Canadian mattress maker Endy is among a growing number of companies that started as online-only operations before moving into physical locations.
In forest management and agriculture, controlled burns – where fires are purposely set and monitored – are generally a good thing. As long as they’re prevented from becoming full-fledged conflagrations, they clear out dead growth, return nutrients to the soil and make room for newer plants to get sunlight.
Some businesses and industry experts believe a similar renewal is happening with the retail aspect of cities. The challenged old guard, punctuated by high-profile bankruptcies or store closures, such as Sears, Hudson’s Bay, Toys "R" Us and Target, is slowly giving way to a newer generation of retailers, many of whom are born and bred on the internet.
This new wave is expected to be defined by fewer, smaller retailers, data-driven and highly specialized. By some perspectives, it’s a benevolent development for cities and the people who live in them – a return to the mom-and-pop, community-oriented feel that prevailed before the rise of impersonal big-box chains.
“When you go to Europe, there’s a butcher, there’s a baker, there’s a cheese shop,” says Mike Gettis, founder and chief executive officer of mattress retailer Endy. “People are now going back to that more human way of retail.”
Toronto-based Endy is part of this wave, which is made up of a growing number of companies that started as online-only operations before moving into physical locations.
It’s following the likes of glasses retailer Clearly and suit maker Indochino, both based in Vancouver, as well as Montreal-based clothing retailer Frank and Oak, all of which have opened bricks-and-mortar stores over the past few years.
Ottawa-based Shopify, which sells tools to merchants that enable them to set up their own e-commerce operations, also this month opened its first physical location, in Los Angeles.
Endy, which has been selling mattresses online since 2015, now has its products in 17 boutique retailers across Canada, with plans to open its own dedicated store.
Online operations inevitably have to expand into the physical world, Mr. Gettis says, because there’s only so much room for growth online. Despite quick growth with e-commerce overall, online shopping still makes up just a small fraction of total retail sales – less than 10 per cent, according to Canada Post figures.
Endy hasn’t hit that inflection point yet – it was named Canada’s fastest growing retail company last month by Canadian Business, with revenue projected to hit $50-million this year – but it’s coming soon, Mr. Gettis adds.
When the company does open its own stores, it will want to be in full control of the experience. Customers will also expect the same customization and personal attention as they find online, which they don’t necessarily find at big-box retailers.
“If we put our mattress in another store, we have less control over how people are trained and how they operate,” he says. “Having our own experience and making that something customers enjoy … we want it to be streamlined. It’s about cohesiveness and long-term brand building.”
Toronto-based StickerYou, which sells custom stickers and decals online, is also planning to open a store in its home city by the end of the year.
Unlike the old guard of retailers, the company doesn’t believe it needs more than one or two locations in a city. Customers are willing to travel further to get a better product coupled with highly personalized service.
“The people who make [these products] are becoming something that consumers celebrate more. It feels closer and more relevant,” says founder and president Andrew Witkin. “People value customized products more than they do mass-produced products.”
There is the risk that this controlled burn in retail regeneration could turn into a full-fledged inferno if real-estate prices continue to skyrocket. A report last year by real estate company Jones Lang LaSalle, for one, predicted commercial rents in Toronto could shoot up 50 per cent by 2019, with other major markets seeing similar increases.
Such predictions suggest that retail could die outright by making it too expensive for new, online-based stores to get a foothold in the real world.
Mr. Witkin says that hasn’t been his experience. Property owners’ interests are actually aligning well with fledgling e-commerce retailers, he says.
“There’s a greater supply than demand, mainly because you see all the retailers who have gone out of business. There are a lot of options for us,” he says. “[New retailers] just don’t want to be held to five-year, 10-year leases until they can really get their model figured out. From what we’ve seen, there’s much more flexibility than what we’ve heard.”
Real estate experts agree – that decreasing demand for space is likely to moderate rent increases, which will indeed clear the way for next-generation retailers. Consumers, meanwhile, aren’t likely to lose their zest for shopping any time soon.
“The aggregate demand for retail space might go down, or might not rise as fast as populations do,” says William Strange, SmartCentres Chair of Real Estate and professor of economic analysis and policy at the University of Toronto.
“Retailing is still going to matter and there will still be locations specializing in retailing, but those locations are going to have to reinvent themselves to continue to be competitive.”
Mr. Gettis warns, however, that this era of smaller-feeling, more community-minded retail isn’t likely to last forever. It’s possible that the mom-and-pop to big-box cycle repeats itself in the future, where specialized brands such as Endy, StickerYou, Clearly and others might end up consolidating into a new wave of department stores or malls.
“They’re not linear, trends go up and down,” he says. “It’s cyclical.”