- Sameer Nayar, Founder and CEO, BuildSupply

Construction and building materials procurement, which accounts for 65-70% of the total cost of a construction project, suffers from several challenges such as high lead time, lack of process transparency leading to leakages, inefficient price discovery, among others. With this in mind, BuildSupply, a digital building material store, provides major construction and building materials online from several building material suppliers and manufacturers, thus, addressing and simplifying the user-flow for complex procurement scenarios. This in turn helps real estate developers and contractors automate workflows in the development and construction process.

In an exclusive video interview with Pratap Padode, Editor-in-Chief, CONSTRUCTION WORLD, Sameer Nayar, Founder and CEO, BuildSupply, discusses the digital transformation in the construction industry, the construction software market post COVID, and more...

Excerpts:

We had earlier heard of many companies venturing into this space, but it would mainly be something related to architecture. BuildSupply is one of the portals thatdeal with the construction industry. Tell us about your journey reaching to an e-commerce company catering to the industry.
When we started the company, procurement was pretty much the end goal. For the first 12-18 months, we started with a simple hypothesis. Technology can really help change a lot of what is happening in this industry and it can create a lot of value. The way the industry functions is archaic. People are not very open to technology as such because they have been doing business the same way since years and they don’t want to change. We spent a lot of time with big companies to understand how the process works and where does the offline process lack. Before we build the procurement portal, we first needed to address the process issues, which is why we ended up building a workflow automation tool. In 2019, we got quick traction for the workflow automation tool, and with it, we understood what the procurement issues were. We built the software first and then the procurement portal.

When you rolled out the process for companies, what was it that they did not do offline which they found facilitated with online portals (as this industry has been most reticent in making the change towards technology).
Pretty much everything our software does is essentially things that people are doing offline. A construction project is a collaborative effort. There are 20-50 stakeholders involved in every construction project – from the contractors to the vendors to the consultants to promoters. All these different stakeholders are almost working independently without really having an understanding of what's going on and there is a lot that gets lost because of that. It causes a lot of time delays and inefficiencies in the process.

To simply think about it, when the contractor finishes the work on site, there is a billing engineer on site to certify the bill first. For the first three to four days he sits on it for a while; then the billing engineer sends it to the project manager to certify; then he sits for three to five days on it; then the project manager sends it to the procurement team who is managing the contract; from there it goes to accounts and then to finance. By the time the contractor gets paid, it's almost been 30-40 days. In most places in our country, it is close to 45-50 days. Now, using our system, this entire process can essentially be a real-time. The minute the contractor raises the bill, everybody in the ecosystem will get to know that the bill has been raised. If the contractor does not get paid on time, they stop the work or delay the work as even they have a certain amount of working capital they can deploy.

So you have combined the process of giving them a full blown process to their immediate need of conducting procurement…
We have not invented something new. We have taken the procurement process, which was offline, to a cloud-based platform that is basically collaborative. We made software which everybody can access from their phones and laptops, and perform the required role they are designated to perform.

The procurement process is old and still remains to be unraveled in the sense that there are so many checks and balances that contractors use in terms of defining various vendors’ specifications and seeing sampling physically. How do you beat this?
The idea is to make the process more efficient and not to beat it. We cannot ask them to throw the old way out and change the way of work. It is the same way of work, but now the work is being done much more efficiently and much faster because of the collaborative cloud platform and automation of the workflows. The physical identifying and approving of the samples is not going away because that process cannot be automated; but everything else that can be automated should be.

In terms of procurement, there are challenges always discussed across the industry, such as you may want to buy one item of something which is one unit but the pricing changes as you define your total order quantity and that is not on a rate card as generally people talk to each other. How does that happen here?
Those problems are very easy to solve. Firstly, we only deal with enterprise customers. Typically, almost all of our customers have a turnover of Rs 20-40 crore plus. So they are generally a bit more organised. They also have an understanding of what they have to buy in a month and those are the requirements they come with. The technology actually makes it much easier for them to basically input their requirements instantly and get a quick understanding of pricing. Now the physical one-on-one negotiation part will not go away; at the end of the day, before placing the order, they still pick up the phone and talk; but at least we have smoothened a lot of the process.

How do you get your revenues – from the vendors or procurers?
The vendors. Basically we are the sellers of record. Our goal is to reduce the cost as much as we can for our customers and to manage that supply chain.

Is the delivery your responsibility or the vendors’?
We take responsibility for all the logistics and delivery.

Does stocking become your concern?
Everything is our concern. The customer should just be able to pick up the phone and call us to tell us what they need, the amount, the time, at the price negotiated on the site. We manage the rest.

Are you accountable to the customer?
Absolutely, we are accountable. In that sense, we are not a traditional marketplace; we are a managed marketplace model responsible to the customer.

What is the money raised on the project so far? Are you planning to expand more?
We raised close to Rs 30-35 crore. We are in the market right now to expand.

What will be the total sale value of the products?
We are roughly about Rs 70-75 crores a year right now and we are ramping up fast.

And that will come from how many customers?
We work with a wide variety of customers. We worked with 35-40 odd customers in the past 12 months because the business is relatively new for us. But we will work with all the top companies in the country. We are primarily based in Delhi-NCR right now, but we are looking to expand in other markets. So that is going to be the next step in the coming financial year.

And in terms of geography, where are you getting the best response from?
We have only done the procurement business in Delhi-NCR, while our software business is national. Our software business has a fair degree of receptivity. We have some large companies like Panchshil in Pune, DLF in Delhi as our customers, and even national players like a WeWork, Oberoi Hotels, who use our software pretty much across the country for their projects.

Which material is most in demand in terms of giving you big business.
Our company focuses on the top five to six categories, which basically amount for about 60-70 per cent of the business industry. So you have steel, concrete, kitchen, doors and windows. So it is basically the high bulk high cost building items.

I did see some small consumer-oriented construction items. Is there any plan for that?
That is something we keep adding. If you go to our core team, you can see it now has 60,000-70,000 plus SKUs listed on the portal. Even stuff you need for a construction site like hard hats, shoes. Anything and everything that makes life easier for our customers is what we manage to put on. Besides, we have now got into a big scale, and are also getting a lot of interest from manufacturers who want to associate with us.

So you got the cost of pickup, storage, delivery and inventory. Do you get adequately compensated from the vendors on this?
Right now, we are not being compensated. We are hoping to grow even more and eventually be get compensated for this. Amazon didn't make any money on their shipments for the first 10 years and they still exist. We are not as big as they are, but the goal is to keep creating a larger universe of suppliers and buyers, so that eventually the cost advantage is really good for the customer.

Currently, the vendors are actually benefiting due to your services. It is an unreal situation you are giving the vendors.

Everyone should be benefitting from the services. The vendors and the customers should benefit.
The advantage for the vendors is that they get much access to the market. Also, as we deal with some of the largest companies in the country, they get access to a much larger market. I think that is a significant advantage.

Do you have any thumb rule that people will allocate it through software that they can invest in, and would that be the budget really going towards your services, which they would then utilise?
Globally, investment on software for construction projects is approximately 3 per cent of project cost. In India, it is less than probably one tenth of 1 per cent. Traditionally, we have not been very software receptive. In fact, in India, people don't like to pay for software. It's still early days now. Eventually, if people are spending even less than 1 per cent of their project cost and saving 5-10 per cent of project cost instead – which is what the software can help you do – then it will be a easy choice to make for the customers.

Has COVID been able to help you explain this better and to convince more people?
Initially, in the first couple of months during the first wave, everything was shut down. And when things opened up, people realised that the online way was easier to get the work done, as we could not go out and meet vendors. The same thing has happened now as well. As April and May were the low months, in June we saw a sudden pick up in terms of usage. Also, considering the situation we are in, people don't want to venture out much, and so it is the most logical thing to do.

How many people do you have on your team and what are the plans ahead for the next couple of years?
We have 50 people right now. We are in one city right now and we would like to expand to all the major cities in India one-by-one.

What is the scope of the business in terms of transactions? What kind of transaction value can such a business do?
The scope of such a business is massive. If you take the total size of the construction market (including infrastructure and real estate), it is almost 15-16 per cent of the GDP overall. Majority of that is in urban areas as most of the infrastructure is in urban areas. It is a massive market. The total construction volumes every year happen between $200-300 billion. And materials are 70 per cent of that, which comes to about $170-200 billion of materials that get purchased every year. Now we are talking about very small numbers in the percent market share here and you can build a very large business out if it. Even at a 1 per cent market share, you are looking at a $2 billion top-line business. So, the scale and scope is gigantic. It will take some time for this market to create that kind of scale.