How Canadian Brand Hatley Is Behaving Like a Billion-Dollar Retailer

Someone should remind Hatley — the LaSalle, Quebec-based retailer known for its whimsical kid's clothing and 100 percentcotton pants — that it's not a billion-dollar corporation. Because it's sure behaving like one.

Hatley maintains 3,200 points-of-sale worldwide, mostly with key wholesale partners such as Nordstrom, John Lewis in the United Kingdom and Australia's David Jones, though it sells to high-end children's boutiques as well. The company runs 16 of its own retail stores in Canada, constantly expanding to new locations such as Montreal International Airport, and operates an e-commerce site that drives about 3 percent of the business. Hatley has plans to open retail franchises in New Zealand and distributorships in South Africa, while Australia and mainland Europe are its biggest growth markets.

In 2007, the Canadian government created the Duty Deferral Program (DDP) to help corporations, and especially large automotive companies, operate more efficiently, says Jeremy Oldland, CEO of Hatley, which expects to do about $42 million in revenue this year. In essence, net exporters — companies that, for example, import 100 owl-emblazoned onesies into the country but ultimately ship the majority of those units for sale abroad — are spared from paying duties on products not destined for the Canadian market. "It's sort of a personal free-trade zone," Oldland explains.

Being able to take advantage of the DDP requires very sophisticated systems and software, so Hatley turned to Visual 2000 for assistance developing the End-2-End platform that tracks vital information such as import numbers of units shipped into Canada along with the currency exchange rate for the import date. If a unit sells in Canada six months after import, Hatley pays the duty based on the exchange rate on the day it was imported. If the unit is further exported for sale, Hatley notifies the Canadian government that the unit has left the country and thus skips out on duties altogether.

"When you're importing millions of dollars of product, the later you can avoid paying your duties, the less you're going to pay
because you borrow money to pay for duties," notes Oldland.

"We save a ton on interest every year," he continues. "It's much more efficient for cash flow." Case in point: Canada levies an 18 percent duty on garments, while similar tariffs in the United States and some other countries are considerably lower.

Using the End-2-End platform, Hatley established subsidiary companies in Australia, United Kingdom, and the United States without setting up multiple warehouses, affording a competitive advantage over similar enterprises that rely on a distributed warehouse model rather than a centralized one.

Hatley finds that duties factor into myriad areas of its business. It recently added international shipping to its e-commerce
site, relying again on data from End-2-End as well as UPS for what duties and taxes would be appropriate to charge.

"We charge a $35 flat fee for shipping and a flat 20 percent for duties and taxes," explains Oldland. "That's a lot of money, but when you're buying $300 to $400 of kids' clothing, it does amortize pretty quickly."

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