Winnipeg Free Press - PRINT EDITION

Beyond the Rack's Shtern delivers inspirational tale

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Last week, several hundred Winnipeggers heard a charming presentation from Chip Wilson, founder of Lululemon, at a gala dinner sponsored by the Associates of the Asper School of Business.

On Wednesday morning, fewer than 50 people had the good fortune to hear Yona Shtern, the co-founder and CEO of Beyond the Rack, the members-only women's and men's fashion flash-sale e-commerce site based in Montreal.

Not to suggest that these are competitive events or that such presentations are rated like theatrical performances, but Shtern's blew Wilson's out of the water.

Maybe because Beyond the Rack is still in the process of evolving and growing and Lululemon is a more mature business, there was more resonance. Also, Shtern is still at the helm and Wilson has become the non-executive chairman of the board.

Lululemon is a publicly traded company and as such has fairly ready access to the capital markets and Shtern spends about 60 per cent of his time raising money, so he's very much in the middle of things.

Shtern had quite the aspirational message at the Information and Communication Technology Association of Manitoba (ICTAM) event.

A kid with an English-lit degree and a vague desire to become a "writer" he winds up writing ad copy and catalogues for Avon, transitioning into direct marketing and then becoming somewhat of a market research, data analysis whiz kid for Saks Fifth Avenue in New York.

For budding entrepreneurs, his message hit home on all sorts of different levels -- the seeming hopelessness of the original fundraising efforts; the ongoing discoveries that so many of his early assumptions about his business were false; and how circumstances beyond their control conspired against them (he first started raising money for BTR just prior to the stock market collapse in the fall of 2008).

Beyond the Rack will do about $200 million in sales this year. Last year it was ranked as the third-fastest-growing company in Canada in Profit Magazine and the fastest growing electronic retailer in North America in 2011.

Shtern spoke about how his original 30-page business plan included several pages on building the market and merchandising and just two bullet points on logistics and information technology.

"As it turns out logistics and IT are the most important parts of the business accounting for 70 per cent of our capital investment," Shtern said.

The company now has about 450 employees and is about to launch two new businesses later this year that will capitalize on the logistics and IT infrastructure that it has built up.

His is also somewhat of a cautionary tale about being an entrepreneur in Canada and making a Canadian business.

Their original major investor, a Swiss e-commerce expert, admonished them for having a business plan that was "too Canadian."

"He told us we have to think big," he said.

Considering Amazon and eBay generated more than $60 billion and $14 billion respectively last year you can see why Shtern said, "We have barely scratched the surface."

On Wednesday, Statistics Canada published its Digital Technology and Internet Use survey results for 2012, reporting that Canadian enterprises sold almost $122 billion of goods and services over the Internet in 2012.

Considering that between them Amazon and eBay did more than 50 per cent of the entire Canadian market, there is likely room to grow for Beyond the Rack in that market.

"It matters that this is a Canadian company," he said. "For Canadian consumers, if you buy from the U.S. companies you pay taxes and duties and returning (merchandise) is a nightmare. The degree to which we can help fulfil the need domestically makes a lot of sense."

The other issue is it took four tries before Shtern was successful with his fifth start-up. Canada needs to be more encouraging of its entrepreneurial failures. Because the next one is often the charm.

Republished from the Winnipeg Free Press print edition June 13, 2013 B8


Updated on Thursday, June 13, 2013 at 10:30 AM CDT: Corrects spelling of Yona Shtern

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About Martin Cash

Martin Cash joined the Free Press in 1987 as the paper’s business columnist.

He has spent two decades chronicling the city’s business affairs.

Martin won a citation of merit from the National Newspaper Awards in 2001 for his coverage of the strike and subsequent multi-million-dollar union settlement at the Versatile tractor plant. He has also received honours and awards for his work on agriculture and technology development in Manitoba.

Martin has written a coffee-table book about the commercial and industrial make-up of the city, called Winnipeg: A Prairie Portrait.

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