When investors think of brick-and-mortar retail now, the term “retail apocalypse” often comes to mind. After all, over 12,000 physical stores had closed between the Great Recession and 2017 when the term was first coined with the Internet and rise of online shopping receiving much of the blame for this. So why would anyone want to undertake a brick-and-mortar retail strategy right now?  Because sometimes a brick-and-mortar retail strategy still makes business sense. That’s exactly what small cap Canada based Spyder Cannabis (SPDR: TSXV)is doing (in addition to an online presence) as the Company leverages its brand and retail operating experience in the e-cigarette and vaporizer markets for a competitive edge in the now-legal Canadian cannabis industry. Investment Snapshot Spyder is an established chain of high-end vape stores in Ontario. The Spyder brand is defined by its high-quality proprietary line of e-juice, liquids and exclusive retail deals dispensed in uniquely and well-designed stores that create the optimal customer experience. Spyder has developed a scalable retail model with aggressive expansion plan to create a significant retail footprint using a targeted and disciplined retail distribution strategy focusing on building well-designed retail stores in high quality, high traffic peripheral areas. Once permitted to do so, Spyder will convert existing Ontario accessories stores into cannabis stores. Due to temporary supply shortage, Alberta has put a hold on issuing licenses and as a result, development permits (DP) are being sold at a considerable discount. Spyder plans on acquiring these DP’s in high quality, high traffic suburban area’s at steep discounts to ultimately give the Company a competitive edge in the province. On Tuesday (June 10), Spyder will begin trading as Spyder Cannabis (TSX-V: SPDR) onthe TSX Venture Exchange. And while it’s a small public offering worth approximately CAD$5.9 million – this is a very good start that will jumpstart the Company’s expansion plans.  “It’s Not About the Internet!” Before we take a closer look at Spyder, its worth examining Restoration Hardware (NYSE: RH)– an upscale home furnishings retailer that’s also pursuing retail brick-and-mortar strategy rather than focusing on heavy online store investing that most other retailers are instead trying to pursue.  Restoration Hardwareis setting up huge flagship stores or "next-generation design galleries" (called RH Modern) in major markets across North America in areas that see high traffic and attract regional and/or international buyers looking to buy high-end goods that they can’t get at home.  Just as importantly, these stores are designed to provide a very different retail experience than what brick-and-mortar customers are typically accustomed to. For example: The Denver store is outfitted with 112 sets of French doors to let in natural light with the four-level space including a conservatory, rooftop park and garden courtyards.  As explained by Chief Executive Gary Friedman in a 2015 presentation to investors:  “While many have allocated their resources to build an online business and are downsizing their retail presence in an effort to shrink to greatness, we have moved in exactly the opposite direction. When debating the general softness in U.S. retail sales to the emergence of online shopping, we like to say: It’s not about the Internet. Only 10% of retail sales are done online. It’s about the lack of imagination at retail. Mall and anchor stores are archaic windowless boxes lacking any sense of humanity.”  A Bloomberg articleabout Restoration Hardware’s retail store plans also quoted Allen Adamson, chairman of Landor Associates North America, a brand consulting firm in New York, as saying: "When everyone's zigging and you zag—that's good. For a brand selling design and aesthetic, creating an experience is still the way to go. You need to surprise people and give people a reason to look up from their cell phones and come somewhere.'' Adamson did add though that Restoration Hardware's lavish stores have to be part of a larger strategy that includes being online in order to be a sustainable investment:  "You need to think of stores as a marketing opportunity, as a way to fuel social media…The future of the business is probably online.'' It should be said that since launching the RH Modern concept or strategy, Restoration Hardware’s share performance has been both up and down. However, that’s what investors can expect with a retailer focused on high-end furnishings whose sales are heavily correlated with what is going on in the high-end housing market.  Spyder’s Tailored Retail Experience Spyder’s brick-and-mortar retail strategy for the e-cigarette, vaping and eventually the cannabis markets is obviously not as big as the RH Modern strategy being pursued by Restoration Hardware; but is worth considering as a key competitive advantage.  The Company was founded in 2014 by entrepreneur Dan Pelchovitz who is considered to be a leader in the vape industry as he has been involved in several vape store launches. This means he has already cultivated a loyal following of customers and has built strong lasting relationship with many of the largest manufactures in the space.    Aside from having an existing online presence, Spyder has three high-end vape stores in Ontario (located in Woodbridge, Scarborough and Burlington) offering a growing product offering comprised of e-cigarettes, vaporizers and accessories; a high-quality proprietary line of e-juice and liquids; and exclusive retail deals dispensed in uniquely designed stores to create an optimal customer experience.    As you can see from the above pictures, these aren’t your traditional looking vape shops as the interiors are designed to look more like the type of shops who would advertise in and cater to readers of Cigar Aficionado magazine (Note that since opening, Spyder has also introduced several higher-end product lines and shifted its business focus from general consumers to the “hobbyist” market).  The customer experience at these stores would be the same as what you would expect from stores designed in such a manner - a well-trained and knowledgeable staff offering a one-on-one and very personalized sales experience with each unique individual customer (who may not be as comfortable shopping in a traditional vape store). However, these stores will still offer consumers the best prices available for the products on offer.  And just like RH Modern (which offers an extensive collection of furnishings found nowhere else), Spyder has slowly built up an array unique and proprietary products in its stores. In June 2015, founderPelchovitz developed “Jinx e-Liquid” as Spyder’s proprietary e-juice line featuring six unique flavors, including flavors such as “S.W.A.G.” (strawberry, watermelon, apple and gummies), “Peanut Butter & Jelly” and “Lemon Cookie.” In April 2018, Spyder introduced two new proprietary e-juice lines, “Spyder Vapes” and “Nautical E-Liquids” (include flavors such as “Gator Sauce”, “Berry Bombs” and “Siren”) which increased the Company’s proprietary flavors to a combined total of approximately seventeen flavors. Spyder would be sourcing the raw materials, labels and bottles for its proprietary e-juices through third party suppliers located in Canada and the United States.  In addition to unique and proprietary product offerings, Spyder also provides in store follow-up care for its customers through experienced in-house teams - including maintenance, repair and warranty services for e-cigarettes, vaporizers and related accessories. So customers can simply take whatever they buy back to the retail store if there is a problem – something that’s harder to do when buying from a seller who is solely online.  Finally, Spyder is covering all bases by advertising its product offering through the Spyder Vapes website as well as through point of sale materials and displays at its vape shop locations. This is on top of building brand awareness through social media marketing activities and in-shop and on premise promotions.  Future Cannabis Retail Expansion Plans Spyder’s present business strategy is focused on a multi-pronged approach to diversify its revenue streams by expanding the number of brick-and-mortar retail locations within Ontario and Alberta. To this end, Spyder believes that it is well positioned to introduce new products and leverage its ability to develop proprietary e-juices to respond to changing market product demands, both in Ontario and Alberta. In addition, Spyder’s long-term business plan is to expand operations to include a cannabis business segment focused on the operation of licensed cannabis retail stores. This segment will be in addition to the existing operation of high-end vape shops with current retail plans being the following: Ontario - Targeting 75 retail locations  Alberta - Targeting 5 retail locations  British Columbia- Targeting 5 Locations The Company already has lease agreements for three proposed vape shops or retail cannabis store locations across Ontario (in Pickering, Waterloo and Niagara Region). Note that these leases have an average initial term of 5 years, and grant Spyder the option to renew the lease for an additional term of 5 years. The Niagara Region lease is conditional on Spyder obtaining a Retail License for a retail cannabis store at that location while the leases relating to proposed locations in Pickering and Waterloo are not conditional (given Spyder’s intention to operate high-end vape shops at these locations in the event that it does not obtain a Retail License for these locations). Otherwise, the timing of any expansion and whether all planned locations have cannabis will be subject to market and regulatory conditions. For example: Due to temporary supply shortage, Alberta has put a hold on issuing licenses and as a result, development permits (DP) are being sold at a considerable discount. Spyder plans on acquiring these DP’s in high quality, high traffic suburban area’s at steep discounts while in Ontario, the Company will convert existing accessories stores into cannabis stores once they are properly permitted to do so. In the event that Spyder fails to obtain the necessary permits, authorizations or accreditations necessary to expand its product offerings into the cannabis sector, the Company will just continue to operate as a high-end vape shop retail business with an online presence. Otherwise, it’s worth adding that Spyder’s cannabis business will have one other competitive advantage up its sleeve: The Company is partnering with Lobo Genetics to promote safer cannabis use through cheek swab DNA testing at its retail stores. Genetics will affect the speed at which a body metabolizes THC and CBD and can affect a person’s predisposition to short and long term side effects (including the risk of schizophrenia, memory loss etc). Consumers can gain immediate, actionable insights into their personal response to cannabis based on their genetic profile through this in-store DNA testing – a service that’s not readily available when shopping online or with competing brick-and-mortar vape or cannabis shops. Going Public This Week… On Tuesday (June 10), Spyder is set to begin trading as Spyder Cannabis (TSX-V: SPDR) onthe TSX Venture Exchange. And while it’s a small public offering worth approximately CAD$5.9 million – this is a very good start that will help the Company jumpstart its expansion plans around Canada and into the cannabis sector. For this reason, the Small Cap Network will be watching Spyder Cannabisclosely over the coming months and years as these plans become a reality.