Jeff Booth on establishing BuildDirect as the Amazon of buildingOct 16, 2014
An unquenchable desire to initiate change in the building industry – an industry he believed was “broken” – spurred Jeff Booth to co-found BuildDirect. And by simplifying the entire process and focusing on customer requirements, Booth has succeeded in changing the entire industry for the better.
Booth detailed the incredible path he took to build his business – from generating no revenue in the first three years to trebling their employee numbers to 275 in the last two years – in the final interview in the Fall 2014 Chief Executives series at the Segal Graduate School.
The series is part of an ongoing partnership between the Beedie School of Business and Vancouver radio station CKNW News Talk 980 to showcase leadership and business advice from some of Canada’s top business leaders.
Success in the business world was by no means a given for Booth when he set out to start BuildDirect, an online supplier of home improvement products that connects the consumer directly to the manufacturer. By his own admission he possessed no business experience whatsoever, but relied on his entrepreneurial drive and a passion for change.
Having worked in real estate, Booth had witnessed first hand the complicated processes involved in building houses, including convoluted distribution channels with multiple vendors and middlemen.
“The distribution channel goes from point to point to point, and the more points there are, the greater the margin for error,” he said. “The system is designed to fail, particularly for heavyweight goods. These products sit in a bunch of distribution facilities, and are then transported to a retail store, which customers have to drive to and then transport the goods home. There had to be a better way.”
When the system finally caused him to let a customer down – forcing him to put a family up in a hotel for several nights after he missed a deadline for completion of their home – Booth decided that he could design a superior one himself. And despite all the odds being against him, he has succeeded.
“When we started in 1999 it was difficult to sell books online, and we were trying to reinvent the building distribution channel in this way,” he said. “Now people talk about me being a visionary, but that’s a really fine line. It was almost the other side many times.”
In creating an online direct distribution method, Booth had to overcome many obstacles, not least of which was the “deliver anywhere from anywhere” guarantee that online sales necessitates. With no such existing freight network, Booth and his partners’ first challenge was to invent one – a task that involved numerous challenges such as algorithms and tracking carriers. As a result, the first three years’ of the company’s existence involved setting up the framework the business required to operate – all without generating any revenue.
“We raised money from friends and family to support the launch phase,” said Booth. “For the first three years we hadn’t sold anything, or even turned it on, but we had borrowed money and couldn’t stop. By 2002 we had started taking orders, but the first customers had to order three months in advance. There was a lot of blind faith required on their part, but they were saving 90 percent.”
BuildDirect not only benefits the customers by simplifying the supply chain and reducing prices, but also helps manufacturers through analysis of data on customer shopping habits. By releasing the statistics on what customers are browsing on the BuildDirect website, manufacturers can far more accurately predict product demand, resulting in reduced costs for storage and less wasted stock.
“All the supply chain points previously created more error for the manufacturer – someone was guessing what would sell so the manufacturers would produce more of a certain product,” explained Booth. “That is why products would be out of stock, or manufacturers would be left with a surplus. Now with our data they innovate for our channel and we move costs from their own manufacturing operations along the way.”
Indeed, the 2008 financial crisis resulted in the BuildDirect team striving to make the predictive data even more accurate. Rather than allow the crisis to take the company under, the team responded with some creative plans that have ensured their long-term success – albeit Booth was at one point forced to sell his family home in order to generate the funds to pull the company through the downturn. Yet despite this period of hardship, he never lost faith in his vision, and the company’s potential.
“There is a danger that I would look insane describing how big I think the company can be,” he said. “I think in the future we can create an Amazon-sized company, and in the next three years I would like to eclipse a billion dollars in sales.”
For more information on the Fall 2014 CKNW Chief Executive Series, visit http://beedie.sfu.ca/cknw