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Vancouver company’s online enterprise eliminates middlemen and connects building material manufacturers with freight carriers and customers around the world Curt Cherewayko BuildDirect.com’s biggest challenge can be measured in weight: 150 pounds to be exact. That’s the maximum allowable weight of deliveries through parcel services like FedEx and the United Parcel Service of America. It’s also the main reason behind the failure of BuildDirect’s first two websites. But after two false starts, including one that was documented on the Canadian Broadcasting Corp.’s show Venture, the online retailer of building materials is on a roll. With sales that grew 12% to reach $50 million in 2007, the Vancouver-based company operates a virtual meeting place for freight shippers, manufacturers and building supply buyers.
It raised $8.5 million in venture capital last September, including $5 million from Vancouver’s GrowthWorks Ltd. A key ingredient in the company’s success its third time around is the logistics technology platform that it developed and launched in 2002. With parcel services out of the picture as a potential delivery channel, the third platform includes complex data about shipping overweight products like flooring, roofing and lumber. A virtual packaging algorithm within BuildDirect’s software determines how to most efficiently ship freight by factoring in road weight capacities, customs clearances, shipping distances, container shapes and modes of transport, be it cargo ship, truck or rail. The platform even calculates how to rotate and arrange freight to maximize container space and to ease loading and unloading. In 2008, the company, which gets about 45,000 unique visitors per month on its website, will process about 25,000 truck and ocean shipments of building materials, roughly 85% of which are directed into the United States. Freight carriers quote their shipping price structures into the platform, which then selects the carrier with the lowest-priced structure for each shipping route. The platform, according to BuildDirect president and CEO Jeff Booth, is a self-sharpening knife that gets more efficient as the company’s business grows. “As carriers bid more and more into our system, [we] get better and better data,” said Booth, who co-founded the company with long-time friend Robert Banks, BuildDirect’s executive vice-president of sales. While BuildDirect’s growth has slowed during the economic downturn, Booth has his sights set on making the company profitable in 2009. Because BuildDirect sells building materials directly from its manufacturing partners, which eliminates middlemen like exporters, wholesale and regional distributors and retailers, Booth said the company’s prices are 30% to 60% lower than retail. Russell Beitmann, senior managing partner of Connecticut’s Hub Realty Associates LLC, discovered BuildDirect by browsing the Internet for a vendor of granite countertops for kitchens. According to Beitmann, Hub has bought “well over six figures” worth of countertops from a Chinese manufacturer that sells through BuildDirect. Beitmann said Hub saves up to 50% on materials by buying through BuildDirect. “Anything of big dollar value or in large quantities, I buy online,” said Beitmann. “I don’t have to leave my office. I don’t have to talk to a million salesmen.” For manufacturers, BuildDirect is essentially a channel to outsource shipping logistics. Atlanta-based manufacturer Robina Inc. has been selling its laminate and engineered wood products through BuildDirect since 2004. The company has manufacturing facilities in China and Malaysia and sells globally. Between 10% and 15% of its sales are done through BuildDirect. “As a manufacturer, you want to have economies of scale and you need volume,” said Jason Loh, Robina’s CEO. “[BuildDirect] is able to move sufficient volume that it makes sense for us to partner with [it].” Because BuildDirect demands more competitive pricing, Robina has better margins through its own sales channels. However, Robina avoids one of its biggest logistical challenges by selling through BuildDirect: estimating future freight costs – which fluctuate with the price of oil – when arranging fixed-price shipping contracts with ocean freighters. “These variances do have a big impact,” said Loh. “A couple of points off on a quarterly basis could mean the difference between a profitable business and one that fails.” •
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Business in Vancouver December 16-22, 2008; issue 999 |
