A conveyor belt of boxes to be shipped from Beyond the Rack in Montreal, October 22, 2013.Christinne Muschi/The Globe and Mail
Montreal-based online retailer Beyond the Rack Inc. has raised $10-million (U.S.) in a debt financing deal. The lender is Silicon Valley Bank, a subsidiary of SVB Financial Group which specializes in lending to North American technology companies.
Yona Shtern, co-founder and CEO of Beyond the Rack, says the funds will be used for marketing and broadening its product assortment, including beefing up its private label business; Currently the firm's private label business is miniscule though, consisting of a smattering of household items, like pillows and shoe racks, and only accounts for around 2 percent of revenue.
The company's bread and butter is selling well-known consumer brand products such as clothes, footwear, home decor and consumer electronics at discounts of up to 80 per cent off retail prices.
(Some of the products on offer are super luxe. Anyone for an Yves Saint Laurent "flirty" handbag in red for $1,399.99? Maybe not, but I might pick up a pair of those red and black Fila running shoes going for $49.99. )
Eight thousand new products go on sale every day. Thirteen million people have signed up as members to Beyond the Rack's website. (You can only place an order if you are a member). Three times a day the company holds what it calls "events," when new items are put up for sale. These events last for up to three days.
Products are stored at the manufacturer. Beyond the Rack only takes possession of the goods after a customer places an order, keeping its inventory costs to a minimum. Schtern says while the U.S. is an important market, the Canadian market is where it has the most economies of scale. Seventy per cent of its business comes from Canada versus 30 per cent from the U.S.
Beyond the Rack has raised $75-million (U.S.) since inception in 2009. Most of that has been in equity. Mr. Shtern says its ownership is made up of private firms and Canadian, American and European venture capital companies. Beyond the Rack isn't turning a profit yet but Mr. Shtern says profitability is "just around the corner." I asked Mr. Shtern whether the company has been approached by buyers? He replied that Beyond the Rack is "always in strategic discussions" and there has been "all types of interest" in things like joint ventures. As for an IPO, he says it isnt' imminent, but "if the timing is right, it is definitely something" he would consider.
Niall McGee