George Beiter and Dan Degan are the co-founders of SHARKMARX. For the past decade, George Beiter has held executive sales and marketing positions with industry manufacturers. As the Brand Manager at Oldcastle (NYSE: CRH), Beiter was instrumental in building a national brand for BELGARD, the company’s line of professional hardscape products.
Dan Degan is responsible for Business Development and contractor acquisition. He has 10 years of contractor sales experience throughout the Northeast, working for hardscape manufacturers Techo-Bloc, Unilock, and Cambridge in the landscaping arena.
SHARKMARX is a cloud-based purchasing platform for the home improvement industry. Using crowdsourcing, combined with reverse auction technology, SHARKMARX generates competitive bids on products like landscape materials, building products, and equipment. With proven traction in the Northeast, SHARKMARX plans to expand nationwide reaching $463 million in gross sales transactions and profits of $13 million by year five.
SHARKMARX successfully proved its concept by focusing on concrete pavers and retaining walls along with natural stone products in the Northeast U.S., a $309M market segment. The launch was designed to validate the model and build brand trust for a new technology prior to expanding into the $1.9B national market.
BusinessInterviews.com: How did you come up with the concept behind SHARKMARX?
George: Dan and I have been in the landscape or hardscape industry for a couple of decades between us. Before that, I spent several years in the technology field. We watched Amazon revolutionize the traditional brick and mortar storefront. They changed the way we buy everything. But ironically, the actual bricks and mortar products clung to the legacy way of doing business. It’s pretty much an “old school” industry. We knew there was a better way.
We also knew that companies like Amazon wanted to get into this industry, but one of their obstacles was the freight and transportation for what we call “the last mile”. How do you get a product that can weigh more than a car into someone’s backyard? It requires special off-loading equipment.
I had experience years ago working with a company doing online, reverse auctions. It was always in the back of my head. Turns out, that was the missing link for moving this industry into an eCommerce model.
Our model keeps the local logistics arm that’s already in place with local suppliers. We simply connect the dots, and we do it much more efficiently with benefits for both buyers and suppliers. Buyers get the best prices; savings range between 10-20%, and that’s significant when you are talking about saving $2,000 on a $15,000 order as a small business owner and getting the exact same, branded materials. On the other side, we help suppliers reach new customers in new markets, something they could never do before.
BusinessInterviews.com: When launching SHARKMARX you had many leading professionals in the industry saying, “It won’t work.” Were you ever faced with doubt or did you have an unwavering confidence in the platform and its potential?
George: Indeed we had our doubts. Dan and I put it all on the line, and quit good paying jobs to start SHARKMARX. Our doubt wasn’t whether the model would work. Crowdsourcing and reverse auction technology has been around for almost 20 years, with proven results. The question was, ‘Would our industry be ready for it?’ We knew one thing; we weren’t behind the technology curve for our industry, but would we be too far in front of it? It’s crazy to think that much of our industry still uses hand-written ordering and receipts. So there was definitely concern about getting early adopters and building proof of concept and subsequent traction. But now, with over $400,000 in transactions on our platform, we think we have our answer. This industry is ready for a platform like ours!
BusinessInterviews.com: So despite the doubters, in less than 10 months you managed to create, build and prove a new purchasing model that has processed nearly $400,000 in orders. Did you encounter any challenges during the early stages or has it been pretty smooth sailing from the start?
George: Like many new technologies, our model is disruptive. Many suppliers have been vocal that they don’t like our model because we are “creating” a price war, or we’re creating a “race to zero.” That’s far from reality! Price competition existed long before SHARKMARX. When I was a sales director for an international building products company, there wasn’t a day that went by without a supplier complaining about their competitor selling for less than they were. So did SHARKMARX create the price war, or did competition already exist in the old model? And I love the “race to zero” comment. The truth is that businesses are in business to make money. If one business has less overhead and can sell at a more aggressive prices, they are still making money not selling at zero! The company with larger overhead simply needs to be more innovative or provide a greater level of service to justify a higher price. And some suppliers simply don’t like that reality. It’s disruptive.
This leads to what we’d say is our biggest challenge: customer evangelism. We’re saving contractors thousands and thousands of dollars. You would think they would be Tweeting, posting on Facebook and telling all of their friends. Ironically, they are very quiet and secretive about it. They do not want their current suppliers to know that they used SHARKMARX. There is a fear that they will be blackballed because they embraced our concept and were early adopters. One fairly large customer told me he loved our concept and heard great things about the success of it. But he wanted to wait until it became more accepted because he was afraid someone might find out he used it.
BusinessInterviews.com: What’s one marketing strategy that’s worked really well for you? How did you manage to gain such impressive traction so quickly?
Dan: The best marketing strategy that we have is our savings results. When you save contractors money, they come back. It’s a pretty simple formula. And the suppliers are reaching more customers in markets that they could never touch before. So they like it and come back, and they are aggressively using our platform.
As far as acquiring new customers, that’s any start-up’s biggest challenge. We found that a simple, direct message about what we do is the most effective. Our customers don’t respond well to fancy buzzwords and consultant-speak. They are too busy for that. They want to know what we do and what’s in it for them. So whether we are using traditional direct mail or e-mail marketing or social media, our message has to be direct and show a contractor what we do in seconds. Otherwise we lose them. The most effective way to do that is to show them actual prices of products on our platform. They do the comparison to what they are currently paying, and the story tells itself.
BusinessInterviews.com: Can you share why you’re so excited about the 2.0 version of your software that’s launching next month? How has your customer’s feedback help influence the updates and changes that you made?
Dan: Our version 2.0 has some really cool features that we are adding. The most exciting is our Counter Offer function. With our current version, contractors set the opening price they are willing to pay. If they are overly aggressive, and post jobs with unrealistic prices, those jobs simply die with no activity. We learned from feedback from our suppliers, that they would have bid many of these jobs if their prices were slightly higher.
With Version 2.0, suppliers can submit a Counter Offer during a live bidding event. Those offers are held in a queue, and if the purchase event ends without a bid, those Counter Offers get sent instantly to the buyer. Buyers can immediately view and have 60 minutes to accept an offer to buy their materials. Typically, this is still at a substantial savings from their current source. With the existing version, however, they would have to repost a job and set a higher price, and guess at what price to enter. That meant more of their time, and often contractors simply defaulted back to their old ways of purchasing materials. With Version 2.0, we are less likely to lose them in these scenarios.
Another upgrade, again driven by feedback from our suppliers, is a Public Message Board. Bidding on live purchase events is anonymous on our platform. However, sellers would often want to ask clarifying questions or, in some cases, present alternative materials, often at a significant savings. Our new Public Message Board allows suppliers to pose questions to the buyer. These questions are all anonymous, but they are public, so the information exchange is available to all of the suppliers reviewing the job. This information exchange can lead to even greater savings for contractors, as they will be able to approve a comparable product substitution if they want.
Finally, we’ve added a lot of social media components to keep up with this growing trend. Users can now register with their Facebook login, they can share their jobs and savings on Facebook and Twitter pages and engage others in the conversation. That’s something they are used to doing on a lot of consumer sites.
BusinessInterviews.com: What are some trends in your industry that you’re excited about?
George: While our industry has a lot of ‘Old School’ players, we always get a new ‘freshman class’ of contractors each year. These folks are more advanced with technology and demand the latest technical tools and methods. They expect more and are much more comfortable making purchases online. They embrace technology like ours.
Additionally, the explosion of mobile technology is exciting for our industry. According to a recent study in Business News Daily, 68% of contractors use a Smartphone on the jobsite. 40% of those use their Smartphones to make purchase decisions. With SHARKMARX, contractors can now use their smartphones for more than just emailing photos. They can actually use their Smartphones to save their company money.
BusinessInterviews.com: How do you plan to keep the momentum going?
Dan: SHARKMARX will continue the momentum by continually adding products to our platform. We’ll expand into new geographic markets, expand into other home improvement categories such as lumber, siding and others and finally expand the percentage of total purchases we have from our existing customers. As these customers see the savings our platform gets on their hardscape products, they want to use our platform other materials that they buy. We’ve already started to see this happening. We’ve had requests from existing customers to use our platform for lumber, ice melt, fencing, and even heating oil!
The other nice thing we see is that Reverse Auctions and Crowdsourcing are becoming more and more common. While this means we have to keep an eye on competition, it also helps validate our concept as government agencies, school districts and other businesses use reverse auctions to save their enterprises a substantial amount of money.
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