Lauded startup may be struggling for further feats
Vancouver-based ecommerce’s ‘ big, bold’ startup is struggling after early success
Shoes.com has been hailed as the hottest startup in the country, raking in awards and constant praise from the business press. But a Vancouver Sun investigation has revealed an ecommerce darling in turmoil, as it juggles unhappy customers, allegations of unpaid bills, and big staff reductions.
In his first interview since coming on board last month, the company’s new president acknowledges there have been some growing pains, but says he’s hopeful that a streamlined workforce and improved customer service will help the retailer get back on track.
Until now, the accolades have been uninterrupted. Just last week, Canadian Business and Profit named Shoes.com the top startup in Canada, praising its history of “big, bold, potentially risky” moves, while Maximum Venture called it a startup company to watch in 2016. Early next year, Vancouver operations will move into customdesigned offices in the newly built FiveTen Seymour tower.
But this summer, dozens of Shoes.com employees were laid off without notice in Vancouver, Burnaby and Seattle, while two claims were filed against the company in B.C. Supreme Court, alleg- ing more than $100,000 in unpaid provincial sales tax and six months of overdue invoices for an independent contractor.
Meanwhile, the opening of a brick-and-mortar shop on Burrard Street has been put on hold, plans for an IPO appear to be frozen, and customers are flooding the company’s social media sites with complaints about unanswered emails and long telephone hold times.
The company has also pulled out of sponsoring a contemporary art exhibition called Art Rapture. Shoes.com had pledged $1,000 to the event, but told organizers that they had to drop out because of financial difficulties, according to curator Paul Becker. The show did receive a number of shoes from the company, which will be painted and auctioned off for charity.
Retail consultant David Ian Gray of DIG 360 says he’s noticed a large number of online complaints from customers about things like late deliveries and mistakes in their orders.
“On the Internet, there will always be some complaints on review sites, but they’re scoring particularly low,” he says.
He believes a lot of ecommerce apparel companies are facing growing pains, in part because of who’s occupying the highest levels of management. Selling shoes and other clothing requires meeting very specific customer needs and understanding things like fit and style, he argues.
“At the end of the day, they’re in the fashion business,” Gray says. “But if you look at who’s really running these companies, they tend to be technology-first types.”
Although Shoes.com recently brought in Bryan Galipeau from Nordstrom as senior director of acquisition, most of the senior management team comes from CEO Roger Hardy’s earlier, wildly successful venture Coastal Contacts, and newly appointed president Bradley Wilson just left a job as general manager at Expedia.
The company that started in a Dunbar basement as Shoeme.ca has gone through a massive expansion in just four years, acquiring the U.S. sites Shoes.com and OnlineShoes.com as well as the lifestyle brand Richer Poorer. Its online sales totalled US$223 million in 2015, according to Internet Retailer, up from $89.2 million the year before.
It’s a daring trajectory, Wilson acknowledges.
“The stuff that they undertook was really, really ambitious,” he says. “Big companies, such as Expedia, took on a level of commitment near that, but there’s thousands and thousands of employees.”
But Wilson maintains the company hasn’t been too ambitious in its acquisitions, and he sees big opportunities in the future.
“You can always second-guess,” he says. “If you’ve got the opportunity to grab at the assets and you’ve got a vision on where you’re taking it, then it’s probably something I would do as well.”
After layoffs last month, Shoes. com now employs about 230 people, down from the nearly 650 reported in The Vancouver Sun a year ago. More than 200 jobs were cut when the retailer shifted warehouse operations to a third-party provider. The company hasn’t released exact numbers for the layoffs in August, except to say about 10 per cent of the Vancouver-area workforce was cut.
The stuff that they undertook was really, really ambitious. Big companies, such as Expedia, took on a level of commitment near that, but there’s thousands and thousands of employees. Newly appointed Shoes.com president Bradley Wilson
Wilson described the most recent job cuts as painful but necessary.
“I will tell you that, having come from small, medium and large ecommerce companies, this company more than anybody needed to restructure for future success,” he says.
Meghan Wilkinson and Stacey Suter had been working at a Shoes. com call centre in Burnaby for about 10 months before they lost their jobs on Aug. 9. According to Wilkinson, 30 to 40 people in her office were called into a boardroom and told it was their last day.
“We weren’t even allowed to go back to our desks,” she says.
While low wages had been a constant point of contention for the call-centre employees, Wilkinson says she was sad to leave what seemed like a promising career.
Suter, who was off work the day the cuts were announced, received the news at home. She was shocked.
“Your job security was preached to you, that you’d go up in the company really fast, there wouldn’t be any external hiring ... that there was no way we’d lose our job in the foreseeable future,” she says.
But there were hints something was amiss, she adds.
One major headache was responding to customers whose orders were late. In the case of at least one vendor, those delays were a result of the company not paying its bills. Ecco Shoes Canada confirmed that Shoes.com had an outstanding balance, but it has now been paid in full. Another recently laid-off employee says she frequently had to deal with customers whose orders were wrong, including one who had received two right shoes.
Customer service appears to have suffered, too. Wilkinson and Suter say the standard when they started was that no customer should be on hold for more than three minutes. Since then, the company has cut back on call-centre hours from 18 to 12 hours each day. “Now, it can be upwards of an hour hold time no matter when you call. I’ve tried just to see,” Suter says.
Comments from frustrated customers on the Shoes.com and OnlineShoes.com Facebook pages seem to confirm that. When a reporter tried calling the customer service line for Shoes.com on Wednesday morning, the hold time was 48 minutes. A current employee at the Burnaby call centre said that some calls now simply go unanswered, and there’s a backlog of hundreds of customer emails.
The company’s new president acknowledges that long hold times and unanswered emails are issues for Shoes.com.
“Yes, I’m of aware of that; yes, we’re addressing it,” Wilson says. “The one way to safely guarantee that you can be a popular brand, a meaningful brand, one with very healthy business margins, is to just serve the customer correctly.”
However, he was unaware of the two legal claims filed this summer against the company. The B.C. government filed suit in July, claiming $119,274 in unpaid provincial sales taxes, and Swim Recruiting followed up in August with a suit over $58,677.95 allegedly owed for the services of a contractor.
Swim Recruiting’s COO, Bodil Geyer, says her company finally received the money owing last week. The recruiting firm had been paying the contractor and sending invoices to Shoes.com from February until the end of July this year, but the unpaid balance just kept adding up.
“We spent weeks trying to get in touch with HR and people in accounting to find out when we were going to get paid, and no one ever responded to us,” Geyer says.
“We started to get little loose ends of information floating out of the company, because we’d placed some people there before, that things weren’t going well.”
Swim Recruiting had also lined up some prospects who were expecting job offers from Shoes.com, she adds, but they never materialized.
Shoes.com’s vice-president of marketing Geoff Henshaw describes the legal dispute with the recruiter as a “minor invoice misunderstanding which has been cleared up.” As for the claim regarding unpaid PST, he says that his company is in good standing and that the claim was the result of a routine audit that resulted in an over-assessment.
Meanwhile, plans to take the company public appear to have stalled. CEO Hardy first dangled the idea of an IPO in May 2015 after raising $45 million in private funding; at the time, he suggested the company would go public that fall. That didn’t happen, but in January of this year, Hardy announced plans to raise at least $25 million to launch an IPO early in 2017. Now his new president says a public offering is not among his priorities.
“I’m not focused on the IPO,” Wilson says with a laugh. “I’m focused on making sure we’re doing the right thing in the marketplace for the customer.”
In an email last month, Hardy wrote that the IPO “is a market driven exercise when the timing is right the team will be ready.”
Timing is also up in the air for the Shoes.com storefront at 779 Burrard St., which was supposed to welcome its first customers this month. The windows are currently clad in blue bearing the retailer’s branding, but Wilson says he has no firm date for the opening.
“All I can tell you is that we’re still going forward,” he says. “I had a bunch of questions that stalled the team, but we’re still planning to get that up by the holidays.”
A Toronto store that opened late last year is still running, and Wilson says it’s possible that more North American locations will be considered.
For DIG 360sGray, the signs coming out of the company aren’t positive, but he believes it still has plenty of time and money to turn things around. Ideally, that would involve a large investment from a traditional footwear retailer with more experience in the fashion world, he said.