70 percent and climbing
Grainger chairman and CEO D.G. Macpherson anticipates that the MRO distributor’s digital footprint has room to grow
by Rich Vurva
About 70 percent -- or $8.3 billion -- of Grainger’s annual sales of $11.8 billion originate through a digital channel.
Included in those sales are purchases placed online; orders originating in purchasing software used by customers that get transmitted electronically to Grainger; and orders scanned in customer tool cribs as part of a variety of Grainger inventory management solutions.
As impressive as the 70 percent figure sounds, Grainger chairman and CEO D.G. Macpherson says there’s room for more growth in digital sales, suggesting that 80 percent is a realistic target. Macpherson recently held a virtual discussion with trade press editors including Industrial Supply magazine.
In 2021, Grainger started segmenting sales into two business segments – High-Touch Solutions (N.A.) and Endless Assortment.
High-Touch Solutions includes Grainger-branded websites, physical branches and inventory management solutions at customer locations. It focuses primarily on larger customers with more complex purchasing processes. Annual revenues for the High-Touch Solutions segment are about $9.2 billion.
Endless Assortment is comprised of MonotaRO in Japan and Zoro in the U.S. Those online efforts market to smaller businesses that tend to have simpler purchasing processes. Annual sales attributed to the Endless Assortment business are about $2.2 billion.
Despite the growth in digital sales, Macpherson doesn’t anticipate making any drastic changes to the company’s physical footprint. The company cut its branch network from 377 branches in 2014 to 287 branch locations in the U.S. in 2020.
“We like our branch footprint now. We’ve actually added two in the last year that are experimental in nature. We feel like we’re at a place where our branch network will be pretty level,” Macpherson said.
He added that branch sales volume has stabilized over the last three or four years and that having a local presence remains important. “We’re asking branches to do additional things that are really important to our customers. They’re going to be an important part of our future. We want to be local. We need to be local; it’s an important part of our value proposition,” he said.
How big of a threat is Amazon Business?
According to its most recently quarterly report, Amazon claims that its Amazon Business segment generated sales of $25 billion in worldwide annualized sales in 2020. Given the impressive growth from the Seattle-based tech giant, how does Grainger view Amazon Business?
“If they’re killing us it’s not actually based on empirical evidence,” Macpherson said.
Rather than worrying about the competitive threat from Amazon Business, Macpherson seems more focused on making sure that Grainger keeps close tabs on the needs of its customers.
“Are we doing the things that we need to do to create customer relationships in the industrial B2B space? Are we adding the right products? Do we have process information correct to make it easy to find? Are we really understanding our customers and building relationships to manage their inventory? Are we consulting to help them to take cost out?”
Macpherson believes that Grainger will succeed against Amazon and other forms of competition by remaining focused on building relationships with customers.
“It’s important that we continue to build relationships with customers. It’s important that we have the absolute best search for industrial products and technical products on the planet. It’s important that we know more about our customers than anybody does,” Macpherson said. “I view [Amazon] as a wonderful company and a great competitor and one that we take seriously but we feel like if we do the best to win ourselves and differentiate ourselves, we’ve got a fighting chance.”
INDUSTRIAL SUPPLY MAGAZINE
The March/April issue of Industrial Supply magazine features an in-depth cover story about Joyce Lansdale and Vallen. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and David Kahle, as well as interviews with numerous product and distribution industry experts.
