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Could e-commerce be a Hamilton strength?

Kevin Browne 1 Comment

The fact that Hamilton e-commerce success story Mabel’s Labels (@mabelhood) is doing the keynote and REfficient (@REfficient) is doing a demo at DemoCampHamilton8 got me thinking about e-commerce as a potential strength for Hamilton. The four mompreneurs (@3ellis, @cynthiaesp, @juliecole, @mumby) at Mabel’s Labels grew the company out of a basement to a 14,000 square foot location and 40+ employees, and Stephanie McLarty’s (@REstephmcl) REfficient has diverted over 1 million pounds from landfills in the last 2 years. Both companies have received a plethora of media coverage (Mabel’s Labels, REfficient). These Hamilton e-commerce firms are having an impact and making waves. And in the process of doing so they are also creating technology jobs in Hamilton – in fact between 20-25% of Mabel’s Labels employees are full-time IT!

So here are some reasons why I believe e-commerce is a potential strength for Hamilton:

 

Hamilton’s “cheap space” has a pronounced effect

I’ve heard lots of people say something to the effect of “Hamilton has great startup potential because the rent is so cheap”. It’s not just about cheap office or warehouse rents either, for the entrepreneurs themselves that are trying to get started their own personal cost of living is cheaper than Toronto. That said, even though Hamilton might be a bargin next to rents in the GTA, cheap rent can be found in many places. Costs in Hamilton have been referenced as about 30% lower than the GTA. It may be an advantage, but is that enough on its own to get smaller tech startups occupying 500 square feet to do business in Hamilton? In my experience many of them will weigh other factors more heavily (access to talent, services, etc.).

But for an e-commerce business that requires thousands (or possibly tens of thousands) of square feet for warehousing or production, I think a 30% difference in costs has a much more pronounced influence on where to locate.

 

Location, location, location

Hamilton and the surrounding region’s strength and potential as a transportation hub has been promoted by TransHub Ontario (@TransHubOn). We’ve got 11 million people within a 2 hour drive, excellent airport, seaport, highway and rail access, and we’re also very close to the U.S. border. Strength as a hub for the movement of goods is also a strength for any e-commerce companies selling physical goods.

 

Community building, branding and social media

Social media and community building have been a huge part of Mabel’s Labels success (see this Globe & Mail article, which I’ll summarize). To spread the word about Mabel’s Labels online they reached out to “mommy bloggers” to run contests and they created volunteer brand ambassadors called Buzzmamas. And they held onto these new customers and kept them connected and coming back by creating their own online brand and community – The Mabelhood. The Mabelhood is a community of “mommy bloggers” led by Julie Cole, which presents “contagious content” relevant to the same mothers that buy Mabel’s Labels. The company is also actively engaged in social media, responding to feedback about the company online, which allows them to respond to concerns and stay engaged with their customers. The online brand and presence of the company is kept consistent through maintaining a set of core values that are taught to and expected from all employee’s online interactions.

REfficient has made similar steps in terms of online engagement, community building and branding. They have a REvolution campaign which will highlight how different companies around the world are embracing sustainability and saving money by becoming part of the ‘RE’ movement. They are reaching to customers through online video with “contagious content” (like this rap spoof video). Stephanie also blogs weekly on TalkSustainability.com about lessons learned in creating the cleantech company, sustainability and women in business.

In both cases, I believe the key is that they are building an online brand and a community around issues larger than the products they are selling, things that resonate with their target customers (motherhood, sustainability). I also think in both cases these are things that the founders themselves care about, and that brings along a sense of legitimacy and purpose that you can’t fake or put a price on. The attachment to these sorts of meaningful issues and purposes can make a company connect with customers in a way that keeps them coming back – and create word of mouth advertising in the process.

But why is this a strength for Hamilton? Because we do social media really well in Hamilton. For example:

We also have a good number of local firms that do online branding, like:

I think when you add it all up, we have the capacity in Hamilton to compete against anybody in terms of online branding and community building.

 

Strong web development/design talent

I’ve had people tell me that there is “a lot of web” at DemoCampHamilton events. They’re right, mobile and desktop are always welcome at DemoCamp (heck even robot/hardware demos…), but most of the demos so far have been web apps. There’s a lot of web development expertise in Hamilton in terms of firms like Weever Apps (@WeeverApps), BraveNewCode (@BraveNewCode), MRX, Orbital (@GetOrbital), and 2gen.net. And all of the firms in the online branding listing above also do web development!

I think this is relevant, and an advantage, because access to the right kind of talent is important. Unless you include the talent in Waterloo and Toronto as accessible to Hamilton firms, and perhaps maybe it should be, we don’t have the capacity right now this instant to support something like the IBM Toronto Software Lab or to compete against the Googleplex at making self-driving cars. These are extreme cases mind you, it’s kind of like saying that NASA couldn’t move into Hamilton tomorrow. But that sort of advanced and large scale high tech, where you have thousands of scientists and engineers targeting the world’s most difficult problems, represents years and decades of build up. I could be wrong, companies like Research in Motion and Desire2Learn can pull talent (and investment) in from all over the world if they require it. But it seems to me like a healthy base of the right type of local talent is still a huge advantage, if not a requirement to remain competitive. I’m sure we’ll get there, and perhaps soon, but we aren’t there just yet. However, with web development, especially the kind that takes into account the broader design, branding and marketing that is required to do e-commerce successfully, we have the capacity in Hamilton right now.

 

McMaster eBusiness Research Centre

McMaster’s eBusiness Research Centre has research projects in relevant areas like mobile commerce. I think a lot of great startups do well on the basis of the “intellectual heft” that practical research can give them, like Waterloo’s largely computer science fuelled startup success. Research into areas like online trust and its relationship to website design and purchasing decisions is the sort of thing that could help fuel e-commerce startups in Hamilton.

 

Relatively/potentially lower startup capital requirements

This one may be a little more debatable. If you’re at the stage where you’re renting thousands of square feet in a warehouse, there’s obviously a huge cost there. And if a startup requires that kind of space from the outset, then it could actually require more capital than other tech startups.

But with at least some e-commerce businesses, you can “start in a basement and bootstrap from there”. There are solutions like Shopify, Etsy and WordPress that make it much easier and cheaper to start selling things online than ever before. As the business gets more successful, you can do things like move to your own custom web application instead of the these solutions, and accessing capital to expand shouldn’t be as much of a problem if you already have customers and growth. If the business doesn’t get more successful, you can listen to the feedback and pivot into something different, and it hasn’t costed you much.

This one isn’t a “Hamilton advantage” so much as an “advantage for Hamilton”. The fact that it’s definitely possible to bootstrap an e-commerce company should reduce concerns over a perceived lack of local investment capital or difficulty in raising capital.

 

You can be a “big fish” in a “medium sea”

This advantage is something Stephanie suggested when I sent her this article. It makes sense, and it has implications for more than just e-commerce startups. As Canada’s 8th largest city, the sea isn’t even “small”, but it’s not so large either that we lose a sense of cohesion. There is a tremendous support network in Hamilton thanks to organizations like the Innovation Factory (@itbeginswithIF), Hamilton Economic Development (@hamiltonecdev), and the Chamber of Commerce (@hamiltonchamber). As a result compared to other locations it becomes relatively easier to build a support network, get going, and gain traction. In Stephanie’s words, “there is more cohesion and support here than anywhere else I’ve experienced”.

 

The trail has already been blazed

Hamilton was not so long ago home to thriving big businesses, but as we know many of them have left town. The “steel city” is searching for a new identity and new paths to prosperity. City of waterfalls? Art? Biotech? I like the slogan that “you can do anything in Hamilton” – it’s inclusive, hopeful and ambitious. And there’s no reason why we can’t succeed in multiple areas at once. I don’t believe we need to be defined by a specific product so much as a state of mind.

The debate over identity and direction sometimes extends to the small but growing tech sector as well, for instance Abdallah Al-Hakim’s (@abdallahalhakim) thoughtful Raise the Hammer (@RaiseTheHammer) article on the subject. Does tech in Hamilton need an identity? mHealth? Video games? I think the “you can do anything in Hamilton” slogan applies just as much to the tech sector, given enough time and effort of course.

But when looking at e-commerce, the path to prosperity has already been cleared. We already know you can do an awesome job in Hamilton, because we’ve seen it done with Mabel’s Labels and we’re seeing it again with REfficient. Local e-commerce startups could learn from what they’ve done and do it again in other spaces. Hamilton’s advantages could be used to attract existing e-commerce companies to Hamilton.

Our industrial legacy has left us with a lot of brownfields, could e-commerce warehouses help fill them up again? What could you start selling online working out of your basement or apartment?

 

Mabel’s Labels & REfficient @ DemoCampHamilton8 – Sept. 24th (Mohawk College)

 

Kevin Browne

Editor of Software Hamilton.