Cities as Digital Warehouses: How Local Retail Can Compete in a Digital World

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Cities as Warehouses:
The Survival of Main Street Retail
in a Digital World

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© Yellow Pages Limited 2016

1
retail (noun)
/ˈrēˌtāl/
the sale of goods to the public in relatively small quantities
for use or consumption rather than for resale.

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Table of Contents
Executive Summary 4
The Evolving Landscape of Canadian Retail 8
Retail’s economic contribution to the Canadian economy 9
The internet is changing everything 11
More choices, changing habits 11
Power shift towards collaboration 13
Case Study: Don Tapscott talks retail 14
Ecommerce marketplaces are dominating 17
The new competition, know it or not 19
Impact of these giant marketplace players 20
Ongoing impact of the global financial crisis 21
“Bricks and mortar” is not going away 22
What’s the future of retail? 23
The Digital Retail Customer 24
Avid online researcher 25
Armed with information 26
Showroomers and webroomers 27
Seeking and using omni-channels 31
In-store preferences over online 31
Online preferences over in-store 32
Mobile is on the move 32
Big fans of free shipping 32

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The Retailer’s Imperative 36
It’s a digital world 37
The challenges of an effective digital presence 38
Digital adoption among retailers 40
Carving out a place on the digital street 43
Blending digital and physical 44
Case Study: Frank + Oak: Building a global brand across platforms 45
The augmented retail experience 47
Case Study: Selling wine online 48
Getting started 50
The questions before us all 50
Cities as Warehouses: Multi-Local can Compete with Multi-National 52
Fight, flight … or unite? 53
Local collaboration 53
“Cities as Warehouses” 54
How does it work? 54
Multiple benefits across the retail ecosystem 55
Neighbourhoods Matter 56
Case Study: I LOVE LOCAL (HFX) Taking an “uncommon” approach to collaboration 58
Retailers as policy stakeholders 60
Costs of not making digital work locally 60
Reduced retail diversity 60
Significant economic impacts 62
Governments have a big stake 63
Taking the digital road forward 64

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the Canadian consumer outpace most others
consumers around the world.
And while this last factor – main street retail’s lag in
digital adoption – is defining, it’s also troubling. The
changing nature of retail in this country means that
those local retailers not keeping up with new digital
environments and habits are being left very far behind.
Three major factors have significantly impacted the
traditional buyer-seller dynamic – and thus the retail
experience – in Canada over the last several years.
Digital lies at the heart of all of them.
1. The onset of the internet enabled real-time
interplay between and among multiple
participants. Interactions became digital.
Supply and demand exchanges became
digital. And the world became digital.
This transformed traditional relationships
between consumers and retailers.
2. The rise of giant ecommerce marketplaces
are fundamentally re-shaping the entire
retail sector. The sheer scope and well-
financed strategies of these massive retailers
is squeezing local retailers out of many
Executive Summary
Changing nature of retail competition
Retail in Canada is the very definition of fierce
competition: it’s among the most aggressive sectors
in the Canadian economic landscape. It’s woven into
the Canadian fabric – and has been for centuries –
but in ways that differ from other countries.
1. Retail in Canada has a significant participation
from small businesses, operating at a local level;
2. The country’s proximity to the United States,
plus a strong foreign retail presence within
Canadian borders, creates a variety of choices
for consumers, and an even more competitive
market for local retailers;
3. Digital capabilities of Canadian retailers
– particularly those on main streets in
neighbourhoods across the country – lag
considerably behind those of their global
counterparts, while the digital capabilities of

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transactions that the latter used to have with
local customers.
3. Among the many effects of the global financial
crisis in 2008 were changing customer habits
that put a premium on savings like never
before. This has translated into persistent
price sensitivity among retail customers and
shrinking margins for many local retailers.
Widespread internet use among buyers means
they seek the best prices from retailers who
may or may not be local. But if it’s a deal,
they’ll take it.
Each of these factors is powerful in its own right. Taken
together, the cumulative effects are as profound as
they are irreversible.
Retail in Canada is currently at a crossroads. The
digital shopping habits of customers – who are
increasingly drawn to ecommerce marketplaces –
are well beyond the capacities of most main street
retailers. And many smaller retailers are not prepared
to take on the digital imperative required to not only
compete in today’s rapidly changing economy, but
to survive in it. Yet, the next step forward lies exactly
in all the promises and challenges of digital.
5%
23%
of retailers think
customers shop in stores
to speak with retail staff
of customers actually
shop in stores to speak
with retail staff.1
of buyers are interested in doing
prior research online; retailers
without a meaningful digital
presence are not able to fully
participate in Canada’s massive
retail market – they aren’t being
seen by customers.2
85%
Gap in Perceptions
1. Ipsos for Yellow Pages, “Consumer behaviour and neighbourhood stores:
Understanding the changing digital landscape”, March 2016.
2. Ibid.

Moreover, the need to close yawning gaps between
buyers and sellers cannot solely be the responsibility
of the retail sector alone. It must be shared by
everyone in Canada’s retail ecosystem, as well as
Canada’s economic stakeholders.
Ipsos for Yellow Pages, “Consumer behaviour and neighbourhood stores: Understanding the changing digital landscape”, March 2016.
Where are Consumers Making Their Purchases?
If local retail is to have a future in this country – and
it must – then it must follow the path of the players
who are permanently reshaping the entire sector.
Marketplaces can compete with other marketplaces.
Individual retailers hanging on for dear life cannot.
6
89%
of Canadians
buy online
70%
buy
in-store
at least
once a week
19%
buy online
at least
once a week
This trend
is increasing
97%
of Canadians
buy in-store

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This white paper further explores how the “cities as
warehouses” concept may provide some needed
answers to the digital gaps in Canada’s retail sector. It
also outlines the need for a departure from traditional
concepts of competition in retail and emphasizes the
need for intra- and inter-sector collaboration to take
on the unique challenges facing retail in this country.
The imperative to close the current gaps between
increasingly digitized consumers and lagging local
retail players is also shared by everyone in Canada’s
retail ecosystem, as well as Canada’s economic
stakeholders.
Digital should be used as a tool to grow Canada’s
retail sector, particularly at the local level, but equally
understood as a threat to its survival if not harnessed
properly and collaboratively.
Equally, collaboration is a powerful solution to the
challenges posed by ecommerce marketplaces and
changing shopping habits.
It is both the opportunity and the challenge that lie
before everyone.
Take for example, cycling. Members of a peloton
compete fiercely with each other. However,
by acting together, each member will almost
certainly finish better than if he or she remained
alone. But once dropped from the pack, it’s very
hard if not impossible for retailers – like cyclists –
to rejoin. They’re out of the race sooner or later.
Their chances are much stronger if they work
together.
The answer, in other words, lies in collaboration
among local retail competitors.
And it lies in fulfilling a vision of our “cities as
warehouses”. Essentially, creating, building and
investing in the creation of a local digital marketplace
in Canada. This would take the form of a digital
destination and use geo-localization technology
to recreate online the collective retail strengths of
a local shopping area. This approach allows those
areas – and local retailers within them – to thrive
by retaining vibrant main streets with physical retail
presence, but to equally compete in the face of
global forces manifest in large-scale ecommerce
players.

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The Evolving Landscape
of Canadian Retail

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Retail’s economic contribution
to the Canadian economy
In 2015, the retail sector represented 5.5% of
GDP, ranking it 11th
out of 22 industries.3
Retail’s
significant economic footprint is even stronger when
considering jobs.
The Labour Force survey from Statistics Canada
shows that retail’s total share of jobs in 2014 was
11.6%, ranking it second of all industries at the
national level. In fact, retail trade is the top-ranked
industry in terms of jobs in two provinces – Ontario
and British Columbia – and ranks second in all
other provinces.4
In total, there were approximately
146,000 retail locations across Canada.5
Meanwhile,
the recent retail sales picture shows a modest year-
over-year increase in 2015 to 2014.
Total retail sales in Canada in December 2015 were
$43.2 billion.6
There are few segments in the Canadian economy
as connected to local communities as retail.
From corner shops to corporate stores, retail is of
vital importance to owners, tenants, employees,
customers, suppliers, neighbours and policy makers
alike.
While there are no universally-accepted
definitions of “local” or “neighbourhood”
retail in Canada, we take it to mean any
of the following:
• Independently-owned retail store
(i.e. florist)
• Independently-owned franchise of
a national brand (i.e. Canadian Tire)
• Corporate retailers who have
chosen to move storefronts onto
main street and integrate with the
neighbourhood (i.e. lululemon)
3. Statistics Canada, “Gross domestic product at basic prices, by industry (monthly)”,
www.statcan.gc.ca.
4. StatsCan figures found in RCC’s “Retail Fast Facts”, January 2016.
www.retailcouncil.org. Canada’s three territories were not included in this survey.
5. Ibid.
6. Retail Council of Canada, “Retail Conditions Report: Outlook 2016”,
www.retailcouncil.org. The survey was conducted during the period of February 8-12, 2016,
and it includes results from 57 retailers operating almost 10,000 stores.

Retail Landscape in Canada
Retail drives
5.5% of
Canada's
GDP
Approximately
one retail location
per 250 people
146,000
retail locations
in Canada
In Ontario and
British Columbia,
retail is the top-
ranked industry
in terms of jobs
1
Canadian
out of 10
works
in retail
10

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Taking a closer look at local retail in today’s economy
reveals three powerful forces fundamentally re-
shaping the industry. Together, they are key parts of
the big shift that is underway.
1. The internet is
changing everything
Before the internet, shoppers’ retail choices were limited
by what they could see and touch on the retail main
street in their neighbourhood, or a short drive away.
Local retailers set the prices and stocked the shelves.
This put a bias on habit. Based on experience,
shoppers knew a certain retailer would (usually)
have what they wanted at a price they were (usually)
willing to pay. So these customers spent their
money in the neighbourhood, thereby contributing
to the local community’s retail vibrancy.
Retailers knew and appreciated this, and they
focused on serving local customers. They also
knew that customers evolved through predictable
buying habits as they aged and their income levels
grew. This made customer segmentation strategies
fairly straightforward in the analogue economy.
The internet changed all of that.
Geography is no longer a limiting, or even a defining,
characteristic of the web-driven retail experience.
Why should it be when the world is connected
digitally and when 97% of Canadian consumers
own some sort of digital device?
Consumers can just as easily browse the product list
of a retailer based thousands of kilometres away as
they can drop into a local store to browse the shelves.
Many Canadians do both.
More choices, changing habits
With the internet, consumers have the choice of
shopping on local physical streets or on the ubiquitous
“digital” street that never closes.
A confluence of websites, online search for products
and price discovery and social media platforms
that spread news – good and bad – at light speed
around the globe are increasingly the norm in local
retail. The internet connects vastly more buyers and
sellers in far more ways than ever before.

own a
computer
Devices Owned by Canadians
own a
smartphone
own a
tablet
84% 77%
71% 97%own
at least one
device
12

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“We used to view customers as being
outside our organization – we push stuff
out to them. Now we can view them as
being inside our business, co-innovating
with you.”
Don Tapscott, CEO, The Tapscott Group Inc.
Retailers across Canada now regularly reach out to
customers (and potential customers) in asking them
to share their shopping experiences across social
networks and digital platforms.
“The use of digital goes well beyond
conversion of sales. Buyers become
advocates.”
Gordon Stevens, President,
The Uncommon Group, Halifax.
The purchasing, pricing and branding power that once
rested with retailers is being shared with consumers.
It’s all about collaboration in the new digital retail
world.
At the same time, customer habits are changing.
Millennials, those born in the early 1980s onwards,
are re-defining aspects of the entire economy by
virtue of their size as a group (30% of the population)
and their collective shopping habits. They are
among the most educated of consumers and
consistently conduct pre-purchase research online
including price comparison, reviews and product
comparison. Most know exactly what they plan to
buy before they walk into the store. 7
Among other things, traditional, pre-internet gene-
rational differences are being turned upside down.
Passing on knowledge from older to younger
generations is no longer the norm. Kids are teaching
seniors about technology and trends, and seniors are
shopping like kids across an array of physical and digital
platforms. Habits are less predictable in the digital age.
Power shift towards collaboration
Using an expanding suite of digital tools, retailers
and consumers are now collaborating more than
ever in the retail and brand experience.
7. Yconic, “The Millennial Shopper: More social and educated than ever before”,
February 2016

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Case Study
Don Tapscott
talks retail
A global digital guru, Don Tapscott
has been at the forefront of innovation
for many years. Author of several
influential books, Don spoke with
Yellow Pages about the challenges
and opportunities facing local retailers
in the digital economy, a phrase he
coined more than 20 years ago.
What does mass collaboration mean in
the digital economy for retailers?
Retail can turn consumers to producers, or what I
called “prosumers” more than 20 years ago in my
book The Digital Economy.
The old world of retail was an age of scale and
mass – mass production, mass education, mass
distribution, mass media and mass production.
Owners controlled everything, and they pushed out
standardized units (be they products or services) to
buyers who were passive recipients of those units.
In today’s digital age, there’s much more interaction
and collaboration. Some companies don’t produce
anything now until the market demands it. And
prosumers – customers who become producers –
are creating ads for companies like Doritos.
Every retail company needs to have a digital-physical
strategy. And that’s not just a website, or a website
that does transactions to global market from a local
store. The next step now is to go beyond that, to
engage your consumer and to build communities.

In this big shift, retailers have to go beyond just
focusing on their customers to engaging them.
How is retail changing today?
Marketing used to be about the 4 “Ps” … product,
place, price and promotion. There was a time when
you could differentiate on any of these. But all these
are now obviated by digital revolution.
Geo-spatial apps mean that old definitions of
place are now replaced by “any place”. And where
sellers used to drive price, you now have price
discovery that includes many variables, including
inventory and product trends. Promotion used
to be one size fits all, but it’s increasingly about
collaboration and engagement. And products
are now seen through the lens of experience.
Increasingly, customers don’t want products. They
want experiences.
Lastly, the concept of brand is changing. Brand
used to be the promise, the trust mark. It’s a
more complicated construct now. Integrity is the
foundation of trust: be honest, be considerate of
others, be accountable, and be transparent. Trust in
business is the expectation that the other party will
act with integrity.
In other words, with digital, rather than the old four
“Ps”, you have the new “ABCDE”. This is new model
of retail in the digital world.
15
Place
Any place
Brand
(a different model
of the brand)
Promotion
Collaboration
Price
Discovery
Promotion
Experience

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give him your frequent flyer card and your entire
transactional history. You just give him your driver’s
licence.
In retail, and if we do this right, we can be in the
halcyon age of entrepreneurship. It will be way
easier to set up a business, and small companies
can have all the capabilities of big companies
without the main liabilities and bureaucracy.
With innovations like blockchain, customers can
be inside and your talent can be outside. The
world can become your HR department. The
blockchain radically drops your transaction and
collaboration costs. It moves companies toward
network and molecular models. All of this will
favour small firms.
Don Tapscott and co-author, Alex Tapscott re-
cently released a new book entitled Blockchain
Revolution: How the Technology Behind Bitcoin
is Changing Money, Business, and the World.
* The blockchain is an online ledger of transactions that is seen and shared by
multiple market participants. Bitcoin is the best-known example of blockchain,
but its application does much farther than that. Retailers, banks and governments
are all innovating based on blockchain technology.
Take Starbucks as the example. Starbucks is now
considered “the third place”. People talk about
work, home and Starbucks. That’s because they
transformed the coffee experience into something
you can’t get anywhere else.
What is the role of “small data” for
local retailers in a world of big data
for large-scale retailers? And does the
blockchain* offer any opportunities
for local retailers?
The blockchain revolution changes everything
in retail, and it changes the data situation quite
profoundly in ways that will be, in the short term,
injurious to the big companies that are capturing
all of our data, not the little guys where we buy
things.
What if we each had our own personal identity
in a black box on the blockchain? Instead of a
company like Facebook owning that identity, we
own it. And we only give out that information
which is required, like it used to be back in the day.
You get stopped by a police officer and you don’t

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2. Ecommerce marketplaces
are dominating
Amazon is an example of a player that has redefined
retail globally. It has created a dominant ecommerce
marketplace that is highly competitive in terms of
pricing, inventory and shipping. It became the fastest
company in global history to reach $100 billion in
sales.8
Although not as widely known in Canada, another
fitting example of disruption to the traditional retail
purchase dynamic is Alibaba. As a marketplace,
Alibaba is a retail intermediary that carries no
inventory itself. It not only competes with other
retailing giants, it also competes with local retailers
in cities and towns around the world.
For many years, Walmart was the world’s largest
retailer by a wide margin, holding thousands of
physical store locations globally. That changed very
recently when Alibaba, knocked Walmart off the top
spot. Alibaba became the world’s largest retailer in
terms of annual gross merchandise volume (GMV)
8. Jeff Bezos, “2015 Letter to Shareholders”.
59%
of retailers believe that online
competition will increase
over the next 2 years
36%
are planning on increasing
their online investments
Ipsos for Yellow Pages, “Consumer behaviour and neighbourhood stores:

Do you feel competition from online retailers?
Retail segments that feel the most
competition from online retailers
Retailers Viewpoints on Online Competition
Clothing
retailers
Electronic
retailers
Sporting goods
retailers
absolutely
somewhat
not really
not at all
47%
YES
53%
NO
20% 27% 30% 23%
18

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and sophisticated pricing algorithms, these global
companies are scooping up customers and sales
across Canada.
For instance, Canada is one of eBay’s most success-
ful global markets, with Canadians spending more
than $1 billion buying goods from the site each year.
This makes eBay Canada’s second largest online
retailer behind Amazon.13
Unlike ecommerce marketplaces, however, neighbour-
hood retailers accustomed to competing against
retailers in the same or nearby neighbourhoods
can’t expand their floor space by an equally
infinite amount. And they can’t hold inventories
at massive scale. What inventory they do carry
can only reach consumers in their immediate
vicinity, further narrowing their potential markets.
At the same time, the art of pricing – a key factor
mentioned earlier in driving consumer interest –
has become a science. Using advanced analytics,
companies such as Amazon can track and change
their prices by the minute.
– $485 billion in 2015 – surpassing Walmart’s annual
revenue of $482 billion.9
Mobile accounted for 68%
of Alibaba’s total GMV.10
The third largest retailer
in the world, Costco, is well behind these two
behemoths, with revenues of $116 billion in 2015.11
“We used 13 years to demonstrate the power
of a different business model compared
with brick-and-mortar retailers.”
Alibaba Group12
The new competition, know it or not
Many (if not most) Canadian retailers now directly or
indirectly compete against enormous ecommerce
players such as Amazon and Alibaba, whether they
know it or not. This also includes large physical
retailers like Walmart who are investing heavily in
the Canadian ecommerce market. Armed as these
players are with access to massive inventories,
13. Hollie Shaw, “eBay aims to transform shopping experience to compete with online
giants Alibaba, Amazon”, Financial Post, March 28, 2016.
9. Alibaba Group, 6-K SEC Filing, April 5, 2016.
10. Alibaba Group, December Quarter 2015 Results.
11. Costco letter to shareholders, December 17, 2015.
12. IGC Retail Analysis, “Alibaba Overtakes Walmart”, April 7, 2016.

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by, third parties such as search engines. Often,
these local retailers have to pay to be seen,
through search engine marketing (SEM) campaigns,
involving the promotion of a retailer website in
search results through paid advertising. Even small
advertising dollar investments do eventually add up
for neighbourhood-level retailers.
Free or less costly options such as search engine
optimization (SEO) which involves optimizing
a website by keywords to affect its visibility in a
search engine’s unpaid results can be wrought
with challenges for local retailers. Smaller shops –
unless they have very specialized inventory – can
also be disadvantaged in digital search engines due
to ongoing adjustments to algorithms that do not
favour results with limited traffic or links.
Big retailers by contrast are well-oiled SEO and
SEM machines with the resources to devote to
upkeeping and adjusting campaigns as technology
and digital marketing evolve.
Combine this with the shrinking profit margins
experienced by many smaller retailers, and the reality of
retail in the face of the rising digital competition looks
stark on streets and in malls from sea to shining sea.
This means price discovery takes on a whole new
definition and importance for retailers. This, while
opening at 10 a.m. (if not earlier) and closing at
6 p.m. (if not later), and serving customers, staffing,
cleaning, marketing and keeping up inventories.
The burden on local retailers to manage their
operations in addition to competing in the digital
space with dominant global players is a heavy one.
Impact of these giant marketplace players
The gravitational pull of these giant retailers means
that neighbourhood retailers are now seeing an
outflow of shoppers’ dollars, where once that
money was kept locally.14
Single retail stores in this vast galaxy of digital –
dominated by a small number of huge players –
will be very challenged to capture enough digital
eyeballs to maintain, let alone increase, their sales.
What’s more, the visibility in the digital space of
these stores is often dependent upon, or decided
14. Shelly Banjo, “How Amazon will kill your local grocer”, Bloomberg.com, April 8, 2016.

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Governor Stephen Poloz preparing Canadians to
brace for a low dollar, higher-priced imports and
rocky growth “for several years”.17
In a low-inflation economy experiencing lower-
than-normal consumer spending, coupled with
high debt loads18
, retail consumers are very likely
to continue to save whenever possible. Turning
first to the internet, consumers are arming
themselves with pre-purchase information online
– they’re looking for the best deals – before they
purchase and, regardless of emotional attachment
to local, will be product and price-driven first and
foremost.
“Retailers are apprehensive about
the impact of the financial and world
economic turmoil on consumer
confidence.”
Retail Council of Canada,
“Retail Conditions Report: Outlook 2016”
3. Ongoing impact of
the global financial crisis
The full impact of the global financial crisis in 2008-
2009 was rapid and intense.
This was particularly true for a retail sector that
was looking to the 2008 holiday season to boost
already-flagging sales. One British analyst at the
time said, the last three months of 2008 would lead
into “the worst Christmas for 30 years” in terms of
retail spend.15
While Canada was spared some of the economic
scars suffered by other countries, the impact of that
financial crisis is nonetheless still being felt here
years later.
Plummeting oil prices in a resource-based national
economy continue to dampen macro-economic
growth in parts of Canada16
, with Bank of Canada
15. Myra Butterworth, “Financial Crisis: Retailers face worse conditions for 30 years”, The
Telegraph, September 30, 2008.
16. Bank of Canada, “Business Outlook Survey”, Spring 2016.
17. Barrie McKenna, “Aftermath of resource rout will be long and painful: Poloz”, The
Globe and Mail, January 7, 2016.
18. TD Economics, Quarterly Economic Forecast, March 23, 2016.

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A side effect of the retailer’s expansion into physical
streets was the ability to access completely new
portions of customers that they had not traditionally
been able to reach online.
The online operations and business focus of the
company were very targeted towards men, ages
25 to 35 and creatively inclined. What the founders
discovered when opening their neighbourhood
level locations was they were able to access
customers through the element of discovery,
having people wander in off the streets. In their
physical stores, they began developing a strong
customer base among men in their 40s and
were surprised by how many women were also
shopping in their locations.
Through their stores, they were able to quantify
a substantial percentage of women purchasing
menswear that they had only anecdotally been
aware of in their online operations.19
“Bricks and mortar” is not going away
Despite the emergence of pure digital players in retail,
the traditional bricks and mortar retail destination still
offers market opportunities that can’t be found in
digital.
Frank + Oak, a men’s clothing store, is one example of
a retailer that took the inverse journey. The company
began and grew as a pure digital retail player. Yet,
in 2013, began a journey to opening physical retail
locations due to customer demand. Now counting
13 locations across North America, Frank + Oak
physical stores cater to an urban crowd and provide
a wide variety of services under one roof.
“Our customers were always asking us to
have a physical presence, because they like
shopping in traditional stores. But for us it
was more a question of whether we wanted
to take that leap. When we decided to do it,
our existing customers liked it and we were
able to find a whole new set of customers.”
Hicham Ratnani, Co-Founder COO,
Frank + Oak
19. Ethan Song, Co-Founder, Frank + Oak. “Digital retail heads back to the future with
old-fashioned stores”, National Post, October 18, 2014.

23
Other ecommerce players have equally opened
physical locations to tap new consumer markets,
including Shoes.com, ClearlyContacts.ca, LXRCo.,
and Etsy.com to name a few. 20
However, digital continues to attract consumer
attention and dollars. It cannot be ignored and in
order for physical retail locations to continue to
thrive, sustaining the vibrancy of the surrounding
communities, an omni-channel approach to retail
in Canada should no longer be a dream or desire,
but considered a real need.
Yet, despite the fact that Canadians are among
the world’s most digitally-connected and engaged
users21
, it is estimated that Canadian retailers are
two years behind their U.S. counterparts in adopting
online technology.22
Two years can be a lifetime in the competitive world
of retail.
20. Ibid.
21. CIRA, “.CA Factbook 2015”.
22. CBC News, June 2015.
What’s the future of retail?
This all leads to three very important questions when
considering the present and future of local retail in
Canada:
• Who is the digital retail customer and
what are their habits?
• What’s the retailers’ imperative to
respond to retail’s changing landscape,
particularly with respect to digital
technologies and ecommerce players
that are re-shaping that landscape?
• How can Canada’s retail ecosystem
survive in the face of unprecedented
and profound change that threatens its
long-term future?

24
The Digital Retail Customer

25
In Canada today, 85% of buyers have an interest
in going online to research something before they
buy it either online or in a store. 24
This pre-purchase is primarily motivated by
price comparison, product comparison and
the ability to read other consumer reviews to
validate purchase choices. This pre-purchase
online research is most commonly conducted
for electronics, appliances, cars, games and toys.
However, other categories still drive the majority
of research in-store where viewing the product
is considered essential, such as food, plants, and
health and beauty items.25
While key drivers of in-store purchasing in
small neighbourhood retailers are the ability to
interact with the product and the practicality
of proximity, online buyers are also driven by
practicality but in a different way. They want
the convenience of not having to visit the store
at all and have their purchase shipped right to
their door.26
23. PwC, “2015 Retail Trends”, strategyand.pwc.com.
More and more Canadians are becoming omni-
shoppers. That is, they use any number of
methods to research, review and purchase goods
and services. They want to “move easily across
channels, have many retail and product options
at their fingertips, and demand full visibility into
inventory and pricing.”23
In other words, they want more flexibility in how
they shop, be it locally or globally. They can walk
down a neighbourhood street to a local retailer, or
they can click their way through the “digital” street
and look at countless retailers.
Many Canadians do both. For them, choice is
paramount. They like the convenience of digital and
the vitality of local retail.
Avid online researcher
Canadians have a clear bias toward checking out
what they can find on the “digital” street before they
do any actual in-person shopping.
25. Ibid.
26. Ibid.

26
Pre-purchase Research
Buying online is indeed very popular: 89% of
Canadians bought something off the internet –
across a range of devices – over the last 12 months,
while 48% of Canadian consumers plan to increase
their online spending over the next two years.27
Armed with information
Before the internet, consumers didn’t have nearly
the same access to product information as they
do now. They couldn’t compare prices without
spending hours driving around, checking physical
flyers, or making phone calls. Product and price
knowledge tended to rest with storeowner and
sales associates, and consumers had to chase it.
Not anymore. Canadians are more prepared than
ever with information and opinions before deciding
to buy anything.
Shoppers go to retailer websites to find product and
pricing information – they assume it will be there –
just as they’re going to social networks to find and
discuss retail with friends and strangers alike before
they go to the point of purchase.
Information consumers look for online
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62%
Peer reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44%
Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35%
Product comparisons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35%
of Canadians conduct
research online prior
to purchase
75%
27 Ipsos for Yellow Pages, “Consumer behaviour and neighbourhood stores:

27
“Today’s consumers are more savvy and
knowledgeable about the products they need
and want, and they are arming themselves
with information before going into a store
or even visiting a retailer’s website. In some
cases consumers believe they know more
than a sales associate, so the opportunity in
the retail store floor is value-added service.”
Mark Startup, Vice President, Independent
Retail Division, Retail Council of Canada
The consumer-retailer relationship has been
reshaped. Well-informed consumers are playing an
ever-bigger role in deciding with which retailers they
should engage, and, by extension, which retailers
they will support financially and socially.
Showroomers and webroomers
Neighbourhood retail stores remain a cornerstone
of Canadians’ retail shopping experience: a majority
of Canadians bought something in a store over the
last year.28
48%
Increase
their online
shopping
8%
Decrease
their online
shopping
44%
Keep the same level
of online shopping
Over the
next 2 years,
Canadian
consumers
plan to...

In-StoreShowroomingDigital Webrooming
Purchase Patterns of Consumers Over Last 12 Months
75% 72% 25% 28%
67% 65% 33% 35%
60% 57% 40% 43%
59% 56% 41% 44%
53% 50% 47% 50%
53% 50% 47% 50%
49% 44% 51% 56%
48% 42% 52% 58%
47% 42% 53% 58%
44% 42% 56% 58%
38% 33% 62% 67%
33% 28% 67% 72%
Electronics
Appliances
Automotive
Games and toys
Furniture
Sporting goods
Jewellery
Clothing and shoes
Health and beauty
Hardware
Plants and gardening
Food
28

29
from those who tend to showroom, usually 18 to 35,
in Canada.30
Afewyearsago,manypeoplebelievedshowrooming
would wipe out aspects of physical retail because
consumers could go online for almost anything
they needed to buy.
“Showrooming was rampant three years
ago. But effects of the falling dollar are
reducing the impact of that as competition
from US-based online retailers has fallen off
because of the foreign exchange issues.”
The Uncommon Group
Webrooming, however, proves that the physical store
still has importance and resonance for Canadians.
It’s part of the expanding retail experience in
which physical is supplementary to digital, and not
supplanted by it. This points to the influence of omni-
shoppers and omni-channels.
Yet, as clearly demonstrated through their use of
online research, consumers are broadening their
retail experiences by adopting digital habits in
complement to their inclination to stop by a local
retailer on the way home from work or on the
weekend with a coffee in hand.
There are two paths to purchase actions in Canada’s
retaillandscapeoncetheresearchisdone:consumers
can go in-store or they can purchase online.
Canadians use both online and in-store channels to
shop. This practice has two names, depending on
where consumers start their research.
Showrooming is when someone researches a
product or service in a physical store, then goes
home to buy that same thing online. In Canada,
this type of consumer is usually over 55 years of
age, supporting the assertion that showrooming
reduces perceived risks related to online purchases
for older consumers whose digital behaviour is not
as ingrained as younger demographics.29
Webroomingistheexactopposite:shoppersresearch
online for items that they will then buy in a physical
store. The demographic profile of webroomers differs
30. Ibid.

30
Average
buyers
6%
Heavy buyers
Digital
buyers
Light
buyers
rejectors
Web
9%
6
%
6
%
14%
58%
Medium buyers
with strong potential
+ Web purchases
- Store purchases + Store purchases
Potential Among In-Store
Consumers to Increase Online
Purchase Behaviours
Ipsos for Yellow Pages, “Consumer behaviour and
neighbourhood stores: Understanding the changing
digital landscape”, March 2016. - Web purchases

31
“It comes down to senses. Online, you can
see the imagery and the aesthetics. In the
store, you can smell something, you can
touch, feel a vibe. Store brings more than
the visual experience. It’s broader, and it
complements the online experience.”
Hicham Ratnani, Co-Founder COO,
Frank + Oak.
It’s perhaps not surprising, then, that food tops
the list of what consumers go in-store to touch
and buy, followed by health and beauty products,
clothing and shoes.31
Similarly, time-pressed shoppers want to have
immediate access to the product in order to
buy it right then and there, after they’ve had the
chance to see and touch it. Store proximity and
convenience also drive the in-store decision
making of customers. As well, customers avoid
shipping costs when shopping locally in-store,
and they can often return items more easily at a
local store.
Seeking and using omni-channels
Canadians seek retailers who provide an ever-
widening range of options when they are deciding
whether to purchase something around the corner
or across the globe.
“Customers come to us in various ways,
across several digital platforms. Many
check us out online several times.”
John Clerides, Owner,
Marquis Wine Cellars, Vancouver
Customers want and increasingly expect it all. But
they have clear preferences for how and where
they buy certain things.
In-store preferences over online
Canadians want to see certain products – they want
to touch them – in a store. It’s an experience that’s
impossible to replicate digitally.
31. Ibid.

32
wallets, mobile devices are increasingly part of
Canada’s retail ecosystem.
Canadians spend more time online with their mobile
devices than with their computers: mobile accounts
for 56% of all time spent on the internet in Canada,
compared to 44% on desktops.33
And they are using
their phones more than tablets in making purchases.
While Canadians may lag some other countries in
using mobile for purchasing, we use smartphones
more than anyone else to access loyalty programs:
23% of Canadians use their phones for this purpose,
compared to a global figure of 16%.34
At the same
time, Canadian retailers saw a 74% increase in year-
over-year usage of mobile to complete transactions.35
Big fans of free shipping
Shipping is part and parcel of the online buying
experience in Canada. From a customer’s perspective,
free shipping is a huge driver when it comes to
deciding whether to buy online or in a store.36
Online preferences over in-store
A different picture emerges when looking at what
drives customers to purchase something online.
Price is the main reason why Canadians shop in the
digital space.32
This is particularly true for commodity
items – things you can find widely and where price
is the only differentiator of note between any given
seller. In these cases, being online allows buyers
to quickly scan and compare pricing from their
chosen location and time.
Mobile is on the move
Online shopping shrinks the time gap between
urge and purchase, leading Canadians to buy an
ever-widening array of goods and services from
laptops, tablets and smart phones.
The use of mobile phones in retail illustrates the
point. From searching on-the-go to using mobile
33. Anthony West, “Mobile is now more engaging than desktop in Canada”,
October 19, 2015, www.comscore.com.
34. PwC, Total Retail 2015”, p. 17.
35. Forrester, “Retail eCommerce in Canada 2015”, p. 11.

50
55
45
40
20
35
30
25
Comparison of In-Store and Online Purchasing Rationale
52%
Price
52%
To see the actual product
39%
Not having to go out
46%
Immediate access to the product
33%
Product in stock
30%
Proximity/convenience
28%
Save time
28%
Waive the shipping costs
24%
Wide choice of products
19%
Try the product
33

34
Where Do We Buy?
At least once over
the past 12 months
At least once
over the past month
At least once
over the past week
In-store
Online
86%
43%
70%
19%
97%
89%
85%
43%
37%
36%
21%
16%
16%
13%
10%
Desktop
computer
Smartphone
Tablet

35
“Shipping costs for small businesses are
“atrocious” and are the biggest cause of
abandoned online shopping carts. The
option of free shipping drives more sales
than any product-price discounts.”
The Uncommon Group, Halifax.
Retailers, however, often have to absorb shipping costs
if they want to attract online customers. The retail
experience for most Canadian consumers these days
boils down to two key questions they ask retailers:
• How much does it cost?
• Do you have it in stock?
Consumers answer these questions with their
hearts, minds, and wallets only when they shop.
Retailers have to constantly answer them in what
has become a 24/7 retail world.

36
The Retailer’s Imperative

37
“If you’re a historical retailer, you had
stores and now you have stores with the
website attached. We are going to invert
that model – we’ll be a digital commerce
company with stores attached.”
Brandon Stranzl, Executive Chairman,
Sears Canada.39
It’s a digital world, and analogue solutions no
longer work.
Retailers without a meaningful digital presence
are completely missing out on opportunities
to sell to an enormous consumer market that
is initially seen by customers through a digital
lens.
That means these retailers are, in effect, being
punished by customers who may or may not
know these physical retailers even exist. And that
means retailers who can transition to digital are
at least in position to put their best (and virtual)
foot forward in being considered for a sale by
information-enabled buyers.
It’s a digital world
Retail in Canada is morphing, quickly.
Driven by technology, soaring customer expecta-
tions and competitors who are as likely to be based
on another corner of the planet as located right
across main street, the definition, execution and
experience of retail in Canada is undergoing
profound change.
Omni-channel marketing strategies, “click and
collect” business models, online loyalty programs
and mobile wallets are all now part of a rapidly
expanding and increasingly sophisticated retail
ecosystem in Canada.
For retailers, simply keeping up the pace of
development, can be an all-consuming struggle.
Some well-known retailers, such as Danier, don’t
make it and wind up in liquidation.37
Others, like
Sears Canada, are actively attempting turnarounds
in the face of declining in-store sales.38
37. Canadian Press, “Danier Leather stores liquidating as retailer starts winding down”,
www.cbc.ca, March 8, 2016.
38. Francine Kopun, “Sears Canada eyes online revamp”, Toronto Star, March 18, 2016. 39. Ibid.

38
These are not new concepts. But what is new is
the expanding manner in which neighbourhood
retailers have to engage and be engaging digitally
given massive marketplace retail players who are
using highly sophisticated digital technologies.
To capture an omni-channel shopper’s interest –
to be even considered for whatever that potential
customer might be inclined to buy – retailers have to
have some form of meaningful, 24/7 digital presence
that is integrally linked to their physical presence.
And that digital presence can only be effective when
the retailer includes sufficiently specific detail about
their inventory, given the digital consumer's primary
drivers of price and product information. Opening
hours, a website and a few photos aren’t enough of
a digital presence for a retailer anymore.
The imperative to provide omni-channel options
firmly rests with the retailers.
Canada has become a digital nation. But main
street retail in this country has not followed suit.
Customers are increasingly just a short step or
fast click away from going elsewhere with their
purchasing dollars and, in many cases, their social
media recommendations.
In other words, their retail store or market stall is
being found in the brave new digital world. Their
supply is finding digital demand. Choosing to be on
the digital street is a choice that opens up enormous
opportunities. However, visibility on the digital
street, particularly for neighbourhood retailers with
limited resources remains a game of catch-up.
The challenges of an effective
digital presence
Retailers of various sizes all still have to do several
main things very well:
1. price their goods or services competitively;
2. bring products to customers at a pace that
matches market expectations;
3. attract enough customers (repeat and/or
net-new customers) to maintain cash flow;
4. engage with existing and prospective
customers in ways that align with both the
customers’ shopping habits and the retailer’s
business strategy.

24%
of retailers don't
have a website
71%
of retailers
have a website5%
of retailers
are planning on
launching
a website in the
next 12 months
76%
of retailers
will have a
website
in the next
12 months
Retailer Online Presence in 2016
39

40
1. To what extent are neighbourhood
retailers in Canada embracing digital
technology?
2. Are there gaps between retailers’
expectations of the promise of digital
and the expectations of their customers?
3. How can a retailer dive into digital when
competing against massive ecommerce
marketplaces?
Digital adoption among retailers
On the whole, retailers in Canada currently have
an enthusiastic but limited embrace of digital. Of
retailers surveyed in a recent Ipsos poll: 41
• 89% have some sort of digital presence;
• 71% have a website now, with an
additional 5% saying they will build
one within 12 months;
This leads to a variety of vital questions for retailers
to ask and answer themselves, among them:
Store traffic doesn’t matter as
much as overall customer
conversion across channels.
For multi-channel retailers,
that means the need for an
increasaingly focused, curated
and engaging brick-and-mortar
store experience that creates
maximum conversion – no
matter what channel ultimately
records the purchase.40
40. PwC, Total Retail Survey 2016

41
Only 21%
of retailer’s
communications
budget is invested
in digital
communications
Only 1 out of 3
retailers are
planning on
increasing this
proportion
over the
next year.
Of those retailers currently online, 21% of their
total communication budget is invested in
digital.
Furthermore, only one in three retailers of
those who have a website plan to invest more
in digital, even though 47% of retailers surveyed
are aware that competition from online
retailers is growing. Most agree that this is just
the beginning.
At the same time, 62% of retailers surveyed are
interested in increasing their digital presence
– and ecommerce in particular – even though
only 36% of retailers actually plan to increase
their digital investment.
What’s perhaps more surprising, given this
awareness, is how retailers plan to compete
against those digital retailers.
Instead of going head-on by bulking up on
their digital resources, many retailers plan to
improve their in-store experience rather than
their online experience.42
42. Ibid.
Ipsos for Yellow Pages, “Consumer behaviour and neighbourhood
stores: Understanding the changing digital landscape”, March 2016.

Active retailersPassive retailers
of retailers don’t have
a website and are not
planning on increasing
their online presence
because:
of retailers are
fighting online
competition by:
they don’t feel
the need
improving
their in-store
experience
they believe
it’s too
expensive
investing
more in
communication
they don’t
have time
selling
online
30% 66%
66%18%
10% 52%6% 48%
42

43
is paramount in order to close a sale. If physical
distances to obtain a product are too great, time
to obtain a product too long, or if there are too
many clicks required to navigate through to a given
product, the likelihood of a purchase decreases.
Complicated online checkout processes, for
example, very often lead to abandoned baskets.43
“Many people chose their neighbourhood
in order to be close to retailers, especially
for things they buy daily. They don’t want
to go to a mall all the time.”
Chris Rickett, Manager of Entrepreneurship
Services, Economic Development Culture,
City of Toronto
Simply put, buyers want easy access to sellers.
Whether this translates to the location of a physical
store a few minutes away or an easily navigable
and accessible digital store a few quick clicks away,
location – the ability to be found – is crucial.
“It’s not a sudden decision one morning
to switch to digital. It’s about being where
your customers are. That’s retail. Engage
with your clients and give them an
exceptional experience. That’s always
been the case.”
Mark Startup, Vice President, Independent
Retail Division, Retail Council of Canada
Carving out a place on the digital street
The old expression of “location, location, location” is
as true about retail as it is about real estate. Location
is everything.
In the pre-internet era, retailers usually had to wait
for another one to leave a prime spot on a busy
street. In the internet world, however, retailers
can create their own place on the digital street
in complement to – or instead of – a physical
location.
But it’s a very busy world, with plenty of retail
options that means simplicity for the consumer
43. Andrew Meola, “Ecommerce retailers are losing their customers because of this one
critical mistake”, Business Insider, March 16, 2016.

44
ecommerce site, appealing to consumers who
want to read about and/or buy their fashion online.
Meanwhile, some retailers have gone the other
way. These “web-to-store” retailers started off in the
digital space, then opened a storefront to add to
their offering.
“It’s not a question of being online or
offline. It’s more a question of how you
interact with your customers. We started
online, and we now feel we should start
to interact with our customers many
different ways.”
Hicham Ratnani, COO/CFO and Co-Founder,
Frank + Oak
While the direction of “store-to-web” and “web-to-
store” is the opposite in terms of what came first,
the objective is the same – to attract and retain
customers.
Traditional lines of marketing are getting blurred as
retailers adopt omni-channel approaches to doing
exactly that.
Blending digital and physical
Just as rapidly changing technology is increasing
consumers’ choices, it’s also enabling neighbour-
hood retailers to reach a vastly larger number of
customers than ever before.
More and more retailers augment their physical
stores with websites that can range from fairly basic
“postcard” sites with store location and hours and
a list of products sold, to highly interactive sites
with curated content, ecommerce offerings and
embedded customer reviews.
They are “store-to-web” retailers, extending their
physical aisles by adopting digital technology.
Take Simons, a department store that started in
1840, as an example of “store-to-web”.
For Peter Simon, CEO of the Quebec-based retailer,
having a physical presence is central to serving his
customers. “We really believe in bricks and mortar
because we think it’s a platform for a human
connection.”44
Simons also invests in an extensive
44. Jeanne Beker, “’Bricks and mortar is a platform for human connection’”,
The Globe and Mail, March 19, 2016.

45
“We wanted to build a global brand,
catering to a demographic that we think
is underserved at the moment,” said
Hicham Ratnani, Co-Founder COO of
Frank + Oak. “Our brand is lifestyle
products, which we sell online and
through our mobile app.”
Understanding their business and their customers well,
Hicham and his colleagues also knew early on that
they had to excel in both the digital and physical worlds
to achieve their goals of becoming a global brand.
In other words, they had to offer omni-channel
options to a sophisticated urban customer.
From just a few people in February 2012, Frank + Oak
has grown to more than 200 employees running a
dynamic website and a growing number of retail stores.
They opened their flagship store in downtown
Montreal in 2015. From there they have opened 12
more stores across North America, with locations
in Vancouver, Edmonton, Calgary, Toronto, Ottawa,
Quebec City, Chicago, Washington and Boston.
Case Study
Frank + Oak:
Building a global
brand across
platforms
Like many start-ups, Montreal-based
menswear brand Frank + Oak started
off as a small team with a big ambition –
to create a lifestyle and a consumer
brand for the internet generation by
way of great clothing.

46
Hicham says they are methodical in their corporate
growth strategy, going step by step in creating and
executing on their strategy while at the same time
not being afraid to take certain risks.
Above all, being a retailer in Canada – whether that’s
physical, digital or both – means having an ability to
handle risk.
“As an entrepreneur, you often don’t
know what will happen. You often start
a project and don’t have all the answers.
That’s OK. It’s important to have a
certain level of comfort with uncertainty
and risk.”
The retail world is taking note of Frank + Oak’s
successful recipe of web-to-store.
And so, too, is the fashion world.
Hicham and his colleagues recently won the
Fashion Innovation Award at the Canadian Arts
Fashion Awards. This prestigious recognition
is given to a company that’s innovative in its
approach to creating a fashion experience through
technology.
“Although a lot of shopping is done online
these days, the majority is still done in retail
stores,” Hicham explains. “So our goal in
opening our flagship location was to be
a community-oriented store where we
highlight our lifestyle and create value, while
being anchored in the local community.”
Hicham says they want to give their stores an urban feel.
So, the main Frank + Oak store, complete with
a barber shop and a coffee shop inside, allows
customers to not only experience the products but
also the brand and the values of the company.
A strategic expansion into physical is growing both
the Frank + Oak brand and its range of customers.
They often have the same sort of buyer – such as
a 28 year- old with a good job and a smartphone –
across their physical and digital platforms. But the
stores help bring in new types of customers.
“Our stores attract a broader demographic
than our website. We have women and
different ages, for example – people who
wouldn’t necessarily browse our website. So
the stores are opening up other possibilities.”

47
Edmonton that features huge interactive video
screens that shoppers can use to design their patio
or backyard with help from Oculus Rift virtual reality
headsets.46
The emphasis on staff in these innovative stores
is deliberate. Local shopping for certain items is
still quite enjoyable for many people. And they
may willingly pay a premium compared to prices
available on an ecommerce marketplace to support
local retailers providing unique experiences and
products they can readily see and touch.
For them, sales associates with deep product
knowledge are very important when it comes
to in-store shopping. The changing role of the
store, soaring customer expectations, and a desire
to support neighbourhood businesses all put a
premium on hiring talented retail employees.47
Similarly, forward-thinking retailers are leveraging
digital in businesses that are traditionally more
physical than digital. And they are opening new
markets for themselves in so doing.
The augmented retail experience
All retailers have to get people into their store –
whether it’s through a digital door and/or a physical
door. An empty basket is still an empty basket.
But for retailers clinging on to traditional marketing
techniques, “tried and true” won’t equate with “will
always work”. Analogue solutions are losing their
impact in a digital world.
From the growing use of interactive, in-store
touchscreen displays45
to staff walking the sales
floor with tablets, innovative retailers are blending
digital with physical in creating memorable (and
repeatable) shopping experiences for customers
with high expectations.
Canadian Tire is investing heavily in their “clicks
and bricks” business model, taking an approach
the company’s Chief Technology Officer, Eugene
Roman, calls a “phygital” strategy that emphasizes
both physical stores and digital channels. Last year,
the chain opened a 140,000 square foot store in
45. Technavio, “Global Digital Signage Market 2016-2020”, January 27, 2016.
46. Christine Wong, “Canadian Tire’s $400 million drive to shift gears as a clicks-and
bricks retailer”, itbusiness.ca, April 22, 2016.
47. PwC, Total Retail 2015, p. 15

A pioneer in digital retail, John opened new markets
for his company Marquis Wine Cellars when he
started his first website in the mid-1990s. With over
20 years of combining online with in-store, John
attracts and retains repeat customers in markets
that include but also go well beyond customers in
his own neighbourhood.
“Years ago you could see writing on wall,”
John recounts. “Digital was going to make
it so much easier to drive traffic if your
customers could see you virtually. It’s
also a lot faster to update your website –
your virtual ads – rather than re-printing
all your hard copy ads.”
John, who has maintained a physical store in
Vancouver since starting his company in 1986, uses
digital technology in many ways. From posting
inventory updates to blogging about his upcoming
in-store events, John and his team do everything
possible to generate business through their website.
Case Study
Selling wine
online
For decades, the sale of wine in Canada
was restricted as much by geography
as it was by regulations. Of-age shoppers
had to be physically present to browse
and buy wines, meaning the catchment
area for any given wine-selling outlet
was generally limited to easy driving
distances. John Clerides of Vancouver
had other ideas.
48

49
“The key is to reach your customers wherever they
are,” says John.
It’s also about finding a good match when time-
pressed retailers are looking for suppliers to help
design and launch a good website.
“When starting out, you have to do your
due diligence. Talk to a lot of people, map
out what you want your site to look like,
and benchmark it against other sites you
like, regardless of what sector they’re
in. Then give that idea to proper web
designer, not your nephew.”
A highly-experienced digital retailer, John also has
some very Canadian-sounding advice for retailers
thinking they can dabble in digital with any positive
effect.
“Wayne Gretzky didn’t get that good by just trying it
out a few times. You have to commit.”
“Customers come to us in various
ways, across several digital platforms.
Many check us out online several
times, but it’s hard for us to judge how
often they’re checking us out. We have
to be actively online, and we have to be
authentic in what we’re saying.”
For John, being in a dense downtown Vancouver
location has positives and negatives. The upside
is that the store attracts a lot of foot and bike
traffic. The downside is that car congestion
can dissuade some customers from coming
into Marquis as they may have a hard time
parking.
By leveraging digital, Marquis is easy to find
online. That means shoppers can take their
time – where, when and how they want – in
learning about wine and the Marquis story before
choosing whether to come in personally or to
shop digitally.

50
Building digital capacity now is easier and
cheaper than ever before. Retailers can set up
good websites for comparatively little cost. And
they can work with an ever-growing array of
professionals dedicated to designing, launching
and running sites for and with time-pressed
retailers.
“It’s not hard a process to visualize
the steps ahead to make that digital
transformation.”
Chris Rickett, Manager of
Entrepreneurship Services, Economic
Development Culture,
City of Toronto
The questions before us all
Digital technology is an enabler for retailers –
regardless of their size – who want to harness its
power. Those who don’t are being left behind,
permanently.
Getting started
Early adopters of technology in retail are thriving
by engaging customers, driving sales and
facilitating exchanges of goods and services in
an era of profound change. They are going digital
so as to meet, if not exceed, their customers’
expectations, while at the same time carving out
niches for themselves in the shadow of huge
ecommerce players.
“If you put as much thought and
planning and resource commitment
into opening an online store as you
would into opening a second physical
store, then you’re much more likely
to succeed.”
Mark Startup, Vice President, Independent Retail
Division, Retail Council of Canada.
Regardless of how a retailer starts to move into the
digital world, the key is getting started.

51
And what are the costs to retailers, to neighbour-
hoods and to the national economy at large if,
collectively, we simply stand back and allow
retailers to be ploughed under – rather than thrive
within – Canada’s evolving retail landscape?
So what can be done in light of massive ecommerce
players permanently changing the retail sector?
Whatrole(s)dogovernmentshave,ifany,inencouraging
the digital transformations on a macro level?

52
Cities as Warehouses:
Multi-Local can Compete
with Multi-National

53
Local collaboration
In looking around their own communities, many
local retailers see their main competition as
being across the street or around the corner. And
while that may be true in many cases, the real
competition today almost literally can’t be seen
by just driving down main street. That’s because
the real competition is found online in the form of
global ecommerce marketplace players.
So, instead of only seeing competitors next door,
retailers need to start seeing competitors around
the world and potential allies next door.
The most difficult part is the consultation
between merchants. It’s terrible because they
see themselves in competition with each other,
and the more difficult the economic situation
is, the more they see themselves as such, while
it’s not the case. As retailers from the same
neighbourhood, they are all in the same boat.
Jacques Nantel, Professor, HEC Montreal
Fight, flight … or unite?
Retail in Canada is resilient. Many retailers, some
featured in this white paper, are innovative in their
use of digital to create memorable customer
experiences that drive sales.
But in today’s economy, it’s very difficult, if
not impossible, for many neighbourhood retail-
ers to fully compete against the likes of Alibaba,
Amazon and eBay. Huge ecommerce players
have won large swaths of the Canadian consum-
er market.
It may be a question of fight or flight for many
retailers facing this challenge.
But the impulse to unite may be a better
choice over the near and longer terms. That’s
because retailers serving local markets still
offer tremendous value to their owners, employees
and customers. Retailers combining their efforts to
do so – with the help of digital – will magnify their
impacts and efficacy.

54
As mentioned earlier, shoppers are inclined
to shop locally if given the choice and if the
experience is compelling and accessible.
This destination would meet all of those criteria
in addition to providing the information that
is the primary motivation for online shoppers
in their pre-purchase research – namely price
and product information, but at the local level.
Therefore, merging the convenience of digital
with the shared human experience of local retail
under the auspices of a local digital marketplace
adds to customers’ choices in an era when
choice is paramount.
This digital aggregation (local digital marketplace)
is mirrored by a physical aggregation of inventories
in small urban-based warehouses (stores). These
stores and the corresponding inventory and pricing
information can be geo-localized based on the
shopper – thus providing the buyer with the best and
closest option for price and product – effectively
levelling the playing field of giant ecommerce
players.
“Cities as Warehouses”
The answer may be found in creating a local
digital marketplace in Canada: a digital destination
where retailers showcase their inventory and that
enables consumers to geo-localize based on
location.
This “cities as warehouses” approach – recreates
in digital all the retail strengths of a local shopping
area. And it allows entire localities to compete
against large ecommerce players.
How does it work?
Using geo-localization technology, a “cities as ware-
houses” concept would feature a collection of local
retailers and their respective inventories and prices
online in one aggregated, easy-to-navigate digital
destination. The scope of this would be Canadian
but could be segmented at a national, regional, city
or neighbourhood level.

55
traffic and online transactions, they
simply need to upload their information
and inventory to be visible and present;
• Preserves the consumer option of
convenience and accessibility and never
needing to even visit a store, while driving
dollars to the local retailer and complementing
their physical presence;
• Sellers are co-located with their buyers,
and through a local digital marketplace,
customers will increasingly come to know
they can find a growing array of products
and services in locally-based meta
warehouses.
Retail competition would still be fierce within each
local marketplace – as it should be.
However, taking a “power in numbers” approach
starts to put local retailers on a more even ground
with massive ecommerce marketplaces. They are
stronger together in this way than in constantly
competing with each other and the large-scale
ecommerce marketplaces at the same time.
“ The technology battle is over; the next
retail battle is logistical. Even though
solutions like Amazon Fulfillment are
interesting for large manufacturers, they
aren’t appropriate for small retailers.
However, developing a logistical capacity
locally and making available shared
inventory...that is a HUGE opportunity. ”
Jacques Nantel, professor,
HEC Montreal
Multiple benefits across the
retail ecosystem
There are many benefits to this approach from the
retailers’ perspective:
• It gives local retailers greater visibility in the
eyes of shoppers who search online;
• Lower barrier to entry in digital for each
retailer as the digital destination already
exists and is the epicenter for consumer

56
Urban-based millennials (and many others) are
inclined to walk or ride (more so than drive) to local
stores where they can see, touch and buy things,
while also getting access to knowledgeable staff for
questions that couldn’t be answered online in their
pre-purchase research. This favours the ongoing
vibrancy of local retail. Taking steps to turn entire
communities in digital retail destinations and the
storefronts collectively forming “warehouses” for
the inventory in the digital marketplace, will do
exactly that.
Neighbourhoods Matter
The “cities as warehouses” vision is imbued with
the understanding that thriving, vibrant neigh-
bourhoods are important. And neighbourhoods –
defined many ways across Canada – are central to
the shopping experience of millions of Canadians,
particularly those living in dense, urban settings.
In cities big and small, residents have strong
emotional attachments to their neighbourhood.
Similarly, this approach creates many benefits for
governments:
• It stimulates urban revitalization by
highlighting local retailers offering good
products at good prices;
• It helps maintain (and possibly expand)
the local employment base;
• It fosters a culture of collaboration that can
have several positive, echo effects on other
aspects of community vibrancy.
Moving completely from a physical store to
the digital space (i.e. the former front of house
sales associate position is eliminated in favour
of consumer-driven online sales) also ultimately
reduces the overall number of jobs.
Embracing the “cities as warehouses” concept
creates and secures local jobs by enabling both
physical and digital presences to co-exist.

57
That’s because the first instinct of local
residents in such cases is to shop within their
immediate neighbourhood for many staples. They
venture beyond the neighbourhood only when
their desired items or services cannot be found
locally, or simply because they want the experience
of going elsewhere for the day.
“Toronto is a city made up of
neighborhoods that give Toronto its
unique identity. The backbone of
those neighbourhoods tends to be the
main streets with vibrant retail strips.”
Chris Rickett, Manager of
Entrepreneurship Services,
Economic Development Culture,
City of Toronto
Increasingly, the allure of neighbourhood retail
is found in expressions of the digital-retail nexus:
shoppers use digital to search prices and products,
and they go into local stores they can see online to
purchase them.
West End Vancouver is a good example. It’s a very
dense, urban setting with a moderate climate
conducive to walking and cycling. It has an
abundance of unique and chain-based retailers,
creating a combination of diversity and proximity
that leads many – if not most – residents to support
neighbourhood retail.
“Residents in our neighbourhood
may go out of the West End for some
things, but there’s high convenience
in high density. So they shop locally
while they’re out.”
Stephen Regan, Executive Director,
West End BIA
In Toronto’s Little Italy, many people identify
themselves as living first and foremost in Little Italy.
As a result, in this neighbourhood you find several
retailers catering to not only the predominant local
cultural community – Italian, in this case – but
also to people who live within walking and biking
distance from local stores.

58
For Gordon, all three traits are important in his
day-to-day job as the President of the Uncommon
Group, owner and operator of Uncommon Grounds
coffee and baked goods, Sugah! Confectionery and
Rum Runners Rum Cake.
They also infuse his collaborative approach to
helping run “I Love Local (HFX)”, a community
initiative that brings dozens of local retailers together
digitally and physically to support and strengthen
Halifax as “an exciting and vibrant place to shop, eat
and live”, as their website says.
“Halifax has a successful buy-local
culture,” explains Gordon. “We have
a long history of buying locally, and
many retailers are quick to adapt and
collaborate. We have 75 businesses
working together in ‘I Love Local’,
attracting thousands of people.”
Gordon and his colleagues use digital technology
to attract a broad range of shoppers. The entire “I
Love Local” campaign is run on social media, with
no spending on traditional ad spends.
Case Study
I LOVE LOCAL (HFX)
Taking an
“uncommon”
approach to
collaboration
@ilovelocalhfx : The Twitter handle for
Halifax-based retailer Gordon Stevens
paints a precise picture of his approach
to business – “serial entrepreneur,
community supporter, family first”.

59
there’s a huge opportunity, through digital, to get
these people into your store.”
“I Love Local” organizers understand that digital has
changed the way most people, including tourists,
shop these days. Many – if not most – people come
into stores knowing what they want to buy, and are
thus doing less browsing.
In Gordon’s experience, that might mean fewer
shoppers walking through the door, but higher
conversion rates.
“There’s a huge disadvantage to retailers
who haven’t transformed to digital, as
so much search is now happening on
phones before people come into stores
and while they’re in those stores.”
The key is to be found by shoppers who are
increasingly turning to their smartphones and laptops
before heading out the door.
In the case of “I Love Local”, collaboration turns that
digital attention into transactions.
Making heavy use of Twitter is a big part of their
campaign.
@ilovelocalhfx has more than
20,000 followers. And through the
combined efforts of the campaign’s
retail members, they’ve tweeted an
astonishing 155,000 tweets since
joining Twitter in August 2010.
That’s an average of 75 tweets per day,
far more than any given retailer
could muster by itself.
The members of “I Love Local” capture the
attention of tourists in particular by acting together
through a targeted and dynamic social media
campaign that highlights the depth and breadth
of the retail shopping experience in Halifax.
“Some retailers still have a capital “T” definition of
tourist, and they don’t pay any attention to business
people staying the night or people attending
conferences,” says Gordon. “I think anyone sleeping
more than 50kms away from home is a tourist,
in that the local market is unfamiliar to them. So

60
Costs of not making digital
work locally
Reduced retail diversity
The forward march of the global ecommerce
marketplace is reducing neighbourhood retail
diversity.
The digital spend of large-scale retailers is
exponentially greater than the combined, let alone
individual, digital budgets of many local retailers.
This tends to draw attention to the biggest players
in any given online search, taking consumer interest
and quite possibly their money with it.
This, despite the fact that there may well be some
local retailers – of furniture, for example – who
offer excellent products at very competitive prices.
What they may not excel at, is in making a high-
ranking place for themselves in digital. This means
they are rarely found outside of foot traffic and
meanwhile the consumer market for furniture
gravitates towards the one player (i.e. IKEA) with a
strong digital presence and an understanding of the
Retailers as policy stakeholders
The value of neighbourhoods to retail illustrates
how retailers themselves are important stakeholders
in their respective communities.
Entrepreneurs through and through, they are
often too busy running their businesses to
attend local council meetings, for instance.
But their voices – on digital transformation among
other big topics affecting retail in countless
Canadian communities – need to be solicited and
heard.
Retailers are – or at least could be – catalysts
for designing and implementing the “cities as
warehouses” vision that is needed in the face of
global ecommerce players.
Above all, local retailers are more often than
not, community-oriented, and are looking for
policy decisions firmly-rooted in visions of a strong
and vibrant neighbourhood retail sector for years
to come.

61
133 131 107 95 92 76 59 52 20
Notable Retail Closures in Canada (2014-2015)
stores stores stores stores stores stores stores stores stores
66 converted into
Best Buy stores
76 converted into other
Reitmans' banners

62
“Political bodies shouldn’t be the ones
who support the retail sector’s conversion
to digital conversion, but some forms of
intermediation must begin to take shape,
such as joint e-commerce infrastructure
and joint logistics infrastructure, street by
street, shopping center by shopping center
or neighbourhood by neighbourhood.”
Jacques Nantel, professor,
HEC Montreal
Significant economic impacts
Closures of main street retail stores cause job
dislocations for employees suddenly looking for
work. Add in the financial losses and emotional
strains on the owners of these failed businesses,
and the macro-level hard and soft dollar costs of
this turnover can be substantial.
All the while, the number of internet users in Canada
– shoppers on the digital street – is only going up,
and there’s no reason to believe this number will
go down.
price and ability to provide instantaneous product
inventory information to the buyer.
The result is a reduced diversity in the retail
experience. This is demonstrated by the fact that
many Canadian homes are furnished with IKEA
furniture. In 2015 alone, IKEA Canada welcomed 25
million visitors to its stores and 75 million visitors to
the IKEA.ca website.48
Given the prevalence of pre-purchase search, small
retailers don’t stand a chance – in the long run at
least – in competing with deep-pocket retailers
who can afford to pay for digital traffic in droves.
Taken to its logical extension, this would lead to
entrenched market dominance by a small number
of increasingly large players – most, if not all of
which are not Canadian – and the enhanced demise
of local retail from one coast to the next. Diversity in
retail, and all the vibrancy it brings, would be gone.
This possibility, of course, runs counter to every
Canadian municipality’s vision of itself from a planning
perspective.
48. IKEA Canada Summary Report 2015, p. 30.

63
The digital transformation in retail is irreversible,
bringing with it increased potential failure among
retailers who do not take concrete steps to protect
themselves in turbulent times.
In other words, the overall store-failure numbers
could steeply rise – adding to job dislocations – if
retailers in Canada don’t firmly position themselves
in the digital world.
These factors – store failures and digital shoppers –
clash at the expense of a vitally important economic
sector that is trying very hard to right its ship in
stormy waters.
Governments have a big stake
Governments, of course, have substantial stakes
in the ongoing success of retail in Canada. “For
Lease” signs appearing on the main streets of their
respective communities, lead to concerns about
community vitality, jobs and local wealth creation.
The levers of government are somewhat limited
when it comes to stimulating an economic sector
undergoing rapid and profound change.
However, just as the “cities as warehouses” vision
requires mutually motivated collaboration among
private sector competitors, so, too, does a vision
of thriving neighbourhood retail require sustained
interest from governments in working closely with
neighbourhood retailers.
“Missing out on digital transformation
would be a long slow decline. Then
one day you’d be gone, at which time
it’s way too late to do anything about it.
When you get to that point, you can’t
just turn a corner and suddenly be in the
digital age. Others will be so far ahead,
and how do you catch up?”
Andrea Reimer,
Vancouver City Councillor

64
Taking the digital road forward
The world of retail is changing rapidly, and will never be the same as it was only a few years ago.
Digital technologies are reshaping how, where, when and why Canadians from coast to
coast do their shopping. The habits of digital customers are well beyond what most retailers are
doing, or even understand. And large-scale ecommerce marketplaces are scooping up
customers across the country.
Local retailers have to respond quickly, efficiently and strategically to these forces.
But they can’t do it alone. Such is the change and the risk in retail these days that acting
jointly is the only way many local retailers will be able to withstand the growing allure of
enormous marketplace players.
It’s time for retailers across Canada to work together.
It’s time for everyone in the retail ecosystem – sellers and governments in particular –
to collaborate in grasping the opportunities to be found amid significant challenges.
And it’s time to make a bold choice of path at the crossroads of retail and pursue vibrancy
and long-term success along the digital highway that connects all Canada’s communities.

3
Acknowledgements
Andrea Reimer, Vancouver City Councillor
Chris Rickett, Manager of Entrepreneurship Services, Economic Development Culture, City of Toronto
Don Tapscott, CEO, The Tapscott Group Inc.
Mark Startup, Vice President, Independent Retail Division, Retail Council of Canada
Gordon Stevens, President, The Uncommon Group
Hicham Ratnani, Co-Founder and COO, Frank + Oak
Jacques Nantel, professor, HEC Montreal
John Clerides, Owner, Marquis Wine Cellars, Vancouver
Stephen Regan, Executive Director, West End BIA
Thank you to bluenove for their guidance in the production of this piece.

4
This document is printed on Rolland Enviro 100, the environmentally responsible choice, because it is processed chlorine
free, accredited Eco-Logo and 100% post-consumer. In other words, no new trees have been cut to produce this paper, and
all the ﬁbre comes from recycling bins.

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