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Builder Depot: A small business re-inventing the Supply Chain

By Michael Goodwin | Small Business

Go to a retail store and you’ll probably end up paying $50 for a square foot of high-end Italian tile—and up to $90 per square foot of mosaic. David Shearn, the CEO of The Builder Depot will sell you that same tile for $5; the mosaic will run a mere $13.95.

The only trouble is no one believes his prices.

Too Good to Be True?

“The number one question our customers asked us when we started in 2008 is the same question we get in 2016: ‘How can your prices be so cheap?’ People think if it sounds too good to be true it probably is. But it isn’t! We pay our suppliers cash, and cut out most of the steps in the traditional supply chain to save money at each step—which allows us to deliver really low prices to our customers on high-end tiles. It all comes down to understanding how the supply chain works, how a product comes from point A and reaches the consumer at point B.”

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Customers appear to have overcome their skepticism, though, because Builder Depot’s sales revenues are in eight figures and rising. The company is already the biggest tile site on the web, with the largest stock and over 2000 SKUs. And construction has started on a new, five-acre fulfillment facility, with 15 loading docks, in Alpharetta, Georgia on the outskirts of Atlanta.

Shearn considered many factors before he chose Alpharetta—a bedroom community just outside Atlanta. “There are too many people on the roads already,” he laughs. “It’s no good for anyone. I hate seeing people who have driven two or three hours in traffic to get to work. They come in exhausted. How can that be good for business? So I put our new facility in a beautiful area with the best schools in Georgia, where people can live nearby and skip the commute. It’s an area you would want to have your family come and have lunch with you. I need happy employees.”

Opportunity Knocks—and Cash Is King

Shearn is a highly-knowledgeable business person, with a degree in business and a penchant for hard work to go with it. His success story doesn’t make it sound easy, though. In fact, it makes it sound hard.

After he graduated from university in 1997 Shearn went to work for a massive manufacturer, where he spent two years visiting the company’s various conglomerates. He spent three months at each one, starting at the bottom and working up to where he could shadow the CEO. Then he’d have to suggest how he would improve the business. As he explains, “It was like doing an unofficial MBA.”

Shearn ended up as head of US operations for a large UK manufacturer specializing in glass and tile imports. Then, suddenly, thanks to the crash of '08, the company collapsed and he found himself unemployed. His company had been forced into debt in order to make payment terms. This model works, he points out, only as long as sales continue. 2008 hit the building industry hard, and lots of companies went under. Shearn swore that in future he’d do business in cash. He had a family to support. He saw that business was cyclical; any business he started had to be able to survive a downturn.

Then he saw an opportunity. “During my time selling tiles I had noticed a few weaknesses in the industry,” he notes. “These companies had huge, expensive supply chains. Nobody was using the internet. Something had to change.” Shearn had already taught himself how to build and run an ecommerce site. Now, in 2008, he thought it was time to start one of his own.

“I wanted no debt,” he explains, “so I sold my 401K, which was considerable, and tried to open a business bank account. I didn’t want a loan, just an account! Three banks turned me down. Finally I found one bank that would give me an account, and I started buying tile. For cash. At the time cash was something people wanted badly. I wanted to break the traditional pricing structure. I would buy for cash, use my ecommerce skills, collapse the supply chain, and sell high-quality merchandise at a price no one else could match.”

Don’t Answer the Phone

At first a lot of people didn’t believe Shearn’s prices. “We created videos to explain how we do it,” he laughs. “Whiteboard presentations. We explained it on the web site. But it still upset everybody. The traditional model is quarry to distributor to sub-distributor to retailer to contractor to consumer—and at every point in that supply chain prices go up. But if you go direct to the quarry at a point when they need cash, you say, 'Look, this is the weakest part of the year for you. You’ve got to pay your people, you’re not going to get any new orders, and you need long runs. So we’ll give you long runs, and we’ll give you cash. All you need to do is provide the absolute best product at the lowest price. And we’ll do it again very soon.’”

One year later Builder Depot was in the black. But if the business model was easy, the fulfillment process wasn’t.

“The biggest challenge when we were starting was doin’ it all myself,” Shearn recalls. “Literally. I would unload a 24-foot truck with a pallet jack, with pallets weighing over 2000 pounds. Then I’d have to pack seven or eight orders. I got a torn shoulder, and I was trying to use my left hand as much as I could. My wife would be packing the samples. We didn’t have the resources to pay someone to answer the phone, so we never answered it. I lost a lot of weight. It was my personal gym. Our garage was our first warehouse. The shipping dock was the front of our house. And we couldn’t spend any money at all. It isn’t for everyone.”

Shearn went through several internet platforms before settling on Yahoo (now Aabaco Small Business, from Yahoo). “I started out with Amazon,” he says, “because they gave me more HTML options, and I tried EBay, 'cause that’s the typical way to do things. But they both wanted between 10 and 30 percent commission. It was just adding to the cost of the product. So I decided to give Yahoo a go. Yahoo only charges 0.75 percent, so it’s a no-brainer! My first site was pathetic, just some online products and me trying to get it going. But our new site is terrific, thanks to a designer Yahoo found for us. I’ve been very pleased with Yahoo (now Aabaco Small Business from Yahoo).”

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Google Trusted Store

Indeed, the internet business just got a lot better for Builder Depot.

Recently, for the third year in a row, 35 million monthly users at Houzz.com cited Builder Depot as Best in Customer Service. And on January 1, 2016, Builder Depot was declared a Google Trusted Store.

What does that mean, actually?

“I don’t know yet,” says Shearn. “They just told us a week ago. You have to have incredible customer ratings. We’ve got 4.9 stars out of five. Then you can put the Google Trusted Store logo on your site, and Google guarantees your buyers $1000 against any purchase liability. They claim it can mean growth of four to five percent in sales. Maybe you place higher in search results too. And by 2018 or 2020 if you’re not a Google Trusted Store you’ll probably find yourself on page 7000 of the search results. But I’m just guessing.”

Shearn certainly isn’t guessing about how to build a successful ecommerce site. “I’ve built up quite a few skills over the years,” he admits. “I didn’t just stumble into this.”

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