ORLANDO, FL — If you thought Grainger was ready to rest on its laurels in e-commerce, think again.
Grainger — the largest U.S.-based industrial distributor, and No. 3 on Industrial Distribution’s Big 50 List — has seen its e-commerce sales comprise a continuously growing percent of the company’s overall total, and especially over the past couple years. In 2015, 41 percent of Grainger’s total sales came from online channels. That figure jumped to 60 percent in 2016, and the company expects continued strong online growth over the next five years.
On Monday morning at the company’s annual tradeshow — Grainger Show — at the Orange County Convention Center in Orlando, FL, company CEO D.G. Macpherson stated, "I would be surprised if five years from now it’s not 80 percent," referring to Grainger’s e-commerce sales as a percent of its total.
Macpherson spoke to a group of trade publication media members — including ID — at Grainger Show, candidly sharing details on a range of topics about the current state of the company and its direction moving forward. A good chunk of his commentary focused on e-commerce, which Grainger has been involved with since 1996.
Macpherson said that Grainger currently is at 50 percent e-commerce sales between sales made on Grainger.com and its EDI/e-procurement, with the remaining 10 percent coming from its KeepStock offering and inventory management.
Grainger’s single-channel online model — which includes Zoro in the U.S., MonotaRO in Japan, Cromwell in the United Kingdom and Zoro Germany — grew by 35 percent in 2016 to $1 billion in sales. The company expects that single-channel online business to double by the end of 2019.
"We’re still focused on the online model. It’s a strong source of profitable revenue growth," Macpherson said. "We expect that to grow 20 percent this year and grow profit even more off of that."
Stateside, Macpherson discussed two main points of emphasis for Grainger’s online business in 2017. The first is a focus on execution, following a 2016 in which the company had its salesforce focus more on verticals of manufacturing, healthcare and government to allow the company to have better conversations with customers.
"That was somewhat disruptive to customer packages. We disrupted some relationships and reformed them, and now we’re focused on execution,”" Macpherson said.
The second key area of Grainger’s 2017 U.S. focus is on pricing, which looks to go lower.
"We’ve had a very high-list, less-discount model. Large customers particularly valued getting discounts off of lists," Macpherson said. "We will continue to have that model, but our list prices are too high right now, so we’ve moderated some of those. The idea is that we have to be able to acquire customers through the Grainger brand, and you can’t keep digital marketing if the price you feature is always higher than everyone else."
Macpherson — Grainger’s CEO since the start of October 2016 — went on to say that ultimately the company believes the pricing adjustments will help the company grow faster, be more relavent to more every customer and acquire more of them. Grainger’s single channel businesses acquired more than 1 million new customers worldwide in 2016.
"As product and price transparency has become more prevalent, it’s become a source of contention with customers and we don’t need that," Macpherson added.
Our ID audience has shown strong interest in how to enhance the customer shopping experience, and Grainger is no different. The company’s vast resources and lengthy e-commerce history have powered a digital offering that is hard for any competitor to match, in the processes for both click-and-buy, and product searching. With its 2017 plan of attack, Grainger expects to keep a leg up on the rest of the market.
"We’re really focused on the customer experience, and digital is a big part of it," Macpherson said. "I think sometimes people get the wrong impression of digital and e-commerce in that it makes everything really easy. It actually doesn’t. The good news is that it’s very difficult to add millions of products and get the right information to customers to help them search and find products. We’ve got an advantage there, and we’ll continue to step on that and invest heavily to win on that basis. Other companies are also working hard in that area, and we have a path to get a lot better. If we do, that’s going to be very tough to replicate."
Grainger will report its 2017 Q1 financial results on April 18.