By SCOTT SIMPSON, Vancouver Sun
Vancouver ecommerce company BuildDirect’s plan to disrupt the retail building products sector just got a lot more focused.
The company on Monday received a $16-million infusion of cash from OMERS Ventures, the venture-capital investment wing of the Ontario municipal employees’ pension fund, to accelerate its growth in a North American market that appears vulnerable to online competition.
The money will go toward hiring additional staff and to expand the BuildDirect product line to make it even more competitive with retail outlets.
It’s one of the biggest venture-capital financings this year to a Canadian ecommerce company. In March, OMERS announced a $20-million investment in Vancouver digital darling HootSuite.
According to recent research from sources in the United States, the flooring market in the U.S. alone is worth $17 billion a year, and the broader building market almost $500 billion.
BuildDirect is a sort of amalgam of Home Depot and Amazon.com, working exclusively online to cost-effectively deliver heavy and bulky finished construction products — notably flooring, tile and brick — through its own supply chain. Shippers bid in real time to give customers what BuildDirect describes as “the lowest possible” freight costs.
By playing the role of sole middleman between a manufacturer and an end customer, BuildDirect claims it can reduce the cost of goods by as much as 80 per cent — with manufacturers making up in volume what they may lose on markup.
President, CEO and co-founder Jeff Booth was working as a contractor in 1999 when he got fed up with the absence of a reliable conduit to get flooring products into the hands of builders and retail buyers.
“I was building a home and the flooring didn’t arrive on time,” Booth recalled in an interview. “I had to put the people up in a hotel. I was infuriated at that problem.”
When he tracked the supply chain, he discovered a lengthy series of middlemen who simply didn’t know how long it would take to get product to its end user.
“I thought, if I’m in this business every day and I can’t figure it out, the end buyer doesn’t have a chance.”
The company offers manufacturers two advantages: one is an efficient network of independent carriers to deliver products on time; the other is a set of metrics that BuildDirect has developed to determine which products will be in the most demand — taking the guesswork out of a manufacturing run of a given product.
OMERS Ventures managing director Derek Smyth said the firm has been evaluating the ecommerce market in North America for the better part of the last year.
“We were looking for a company that had developed some vertical expertise in a market that was still in its infancy in terms of percentage of transactions being done in ecommerce. BuildDirect tended to be at the top of the list,” Smyth said.
“Delivery is a big part of the value proposition, and the expertise they’ve developed to do that for big and bulky things — currently being flooring — they are going to be able to apply to other categories as well.”