An Ottawa startup that provides automated merchandising for online retailers is making major strides this year after landing contracts with e-commerce companies Shopify and Magento.
With e-commerce sales in Canada expected to hit almost $30 billion this year, there’s little question that online retailers are selling to a large and rapidly growing market. But in a space that’s more competitive than ever, particularly in the fashion e-commerce subsector, visuals and other accompanying digital content are essential.
Looking to enter the thriving business space that launched fellow Ottawa company Shopify’s success, three-year-old startup ZINation has made major early strides in 2015 with its technology that lets retailers make elaborate and engaging e-magazines to allow customers to view products much like they would flip through a fashion catalogue.
“A product that has value needs to be presented in better packaging, and that better packaging goes beyond a Shopify store where you have (just) pictures presented. How about presenting them in a (way) that the fashion industry knows very well?” explained CEO David Ker.
Then a master’s student at Carleton University, Mr. Ker founded ZINation in 2012 with the initial concept of curating online content into custom user-made digital tablet “magazines,” in the vein of Pinterest and Flipboard. “How can we make content beautiful in a format that’s similar to a magazine?” asked the 40-year-old entrepreneur.
Eventually he found that model wasn’t working and the funding wasn’t there to allow his company to scale and subsequently survive. Now one of six L-Spark incubator companies working out of the program’s Kanata headquarters, ZINation has the focus it needs to succeed, Mr. Ker said.
“There’s synergy between the value proposition that we proposed, which is presenting content in a beautiful manner, and applying it to an e-commerce context,” he said. “(L-Spark’s advisers) recommended we be even more focused, and that focus was around merchandising, instead of just stating that we’re tapping into the e-commerce marketplace.”
From there, the bootstrapped startup landed its first major contract with Shopify in April, resulting in 2,000 e-retailers using its service. With the addition of Los Angeles-based Magento, which has about twice the client base of Shopify, ZINation expects to triple its user base.
In the L-Spark incubator program, ZINation and its fellow startups are expected to earn between $10,000 and $30,000 in monthly recurring revenue after a year. Mr. Ker said his company will aim for the lower end of that scale, around $10,000 to $15,000 per month. As long as the firm meets that goal, ZINation can be profitable by mid-2016, he added.
The new Magento contract will help with that growth, he said, and his company is also eyeing other major e-commerce players such as Bigcommerce, Etsy and, further down the line, even Amazon and eBay, which owns Magento.
“The big one we’re looking into in the future is Alibaba, I would say by the end of next year, but it could be faster,” said Mr. Ker.
The main challenge, however, is conversion. ZINation offers its service free to merchandisers for the first month and many customers, particularly major clients, need a bigger push – including tutorials to maximize their use of the technology – in order to commit to the service.
In the meantime, ZINation also finances itself by acquiring side contracts, building apps for other small companies to earn service revenue that helps sustain the main business model.
Mr. Ker said there were multiple times during the first few years of his startup when it looked like things weren’t going to work out, but he added it taught him the value of long-term commitment, good business advisers and real problem-solving.
“We (spend) a lot of time falling in love with technology and then figuring out how we can apply it, where it would have been better if we just identify what is the problem, who’s the customer, and try to solve the problem of that customer using the technology.”