In 1999, consumers were still wary about buying a $10 book online, let alone thousands of dollars worth of flooring or roofing material.
So when Jeff Booth and Robert Banks launched BuildDirect – a kind of virtual Home Depot for homebuilders – skeptics could be forgiven for thinking it was destined to join webvan.com (groceries ordered online) in the dot-com boneyard.
“We’re a Canadian company selling into a U.S. market, we’re taking payment up front, we’re an e-commerce company and our average order size is in the thousands of dollars, and no one knows who we are,” said Dan Brodie, BuildDirect’s vice-president of information technology.
“People thought we were crazy – and we were crazy,” Banks added.
But as a building contractor who had often experienced the frustration of not getting building materials delivered on time, Booth knew there was a huge market for anyone who could sort out the logistics of getting building materials from suppliers to customers quickly. Through sheer persistence and a heavy investment in logistics and analytics, the Vancouver-headquartered company has become a leader in e-commerce for home furnishings and building supplies.
After more than a decade of slow, gradual growth, the company is now experiencing a growth spurt, thanks in part to a recent $16 million investment from OMERS Ventures, the venture capital arm of the OMERS pension fund.
“As we put together our investment strategy, we zeroed in on the e-commerce market in general, and then we looked throughout North America for e-commerce markets that we felt were in their infancy that had high potential and BuildDirect came to the top of the list,” said OMERS Ventures managing director Derek Smyth.
BuildDirect now employs close to 80 people locally and expects to increase that to 100 by year’s end.
“We grew over 40% last year,” Banks said. “We expect to grow over 70% this year.”
Although based in Vancouver, BuildDirect does little business here. The company, whose closest distribution warehouse is in northern California, has focused almost exclusively on the U.S. market, which constitutes 85% of the company’s business.
Booth and Banks spent the first two and a half years solving the first major challenge: developing a distribution system.
“The integrated logistics – the transportation – is a hurdle that took years to figure out,” Banks said. “We sell items that are 5,000, 10,000, 50,000 pounds worth of material. You can’t throw that in a UPS or FedEx courier package. We had to invent a way to ship really heavy items.”
A key to the company’s success was being able to deliver product quickly – product that comes from suppliers around the world. The company set up eight warehouses strategically located throughout the U.S. and has a network of transportation companies that can deliver orders within 48 hours to 92% of the population in the continental United States. It also has a 22,000-square-foot warehouse in Richmond, where it keeps samples that can be shipped anywhere in the U.S. overnight for free.
Miscalculating what consumers will want, and when and where they will want it, can be costly for both manufacturers and retailers, so BuildDirect invested heavily in predictive analytics – data that Banks said “no one in the industry has.”
The company developed algorithms that use BuildDirect’s website activity to predict what product will be in demand and in what geographic region. Taking the guesswork out of the supply-demand forecasts reduces costs all along the supply chain.
BuildDirect has become such a leader in e-commerce that the BC Institute of Technology – where Banks and Brodie both earned finance diplomas – is now learning from its own former students.
When developing courses, BCIT consults with companies that are on the leading edge of their industries, and BuildDirect is one of them, said Robin Hemmingsen, dean of BCIT’s school of business.
“What better resource is there than a company that is ahead of the game to tell us what we should be teaching?”
A little more than half of BuildDirect’s customers are builders. The rest are do-it-yourself homeowners. Because it cuts out the middleman, BuildDirect can sell products 20% to 80% cheaper than retail outlets.
But Banks said lower prices aren’t the only reason for BuildDirect’s success. Because it’s not limited by what it can place in a showroom, the company can offer a greater range of products.
“When you walk into a home centre, you may get an opportunity to look at 10 or 20 different types of laminate flooring. We’ll give you 200.”
Banks added that the company plans to use the $16 million invested by OMERS to hire more staff and do more marketing. The company also plans to increase its business in Canada and eventually expand into Europe.
“We want to be Amazon.com in this industry,” Banks said. “We’re looking to be a global player.”
