When Elle Ayoubzadeh was transferred from Australia to Toronto during her time working in international finance, she had a lingering aspiration to break into the luxury retail world. Soon, she found Toronto’s growing fashion scene — as well as its proximity to cities like New York — could be the place to get her start. Not long after packing her bags and going west, she left the world of finance and started Prologue, one of Toronto’s first luxury concept stores, which featured a curated collection of high-end designer goods, hand-selected by Ayoubzadeh and her co-founder. Two years later, she founded her own shoe brand, Zvelle.

“The best thing about Toronto is it’s a mosaic of all parts of the world,” she said, on a call from Italy, where she was meeting with leather vendors that supply to Zvelle. “If you want to test something, there’s no better part of the country to test it. There are people from all over the world traveling and visiting, and it’s a great way to get your product out to the market and get exposure.”

In recent years, Toronto has grown into a hub for emerging fashion brands, which use it as an experimental playground to test the retail waters before going global. Yet while the Canadian city provides a myriad of opportunities to test new products and strategies, it’s not without its own challenges.

Canada’s Silicon Valley
A growing number of retail companies can attribute part of their success to early efforts in Toronto. Among them are brands including Canada Goose, Roots, and Hudson’s Bay Company. Indochino tested its showroom retail model in the city after first experimenting with brick-and-mortar in Vancouver. Now the company operates 18 showrooms, and counting, across Canada and the U.S. Canada at large is also the home to several major retailers that are prominent in the states including Aldo, which is headquartered in Montreal and recently acquired New York–based Vince Camuto.

“From the our experience with the temporary showrooms, we realized we had an offer that would be appealing to both sides of the border, and that we could go into the U.S. at scale,” said Dean Handspiker, vp of design and product development at Indochino. “When you’re doing business in Canada, the market allows you to test different things — not just in the market, but worldwide.”

In a study conducted by Radial, a research company owned by eBay, 53 percent of Canadian retailers are considered small, with less than $10 million in annual revenue. A mounting number of these companies are looking to expand into the U.S. and are building the infrastructure to do so. Radial estimates that, in the near future, 60 percent more Canadian retailers will outsource customer fulfillment in order to increase shipping range.

Beyond just fashion, Toronto has become an attractive experimental location for tech juggernauts like Alphabet, the parent company of Google. The company announced plans last week to develop 800 acres of the city’s waterfront property into “the world’s first neighborhood built from the internet up,” Eric Schmidt, executive chairman of Alphabet, told the New York Times. The land will be part of Sidewalk Labs, an experimental project to test the integration of technology into urban planning and development.

“We started talking about all of these things that we could do if someone would just give us a city and put us in charge,” Schmidt said in the article.

At first glance, Toronto may not appear to be an obvious hotbed for tech development and entrepreneurship, but it’s a culture that has started to permeate across industries. The city is also home to the world’s first fashion incubator, the Toronto Fashion Incubator, which was founded in 1987 and later inspired the development of sister organizations in major cities like New York, London and Paris. The non-profit group supports up-and-coming fashion designers and entrepreneurs by providing them with the resources to help grow their businesses.

Susan Langdon, executive director of TFI, said fashion and retail has been an integral part of Toronto’s economy for the last several decades. The fashion industry is the third-largest employer in the city, and the city government has played an active role in funding the industry since the 1980s, shortly before the founding of TFI. Today, the group has 800 members.

“While Toronto is a big city, and people here are competitive and motivated to succeed, a sense of community and helping others is something that’s ingrained into the Canadian psyche,” Langdon said. “Collaboration, working cooperatively and sharing ideas and resources are things we are eager to do to help one another.”

Seeking exposure across the border
The culture of collaboration helps developing brands get their footing; they share ideas and forge partnerships. Though Zvelle started as an e-commerce company, it later expanded to pop-ups and eventually opened a permanent location in Toronto’s luxury shopping mall, Yorkdale Shopping Center, operating alongside established brands like Gucci and Burberry.

Zvelle currently sells to the U.S., and Ayouzadeh is now eyeing brick-and-mortar retail in the U.S. She recently held a pop-up in Soho in the former space of the now-defunct Thakoon store, which she shared alongside fellow emerging Canadian luxury designer Marie Saint Pierre. For both brands, the ultimate aim was to raise visibility and awareness in the U.S. market.

Ayoubzadeh said pop-ups have been an important strategy to customer acquisition, particularly given that the Canadian media market is quite small. Through publications like Elle have a Canadian edition, for the most part, the major fashion and beauty magazines and sites reside in the U.S., and lack a regional Canadian branch.

Another reminder that we’re really (really, really) into red this season. 💃🏿💃🏽💃🏾

A post shared by ELLE Canada (@ellecanada) on

Deborah Yeung, director of marketing at Titika Active, a Toronto-based activewear company, said that while media coverage can be difficult to come by, the city makes a concerted effort to host local fashion week events to increase exposure.

“Toronto is not as big as other cities, but we do get influence. We don’t have a lot of huge publications and media, but we have events like Vancouver Fashion Week and Toronto Women’s Fashion Week. Toronto puts in a lot of effort to nurture new designers.”

There are other challenges, as well, to starting a brand in Toronto. According to Langdon, the executive director of TFI, available venture capital for fashion startups in the city is extremely limited, and investors in the city are generally risk-averse and uninterested in backing early-stage designers.

“It’s so difficult to launch a new brand on a shoestring budget,” she said. “After the five-year mark, a big cash input is needed to take the business to the next level, or it could fail. Americans are much more willing to take a chance and seize opportunities.”

The lack of funding is, in part, what drives Toronto’s designers to forge business ventures in other cities. Places like New York, with its illustrious fashion background and concentration of design talent, can be alluring for Canadian founders who are seeking growth opportunities opportunities.

“Toronto and New York are both cosmopolitan cities. The main difference is New York has that history of all the fashion companies — that richness in the human knowledge and capital knowledge,” Ayoubzadeh said. “If I’m in New York, I can meet the right people.”