Industry Committee on May 7th, 2013

[The Chair, Conservative, David Sweet]

We'll now move on to our five-minute round, and Mr. Braid, for five minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for being here this afternoon.

Mr. Finkelstein, you've explained that, from your perspective, you think that Canadian SMEs are reluctant, perhaps risk-averse, to more widely embrace digital technology.

Do you have any thoughts or suggestions on how we overcome their reluctance or risk aversion? It's not cost, necessarily. You've spoken to that.

[Harley Finkelstein]

I don't mean to repeat myself, but I think a lot of it is inspiration. I think we have to tell the story of Canadian business a little better.

Now that Shopify is a successful business, I feel that one of my responsibilities is to help other Canadian entrepreneurs realize that you can build a company and you can stay in Ottawa and you can stay in Canada. I think the same thing goes for these retailers. I think we need to tell the story of how François had gone ahead and used the Internet to expand his business beyond anything they believed possible 20 to 30 years ago.

There's a great business called Canadian Icons, out of Aylmer, Quebec, that sells Canada Goose jackets. If you order during a snowstorm, they'll deliver to you by hand within 90 minutes. They're a multi-million-dollar company established for less than one year now. They were inspired by other Canadian companies doing a similar thing out in Vancouver. I think we need to inspire more, we need to tell their stories more. We don't have too many massive Internet home runs here in Canada as they do in the States, with Amazon and Zappos, companies of that sort.

Frankly, Canadian Tire started selling online only a couple of years ago. We were selling online before they were. I think a lot of it comes down to just inspiring them with different tools and inspiration. Things like the Canada Post E-commerce Innovation Awards, which started just last year, will help, but we still need to do more. We need to show them that these success stories are out there.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay.

Continuing on that thread, then, do you have any specific thoughts or suggestions on how we share these stories? If it's about awareness and inspiration, then how do we get the information out?

[Harley Finkelstein]

The Internet, of course.

I'm actually just kidding. But beyond that, I think the media has done a decent job of highlighting some interesting, cool, tech companies here in Canada, but if you open most of the major newspapers in Canada, the tech stories are about U.S. companies not Canadian companies. Maybe they're a little sexier and a little more interesting, but I think we can—

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

No, they're not.

[Harley Finkelstein]

I don't think they are. I think maybe they sell more papers. Maybe RIM is an interesting story.

[Voices]

Oh, oh!

[Harley Finkelstein]

I think we need more role models here. I think the companies here that are doing really well, like Canadian Icons.... It's a shame that not everyone knows about this story, that three guys out of Aylmer, Quebec, have built a million dollar company in less than six months selling Canada Goose jackets using real time delivery. I think the media can do a better job. I think we as small business entrepreneurs can do a better job. I think we all have a responsibility to do that.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you for sharing that neat story about the business in Aylmer, just across the river.

Mr. Finkelstein, what do you think the future of retail looks like in three to five years?

[Harley Finkelstein]

I'm really happy you asked that question.

Ten years ago, if you wanted to sell a product, you had to do a couple of things. You had to raise some money to manufacture that product. You had to manufacture that product. You then had to find an agency or a distributor to distribute that product. You had to find a retailer to sell that product and then a consumer to buy that product.

One of the most interesting parts about the Internet is that it's democratizing, that someone who wants to make a new pen that is the most amazing pen ever can manufacture it. Maybe he builds a prototype using a 3-D printer. Maybe he raises money on a crowd-funding platform like Kickstarter and then he can sell it direct-to-consumer. He can remove all of the intermediaries between him and the end consumer, and do that while charging much less money and making a lot higher margin. I think that's the future of retail. It belongs to creators and curators.

The days of these hegemonic retailers taking all the profit margins away from the original manufacturers are gone. I think that in the future everyone is going to be an entrepreneur. I think if someone has an idea for a new type of anything, they can retail it themselves directly to consumers. It's democratizing.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

I like the future that you've painted.

Mr. Bouchard, in my remaining time, tell us about those iconic Canadian products that you sell from your store to Canadian expatriates.

[François Bouchard]

It's interesting because it's not your maple syrup, smoked salmon, or things like that. Often it's chocolate bars, something sweet. So you had a lot of people looking at it in Las Vegas when they had the construction boom, and they wanted chocolates that were available in Canada, Smarties for example, things like that—M&M's in the States and Smarties in Canada. Robin Hood flour is another good example. I can't find that in the States. There's a bit of a shipping issue. You're shipping white powder through customs—

[Voices]

Oh, oh!

[François Bouchard]

—but we did manage to do that.

It's certainly been interesting. The requests are interesting because people come online, they find you and they say, “Can you please...”. And cost is not an issue because food is to the heart.

Thank you.

[The Chair, Conservative, David Sweet]

We'll move on to Mr. Thibeault for five minutes.

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you, Mr. Chair.

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?

[Harley Finkelstein]

I think currently we are lagging. Forgetting about population size, because that would be misleading, but just looking at percentages as opposed to real numbers, we have half the online retail penetration that the U.S. has. The most recent numbers that I've seen show that online retail in Canada is growing at about 14.5%. It's about 14% in the U.S. So we're growing faster. That's only been in the last year or so. So there is a little hope there. But I do think we are lagging behind. I think as consumers we should be pushing our favourite stores to sell online.

I use a service called Manpacks that delivers me monthly subscriptions of razors, underwear, and T-shirts. Every month I get a new package of razors, underwear, and T-shirts delivered to my house. That is revolutionizing the way I shop: I don't have to shop any more.

I think as Canadian consumers we should demand those type of things. If a retailer in Canada is having trouble offering free shipping, they should figure out how they can facilitate free shipping and be able to afford that cost. So I think it applies to both sides. As consumers we need to be more demanding of our retailers and our big brands, but as retailers we need to be more innovative.

Canadian Icons can't compete directly with Canada Goose as a corporation because they're the original manufacturer. The difference, however, is that Canada Goose is not going to deliver to you within 90 minutes. So I think innovation and creativity, which makes Canada so great, is exactly what's going to get us in front of the pack.

[Glenn Thibeault, NDP, Sudbury, ON]

Fantastic. Thank you.

I come from Sudbury. It's not a small city. We're a city of 150,000-plus people. Fifteen minutes outside of my city, parts of my riding are on dial-up and can't get cell service.

Many of the individuals who live out there are small business owners, and they are wanting to be part of this digital e-commerce world, but they can't get there.

From what we're hearing—if it's spectrum or if it's rural broadband—is that somewhere you think the government should be going and looking at, so we continue to find ways to roll out spectrum and broadband to ensure it gets to these types of communities right across the country, so everyone can play in the global economy?

[Harley Finkelstein]

How ironic is this: the fact that the people who can benefit most from the Internet and the democratization of technology are the very people who don't have access to it?

I cannot go ahead and build a brick-and-mortar store across the street from a Walmart. I would have to get the building, leasehold improvements, inventory, payroll, and all those other things. However, I can compete with Walmart, having no money, in the online space because the technology has a low barrier to entry.

But the very people who need to compete and are having trouble competing don't have access to this democratization technology. Who cares? I think that's a problem.

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you.

Go ahead, Mr. Hersche.

[Robert Hersche]

I'd like to say something to that question. I'm sorry; I don't mean to take up your time. But there is a way to start bringing that out into rural areas in a way without coming to government taxation.

We had what was called a high-cost serving fund to stimulate the affordability of basic telephone services. Unlike in the United States, that fund, which really only taxed 0.06% of telecom revenues, does not apply to wireless and other kinds of things that could give broadband outside of Sudbury or other kinds of places like that.

I'm sorry for interrupting.

[Glenn Thibeault, NDP, Sudbury, ON]

You don't need to apologize for interrupting. That was a great answer. Thank you.

[The Chair, Conservative, David Sweet]

Mr. Hersche, answers are never interruptions. That's fine.

Thank you very much, Mr. Thibeault.

Now we'll go on to Mr. Carmichael for five minutes.

[John Carmichael, Conservative, Don Valley West, ON]

Thank you, Chair.

And congratulations to each of you on your innovation and creativity.

I want to begin with you if I could, Mr. Finkelstein. I want to talk about Canada versus the U.S. You were talking about some of the numbers, 5% versus 10% in terms of online retailing versus retail sales numbers. I'd like to try to understand your platform, just how it works, because I'm not sure I have quite got it. It could be a vintage thing.

First of all, how many shops or how many retailers are part of your organization?