At its annual Grainger Show earlier this month, company CEO D.G. Macpherson revealed a handful of details regarding the industrial distribution giant’s two major ongoing initiatives — salesforce reconfiguration, and pricing. He spoke upon both topics in a roundtable discussion with a group of industrial trade publication editors, including myself, at the event.
In my previous Grainger Show pieces these past two weeks, I covered Macpherson’s comments on the industrial economy, 2016 branch downsizing and Amazon; his expectation that 80 percent of Grainger’s sales will happen via e-commerce by 2022, and I shared my sights and overall impressions from the event.
Macpherson discussed how throughout 2016, Grainger had ‘some significant changes’ to its salesforce and how it configures it. Grainger had its salesforce refocus on its key verticals of manufacturing, healthcare and government, a move aimed to spur better conversations with customers. With that reconfiguration now in the past, Macpherson said Grainger is now focused on execution.
“That was somewhat disruptive to customer packages,” Macpherson said regarding the changes. “We disrupted some relationships and reformed those, and now we’re focused on execution.”
Macpherson then went into Grainger’s pricing strategy in the U.S., which he said is currently too high.
“We’ve had a very high list, less discount model,” Macpherson said. “Large customers particularly valued getting discounts off of lists. 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’s.”
Grainger — No. 3 on Industrial Distribution’s Big 50 List — had 2016 sales of $10.14 billion, up 1.7 percent year-over-year, although U.S. sales declined 1.1 percent.
Macpherson said the company thinks its newer, more moderate list prices will help Grainger grow faster, with some negative impact to gross margin and a strong positive result on operating margin. The overall goal is to be more relevant to every customer and acquire more of them. That, and avoid friction.
“As product price and transparency has become more relevant, it’s become a source of contention with customers, and we don’t need that,” Macpherson said. "We don't need to have the lowest price, we just need to be in the ballpark."
Macpherson said the company started its pricing moderation process in January, and plans to be finished by March 2018. The company now has 400,000 items that have a web price, which existing customers opt-in to with a two-question survey. Once they opt-in, they get that web price each time they shop Grainger online.
"So (each product) has a list price and a web price," Macpherson said. "Ultimately we'll get everything set on a web price that's reasonable. Most of the magic happens in the background, in terms of understanding competitor pricing and how our pricing works. But this will all be organized by this time next year."