U.S. registering a business, launching a business, and scaling a business than we do have here in Canada.
:
In terms of making sure that everyone is connected, they have a number of plans in the United States, and they're putting some dollars away with that.
I know we can't necessarily do that in Canada; there's the fiscal situation and those kinds of things. Again, I referred earlier to the high cost of making sure that everyone can participate.
All of the kinds of businesses that I talked about in our presentation, which are just outside of Sudbury or other small Canadian towns, need to be connected if they're going to go online, or if they're going to actually go out and buy Canadian online. They're really left out of that new mode of doing business.
It's not simply a matter of doing the traditional things going online. People do that a lot. Now, for example, because of changes in how they buy things, every farmer has to do their own marketing online for wheat and other kinds of things. They need broadband to do their business.
If you're going to run large operations, such as hog barns, you're not going to locate that in a town. Therefore, they need access to these large bandwidths.
Yes, it disadvantages most of our businesses in rural Saskatchewan, because 65% of our small businesses are in rural Saskatchewan, because they are outside of town.
Thank you, witnesses. This is very interesting.
I want to focus on what are the challenges and the hurdles for Canadian retail businesses in getting involved with online sales. You've mentioned that 5% of retail sales are online. I think you said it was 10% in the U.S., and that is improving, but very slowly. What are those hurdles?
I'd like to share an anecdote. Things are constantly changing if you're in business. Death and taxes are secure, and you know that's happening, but if you don't change with the times, I think you may be a dinosaur. I'm thinking back to way before your time, when there was a washing machine called the “wringer washer”. It didn't have a spin cycle. It had wringers or rollers that you put the clothes through to squeeze out the water. Those washers became obsolete, but a number of people still had them, and probably about 40 years ago the wringer washers all died: they broke, and they wore out, and people weren't getting them repaired anymore because they didn't compare with the new technology.
We have a changing technology now, and the anecdote I want to share with you is about a very successful bridal boutique in the Fraser Valley. What's happening now is that a prospective bride will go in there and try on different dresses. She'll try on a dress and say that it's fine, that she likes this dress, this model, in this size; she uses up the store's time, the staff time, and then she'll buy it online. They are being forced into competing with themselves. There are two prices. There's the sale price in the store, where you're getting the service, but if they do not provide a competitive price, they won't get the sale. This is the challenge they're faced with: eventually you go to the lower denominator.
Today we go into stores that used to have a lot of sales help, but it's not there any more. A bridal boutique like this may not survive. To survive, they may have to start selling online, but they can't even do that if the manufacturer is selling directly to the customer: you go right from wholesale to retail with no middleman. Things are changing.
What are the hurdles for businesses like this boutique or 95% of Canadian business? I heard from that person when they were in a consultation process when the went on pre-budget consultations; I heard their story. Another common problem was that the wholesale price Canadian retailers have to pay is at times more expensive than what the U.S. market is retailing for, because of tariffs. That's another issue. You have shipping and tariffs.
What is the future for Canadian retailers? What are the hurdles?
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Very seriously. Shopify is not a payment gateway, but we do work with 65 of the largest payment gateways in the world. We are PCI level 1 compliant, which is the highest level of PCI compliance, meaning that we do have to spend quite a bit of time monitoring it.
The way we do it is we self-assess. We have a fraud team of about six people who work at Shopify, and their entire job is just to go out and make sure that the things being sold on Shopify are proper—they're licensed properly and they're not counterfeit.
What's interesting about the Internet, though, is that a lot of self-monitoring goes on in general. If someone purchases off of us a fake Canada Goose jacket, and they figure out that it's fake, that store they bought it from will probably die a death of a hundred sorts, simply because of Twitter.
The opportunity there is that you can use social media, and you can use that technology to promote your brand to drive people to your store. But if you screw up, that same social network can also ruin your entire store.
So we do rely on the fact that, when they set up for Shopify and they sign our terms of service, they do acknowledge and they do commit to the fact that the goods and the products they are selling are not counterfeit. We also do our own checks, because we can never be too sure. It is becoming something that we are investing in as much as possible, because it's important.
I have a Canada Goose jacket, and I bought it off Canadian Icons. Now, Canadian Icons is not Canada-goose.com, it's a retailer. But what I did was I went to Canada-goose.com, and there's a section that says “Find a Retailer”. I put in the URL, the domain name, of the actual retailer, and within a matter of seconds I knew that they were an officially licensed retailer.
So I think the manufacturers have a responsibility to use technology to make it better. If I put in another retailer, such as Winterjackets.com, and it came back that it wasn't an authorized retailer, I never would have made the purchase.
To use the legal maxim, there is a little bit of caveat emptor, “buyer beware”. I think that is important. Again, because you have so many more people who are online, you have more retailers and you have more consumers, the onus does need to be borne by the consumer. But I do believe that big brands like Canada Goose, in going ahead and creating a directory of who are authorized retailers to buy from—that's using technology in the right way, and that will prevent fraud.