Vancouver's Shoes.com shuts down operations

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Vancouver e-commerce company Shoes.com Technologies Inc. shut down operations effective Friday, and will work with its lenders to liquidate its assets and assign some of its companies to bankruptcy. The company took its websites offline and said it had closed its two stores in Vancouver and Toronto.

It's an abrupt end for a company that was once touted as an IPO hopeful, as chairman and CEO Roger Hardy hoped to repeat the success of his previous e-commerce company – online eye wear merchant Coastal Contacts – which he sold in 2014 to Essilor International for $430-million. Shoes.com had previously said it brought in more than $200-million in revenue two years ago and had hopes to reach $1-billion by 2020. Mr. Hardy did not return messages Friday.

Shoes.com's forerunner started in 2012 as Shoeme.ca, when former Coastal employee Sean Clark started an online shoe merchant after Zappos pulled out of the Canadian market. Mr. Hardy was an early investor and became CEO shortly after selling Coastal. Part of his strategy was to consolidate the online shoe market, and he raised tens of millions of dollars to fund acquisitions across North America, including rights to the shoes.com website from U.S. footwear retailer Brown Shoe Co.

But earlier this month rival online shoe maker Shoebuy.com sold to Wal-Mart for $70-million (U.S.). Combined with the fact market leader Zappos was already owned by e-commerce behemoth Amazon.com Inc., Shoes.com faced a much tougher competitive environment.

By then the Vancouver company was already struggling. A story in the Vancouver Sun last fall revealed the company was plagued by customer service issues and peppered by legal claims from unpaid suppliers.

New president Brad Wilson, a former GM with Expedia Inc.'s Travelocity unit, was hired last summer to turn the company around, saying at the time he had "jumped in, feet first" to the opportunity. Through the course of last year the company laid off two-thirds of staff and outsourced some work. "There are a number of things that we're doing that are pretty consistent when a new president or CEO comes in and looks at the business and establishes a path forward," Mr, Wilson told BIV two months ago. As of Friday, Mr. Wilson's LinkedIn profile made no mention of his tenure at Shoes.com.

Shoes.com's demise is the latest in a string of e-commerce disappointments, as companies including Canada's Shop.ca and Beyond the Rack and U.S. retailers One Kings Lane and Hayneedle either filed for creditor protection or sold for a fraction of their former value. At the same time, many other e-commerce merchants continue to thrive, as evidenced by the strong growth of Ottawa-based online retail management platform Shopify.com and last year's sale by upstart Dollar Shave Club to Unilever for $1-billion. E-commerce sales are expected to expand well ahead of overall retail sales in Canada and internationally through the end of this decade, according to eMarketer.

Doug Stephens, founder of consultancy Retail Prophet, said the company suffered from having too few managers from the fashion industry and too many from the technology sector. And customer service "wasn't where it needed to be to give online customers the level of confidence necessary – especially in such a tricky category ..."

"It seems a matter of biting off way more than they could chew through a spate of acquisitions," Mr. Stephens said. "Despite all the appearances of growth, market awareness was still quite low."

As well, Amazon.com Inc. "has been a juggernaut both in terms of its penetration into the Canadian market and in the North American apparel market generally. I think investors are recognizing that competing head to head against Amazon online is practically foolhardy at this point, unless you're tremendously specialized."

David Ian Gray of retail consultancy DIG360 also said the company was lacking executives with retail experience. "Shoppers want shoes that look good and fit well with minimal fuss," Mr. Gray said. "The price can lure them in but getting two left shoes in a box or limited call-centre access – fail."

Mr. Gray said e-commerce operators have a tough time running profitable businesses. "Many early investors are so eager to exit there is little incentive to build a complete model for the long term."

Suthamie Poologasingham, director of marketing and research at consultancy J.C. William Group, noted that giant shoe specialist Zappos.com tried and failed in Canada, where companies have trouble achieving economies of scale because of the relatively small population. "They would have needed to have a unique offering and/or sell internationally as well."

And companies that have both e-commerce and bricks-and-mortar stores as an "omni-channel" operation have an edge, she said. Retailers such as Aldo with multiple stores and an online presence have found a better formula, she said.

With files from Marina Strauss