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Posted October 6, 2025

The hidden data goldmine: What distributors don't realize they own

By Nelson Valderrama

Netflix taught us that viewing patterns were more valuable than DVD inventory. Amazon showed us that purchase behavior trumped warehouse efficiency. Now, America's most forward-thinking distributors have found their own goldmine: traditional wholesale operations transformed into customer intelligence platforms.


Crowd of people and thought bubblesFuture-forward distributors highlight a growing divide in the $340 billion North American distribution industry. While traditional players focus on small operational upgrades, industry leaders have acted on their “Netflix Moment,” using AI to become customer intelligence platforms.

That Netflix Moment

A once-mighty giant, Blockbuster Video thrived on physical stores, late fees, and the ritual of renting movies. But as the digital tide rose, so did Netflix, a startup built on understanding customers. While Blockbuster managed shelves and charged penalties, Reed Hastings, Netflix's CEO, saw the power in customer data – what viewers liked, how often they rented, the “long tail” of movie preferences.

Netflix's algorithms transformed this data into personalized recommendations, building loyalty Blockbuster couldn't grasp. Blockbuster even famously turned down a $50 million offer from Hastings in 2000. Meanwhile, Netflix, free from the burden of physical stores and entirely focused on its subscribers, quickly shifted to streaming and absolutely exploded. Blockbuster, though, was bogged down by debt and just couldn't let go of its old ways. It ended up being a harsh lesson in what happens when you hold onto the past when the world is screaming for digital innovation and a customer-first approach.

Transactional data holds a treasure trove of behavioral insights, a fact that Netflix and Amazon recognized early on regarding viewing and shopping habits. Three leading distributors have successfully harnessed this unprecedented intelligence. Here's how they did it:

Winona, Minnesota – Early Spring 2024

The alert buzzed Fastenal's CEO Dan Florness's phone at 3:47 AM. Twenty thousand vending machines across North America had just transmitted their overnight data—not just inventory levels, but something far more valuable. What Florness saw wasn't just data on fastener usage; it was like looking at the pulse of American manufacturing, with real-time patterns that no one else could possibly copy.

Right then, Dan realized what Reed Hastings had figured out twenty years before: the real treasure wasn't the product itself—it was all the information about how customers behaved, gathered from every single interaction.

Fastenal, once a company focused on manual inventory checks and restocking, transformed itself by embracing technology. A decade ago, its $7.3 billion business was reliable but slow and easily replicated by competitors.

The game-changer came with introducing intelligent vending machines, FASTVend. These machines gathered valuable data on product usage, timing, and consumption speed. This information, previously unavailable, contained insights into tool depletion, project pace, and potential maintenance issues.

From a few units, the network expanded rapidly, developing into a global industrial IoT platform. This change really boosted Fastenal's online sales, which now make up almost 60% of their total income and have grown by nearly 28% in e-commerce year over year.Fastenal now integrates real-world service with data-driven insights through its 2,000 onsite locations.

This strategic pivot, Fastenal's “Netflix Moment,” changed it from a mere supplier to a platform providing valuable intelligence. CEO Dan Florness articulated this vision; he foresees adding a billion dollars in revenue annually, emphasizing that the future of industrial distribution lies in controlling data at the point of consumption – a position Fastenal now holds.

Chicago, Illinois – June 2024

It was a warm June day in 2024, and inside Grainger's Chicago technology center, something big was about to happen—a quiet revelation that would spark a revolution. Chief Product Officer Brian Walker stood before a screen, the glow illuminating his focused expression, as his team unveiled a truly startling discovery: their AI-powered platforms weren't merely helping customers find products; they could forecast customer needs before customers even knew they had them. “We're not in the catalog business anymore,” Walker declared, the weight of the realization settling in the room, “We're in the customer intelligence business.”

This wasn't just a discovery for Grainger, the industrial king with over 1.5 million unique items, raking in $17.18 billion a year; it was a “Netflix Moment.” They'd always prided themselves on their massive inventory, but the search data proved to be their most valuable asset. Think of it: a customer might type “big shiny thing for pipes,” a search that yields no direct results. Yet, those seemingly “failed” searches, those awkward phrases, those subtle clues about underlying needs, became a goldmine of insight. The quantity of items mattered less than understanding true customer desires, even unstated ones.

This “Aha!” moment sparked a monumental shift. Grainger went all-in on AI, quadrupling their AI/machine learning team and pouring continuous investment into the technology. They built a custom cloud-based AI platform, integrated machine learning across their North American distribution network, and even implemented computer vision technology using smartphone images to optimize KeepStock inventory setups, eliminating manual errors and boosting efficiency. As Walker aptly put it, “Digital transformation is people transformation.” Grainger had transitioned from a catalog-based company to a data-driven powerhouse, showcasing the immense power of understanding “how” over “what” in their customers' journeys.

Miami, Florida – February 2025

Ten years ago, a homeowner facing a broken AC unit in the humid Florida heat would have been at the mercy of their contractor's recommendations. They would shuffle brochures, exchange technical jargon, and ultimately, the homeowner would choose from a limited selection provided by the contractor. Watsco, the massive HVAC distributor, acted primarily as an intermediary, supplying the contractors without a real say in the homeowner's final decision.

Then came their “Netflix Moment.” Someone at Watsco realized something big was missing: homeowners, who were paying for their HVAC systems, weren't really part of the conversation when it came to choosing them. That idea sparked a huge change: Watsco decided to stop being just a delivery service and become a trusted guide in the HVAC journey. That's how OnCallAir was born.

OnCallAir, a digital platform, effortlessly connected contractors and homeowners. With over 313,000 households already using it in 2024, Watsco stumbled upon a goldmine of real-time homeowner interaction data. This data wasn't just about what people bought, but, more crucially, why. It was like a detailed diary of customer preferences, questions, and what happened next, offering an unprecedented look into their true desires.
With this newfound clarity, Watsco deployed AI to optimize its enormous inventory of over 200,000 products. The AI algorithms meticulously analyzed past sales figures, weather trends, and regional demand, allowing for exceptionally precise inventory management. This proactive approach dramatically cut down on both running out of stock and having too much, which is a huge advantage in the $74 billion HVAC industry. Pricing became smart, changing with the seasons, different locations, and real-time demand, helping to ease the impact of inflation and tariffs. Promotions became super specific, designed to really hit home with different kinds of customers.

The changes had a real impact. Analytics on contractor performance, directly tied to how happy customers were, gave invaluable insights into service quality and market trends. Watsco really built up its community by creating an online space for contractors. This made customers more loyal, simplified ordering, and helped them collect even more useful information about how people were using their services. Thanks to these new ideas, online sales shot up and now account for 35% of Watsco's business, growing by a significant 16% each year.

Watsco had forged an unmatched feedback loop within the industry. Homeowner preferences, captured through OnCallAir, informed and influenced contractor operations. This shaped Watsco's strategies regarding pricing, promotions, and inventory management. From the initial consideration of a new AC unit to its final installation, Watsco was now deeply integrated into every stage of the homeowner's journey.

According to A.J. Nahmad, Watsco's president, the company has only just realized the full potential of its technological investments. Watsco is in a unique position, seeing firsthand what products are out there and what customers are searching for. This puts them in a powerful spot to really influence the future of the HVAC industry, making it work better and truly cater to what people need. For instance, during a record-breaking quarter, Nahmad shared an amazing detail: OnCallAir had generated quotes for 313,000 homes, which turned into a staggering $1.5 billion in sales.his really shows just how big of a change they're bringing about.

The real triumph, Nahmad pointed out, wasn't merely the revenue. It was the profound realization that Watsco had become the only B2B distributor with direct insight into consumer purchase decisions. While competitors continued selling to contractors, Watsco was actively deciphering homeowner behavior patterns, predicting HVAC market trends across seasonal and geographic segments. “The bulk of the benefit from our technology investments remains ahead of us,” Nahmad noted, hinting at future applications extending far beyond traditional distribution metrics.

The “Netflix Moment” for Distributors

Future-forward distributors have identified and leveraged their “Netflix Moment,” a pivotal point where the business undergoes a disruptive transformation because of an on-demand digital model.

A business pivot: A business radically changes its model for future survival or growth, as Netflix did when moving from DVD rentals to streaming.

An industry disruption: A new technology or service completely changes how people consume or access products.

A customer experience shift: Convenience, personalization, and instant access become the standard expectation.

The Transformation Models

Based on our analysis of public company strategies, three distinct transformation approaches are emerging:

  1. The Data Platform Model: Grainger transforms search and customer interaction data into predictive intelligence that guides inventory, pricing, and customer service decisions.
  2. The IoT Service Model: Fastenal uses connected devices to capture real-time consumption data, creating unprecedented visibility into industrial demand patterns.
  3. The Experience Platform Model: Watsco connects B2B distribution to end-customer decisions, creating unique market intelligence that transcends traditional supply chain boundaries.

Companies that continue treating technology as an accounting practice and IT support rather than business transformation face the same fate as Blockbuster. The warning signs are clear:

  • Website improvements instead of customer intelligence platforms.
  • Cost reduction focus instead of revenue enhancement through data.
  • Incremental optimization instead of business model evolution.

Mid-sized distributors risk missing their “Netflix Moment.” Many work on incremental improvements like logistics or processes. They miss that electric moment when they can charge their future with cross-functional power, that opportunity to transform their business model with affordable, customized, and proven AI/ML technology.

Nelson ValderramaNelson Valderrama, CEO of Intuilize, is a skilled data-driven strategist focused on boosting profits for mid-size distributors. With 25-plus years of experience in all aspects of the wholesale industry, Valderrama continues to support businesses in discovering hidden competitive advantages and leveraging data's potential in the modern Digital Economy. He can be reached at nelson@intuilize.com. 

 

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