BuildDirect’s Gateway Shows AO How to Leverage Logistics

BuildDirect GateWay.png

Today’s logistics is still mainly the same system that was built around a pre e-commerce world. So, lots of companies try today to build the next generation logistics infrastructure. One that serves the most demanding and also biggest customer (in volume and revenues): online retailers.

An online retailer building out their own logistics infrastructure builds, by definition, a service for the needs of e-commerce.

So, why not open that up, right? Well, first, not many online retailers do in fact build their own logistics operations. The ones that do that do it mostly because they are not well served by today’s market. They do it out of necessity. These are mostly only online retailers selling bulky products (or products with special needs, like groceries).

Though hard as it may be today, those online retailers build something they can use to build a new business.

One recent example of this is BuildDirect. It looks very promising.

TechCrunch:

Over the last few years, BuildDirect developed a name for itself as an online store for home improvement products (think flooring and roofing materials, bathtubs, etc.). One issue with selling those kinds of products online is that you also have to build a logistics backend that allows you to ship these heavy items to the customer. BuildDirect did just that for its network of sellers on its one-year-old marketplace and today it is opening this shipping network to anybody who has to ship heavy goods across North America.

BuildDirect Gateway, as the new service is called, builds upon the company’s experience in working with its sellers to get products to its 40 warehouses and to customers. As the company’s VP of Marketing Joe Thompson (who was previously a GM at Amazon) told me, the company always had plans to open its shipping service beyond its own seller network. Its sellers, though, started asking the company about tapping into its supply chain network earlier than the company anticipated, so for the last few months, the company focused on testing this new service, and it’s now opening it almost a year earlier than originally planned. […]

Gateway promises that it can shave hundreds of dollars off the usual cost of shipping a heavy item across the country. By tapping into its network, a seller could ship a 1,500-pound load across the country for just $200, for example. The company promises that its delivery costs will allow vendors to save up to 30 percent on their shipping costs. Thompson tells me that the company is able to do this by having those items effectively piggyback on existing trips it would have scheduled for its sellers anyway.

BuildDirect’s Gateway service will also offer its customers access to its ocean freight service.

shipping with gateway.png

Here is some more differentiation, via Gateway’s website:

Powered by predictive analytics
You will get access to varying levels of data depending on how you engage with the platform. At the highest level, you get real-time access to a dashboard that leverages sophisticated predictive analytics to show where demand for your products are. Products in the network are easily moved around the country to ensure they are close to your customers, which closes the gap on shipping costs and offers more reliable delivery windows.

Customized delivery options
Your customers can save up to 30% on shipping costs and can choose how they would like their products delivered: white glove (i.e. room of choice), first threshold (i.e. inside a garage), light or heavy assembly and removal of old product, garbage, or dunnage. Additionally, as manufacturers and distributors you can select how to manage the movement of your products (ocean and ground logistics, or warehousing services).

Another candidate for potentially going this route is AO. AO is selling household appliances like washing machines in Great Britain and, recently, in Germany and the Netherlands, with plans to expand further in Europe. Besides rather large warehouses, AO is using a fleet of branded trucks to deliver its products.

AO branded trucks.png (via)

Now, AO has a role model.

From AO’s recent capital markets day presentation (PDF):

AO

ao-2.png

Logistics is expensive to build out and thus, by definition, also functions as a moat.

More on this topic:

2 comments

  1. […] retailers selling furniture like Wayfair are, in theory, perfect candidates for BuildDirect’s Gateway logistics service. On the other hand, Wayfair could go the same route like […]

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  2. […] the UK to Germany and Netherlands. You can see the next European markets in the first slide above. And, as we mentioned, AO could follow BuildDirect’s role model and roll out a logistics service for bulky products (like furniture for example) in the UK, […]

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