Sad news today from Shoes.com which has ceased all operations, laying off hundreds of employees and shuttering two brick and mortar stores. This is a surprise for co-founder, eCommerce golden boy Roger Hardy who also founded Coast Contacts which was sold for $430M back in 2014. Hardy had deep pockets, tons of experience, and a proven track record having recently won awards as a leading online retailer. So what went wrong?
While the Canadian online shoes market had been abandoned by Amazon owned Zappos, Canada just does not have the economies of scale needed to create a top 500 eCommerce company. This has played out with the challenges faced by The Bay, and Sears Canada. Without a chunk of the US market, Canadian online merchants are at a serious disadvantage.
Hardy knew the importance of the US market and worked hard to build a foothold starting with acquiring Seattle outfit OnlineShoes.com in mid-2014 and Shoes.com from Brown Shoe Co. in December of the same year. The challenge for Hardy was that the US market was dominated by Zappos.com which Amazon acquired in 2009 for close to $1B. It had a massive head start. Walmart’s recent acquisition of ShoeBuy.com to roll into their $3.3 Billion Jet.com eCommerce subsidiary and despite its $300M in annual online sales and experienced executive team, Shoes.com was the low man on the totem pole.
To take on players like Amazon and Walmart you need nerves of steel, a fat bank account, and something to differentiate yourself. With no “store brand” Shoes.com was competing head to head on price, selection, and fulfillment. Short of raising hundreds of millions of dollars or finding a suitor, Hardy didn’t have many other options.
I am sure this is not the end of the road for Hardy and the recently released staff will actually be a boon to the Canadian eCommerce industry. Canada lacks a deep talent pool of people with eCommerce experience at this level. Just like the troubles at Blackberry leading to a cluster of start-ups in Waterloo, I suspect we are going to see Shoes.com employees starting their own businesses and joining other local eCommerce teams and helping them grow.