Two Montreal startups are going beyond the stereotypes of what it means to be a tech company. Frank & Oak and Lufa Farms aren’t just e-commerce platforms, their relationship with the goods they sell goes much deeper than that. Frank & Oak design, manufacture and sell men’s clothes. While Lufa Farms grows the food they sell at rooftop gardens.
“We’re a fully integrated company,” says Ethan Song, Frank & Oak’s co-founder and CEO, “We go beyond vertical integration.”
Handling every stage of the process not only allows the company have more control, it also gives them far more data on their customers than traditional retailers.
“If you’re not integrated, you basically have no data on who’s buying,” he said. And while a vertically integrated company might have data at the tore level, they don’t have that kind of information on their customers.
Having that data can not only help the company shape its designs, it can also help it shape the customer’s experience. And that’s an important piece for Song, it’s part of the reason the company has been fully integrated since it launched.
“We wanted to be both owners of the product and the experience,” he said.
He breaks what Frank & Oak does down into three separate areas: clothes, technology and what he calls “foundational” – things like quality control and shipping on time.
He says it’s difficult to say which one is the most difficult.
“Because the challenges are so different it’s hard to compare,” says Song. “The biggest challenge is balancing those aspects.”
As the company’s emphasis on data might suggest, much of the company’s efforts are focused on the technology side. Song says the company’s resources are split, 50 – 50 between the e-commerce platform and fashion.
And he says that since they’re in a web and mobile environment, which tend to be content heavy, the company tries to find “the right balance between content and shopping.”
“We have a community of users and we want to keep them engaged,” he says.
Lufa Farms may have a more limited reach than Frank & Oak, their organic rooftop grown produce is currently only available in Montreal, but the company has ambitious plans for growth, they plan to be in Boston by the middle of 2014 and are eyeing Toronto and Chicago.
They also have a different challenge, getting their produce from farms to tables.
“Our primary challenge is the last mile problem,” says James Rathmell, “It’s the most expensive, most logistically challenging.”
The company has tried to overcome this by using drop-off points – they have over 100 in Montreal and its suburbs – and by promoting a subscription-based sales system.
“I don’t know many people who have to harvest at 5 a.m. and deliver food by 4 p.m.,” says Rathmell.
While he says getting the greenhouse right took several years, it’s something the team is now “pretty comfortable with,” he says.
“We’re really big on finding technological solutions and automating,” he says. Part of that is a custom iPad app that Lufa Farms developed in-house to automate its green house.
“We’re really trying to find our niche,” says Rathmell. “Are we going to license our technology? Are we going to supply grocery stores? Are we going to build green houses for people? Are we going to keep delivering fresh produce to people?”
He says the company is continuing to gather data as they move forward and try to figure out what works best.
“This is an industry that didn’t exist four or five years ago,” he says.
He says the company is “at the nexus” of online and brick and mortar businesses.
“We operate in a lot of ways like a tech startup,” says Rathmell. “We iterate and bootstrap.” But like offline business the company faces large capital costs when it expands.
Song sees the success of companies like his and Lufa Farms as the beginning of a new trend of industries combining.
And in this trend, “technology will play a big role,” he says.