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.