The Secret to Beating Grainger

My last blog called The Secret to Being Grainger drew a lot responses, and the gist of many of these was, “Thanks for telling me how they win – but how do I beat them?”

The bad news is that only a handful of distributors have both the systems and scale to compete directly for the “speed and convenience” business that Grainger has, as I explained. However, many distributors are losing business to Grainger every day that they could win back with some smart changes in how they operate and market themselves.

The best thing about these recommendations is that they each require little or no capital.  My focus is on helping you compete more effectively without changing your business model.

Make Your Inventory Highly Visible
Customers perceive that Grainger carries just about everything and are highly confident it will be in stock. Why is this? Because between Grainger’s huge catalog, marketing flyers, easy to use website and extensive, professional branch displays, customers are constantly exposed to their product line. When you interact with Grainger, you see overwhelming numbers of images of products and brands. You get the sense that no matter what you need, Grainger has it.

In contrast, how visible is your product offering to customers? I work with a lot of distributors, some of them very large, and for the most part, what I see is a very old fashioned merchandising approach. Branch displays are unattractive, unimpressive and incomplete, website inventory is sparse, hard to find and often lacks images; catalogs and flyers are either poorly done or missing entirely.

Distributors are primarily in business to market products – how good are you at this core task? If you aren’t continuously educating your customers about what you carry and presenting your merchandising attractively and aggressively, who do you think customers will call when they don’t know where to buy a product? Grainger, that’s who.

Related from MDM: Benchmark your inventory practices with the 2010 Wholesale Distribution Economic Reports from Adam Fein

Build a Great E-Commerce Website
There is simply no excuse anymore not to have all of your products online, with available inventory. Strive to make your website easy to use, with quick product look-up, quality images and very fast transaction processing. Don’t require new customers to register to place an order (Grainger does this). Extensive research shows that customers will often abandon a purchase at this step. Instead, let customers complete the order without registering. By the time they’re done, you’ll have all of their registration information anyway.

But that’s just a start. When you begin selling on the web, you automatically expand your geographic reach as a distributor because everyone in the world can find your products. Over time, this will allow you to stock items you couldn’t afford to carry prior to being in the web business. This allows you to expand your product range, making you more competitive with Grainger.

Remember that building a great website is just the beginning. You must do “search engine marketing” effectively so that Google, Yahoo, Bing, et al, refer customers looking for your products to your site.

Related from MDM: Grainger's E-Commerce Evolution

Send out “Offers”
One of the best ways of educating customers about your product lines is to promote them with paper and electronic flyers. Developing and implementing a long-term, profitable database marketing strategy takes time and investment, but if you are disciplined in your measurement and testing, this can become a significant new revenue stream for you. This strategy also educates customers continuously about your product and service offering. That means customers who have seen your promotions for awhile will begin calling you more often because they have a better understanding of what you sell. That’s why long-term database marketing initiatives don’t just drive sales of promotional items – they grow more frequent transactions of all types.

You may need a catalog. I say, “may” because catalogs are vital in some kinds of distribution (MRO, a la Grainger, MSC, Fastenal, McMaster Carr, etc.) and are not as important in others (e.g., electrical supplies). The reasons for this are too complex to explain here, but suffice it to say that if your competitors have catalogs, you probably need one, too.

Lately, I’ve encountered sizeable distributors who send out quarterly or monthly “newsletters” but no direct mail flyers. I tell them, “If your customers like you enough to read your newsletters, they won’t mind you offering them products to purchase.” Customers know you exist to sell products. Give them a reason to buy.

Related from MDM: Go Beyond 'Brochureware' Online

Price Everything
I often meet with distributors who don’t put pricing on their promotional materials, websites and branch displays. Their logic is that since they have multiple of levels of pricing that vary by the customer and even by the transaction that it’s impossible for them to publish pricing.

I encourage them – and you – to price everything. It’s important for customers to have some idea of your products’ costs. Customers who have discounts will know that they do and so you won’t scare them away with the pricing you publish.

Not publishing pricing on your promotions, website and displays has the same effect as a menu without pricing posted outside of a restaurant: everyone assumes the reason there is no pricing is because it’s extremely high and the proprietor doesn’t want to scare you away before he rips you off.

Think about a customer entering your branch and seeing a 3/8” drill for sale. He doesn’t know if it costs $50 or $250. However, if it has a sign displaying a price of $99, he at least knows the ballpark cost to purchase the tool. If he’s used to getting a 10% discount, he’ll come up with a rough estimated price in his head. Without some benchmark price, he is very unlikely to bring the drill to the counter.

Grainger probably has higher pricing on most items you both carry than you do, and they price everything. If you don’t display a price, you create a sense of doubt about your competitiveness and allow customers to assume you cost more than Grainger.

Establish “street prices” for all of your items and then use them in your flyers, on your displays and on your website. Your response rates and incremental sales will jump up substantially. Going priceless simply announces to the world that you have prices so breathtakingly high that you don’t dare show them.

Related from MDM: Balancing Online and Print Catalogs

Simplify Your Transaction Process
Whenever I take on a new distributor client, I ask to sit with customer service people as they talk to customers. In one recent engagement, I worked with several phone reps and was horrified to see they wrote down every order before typing it into the system. This introduces enormous opportunity for error. I worked with another major distributor who didn’t use any phone call statistics to analyze wait times, abandon rates, etc.

I watch out for situations where the customer has to offer the same information twice (“What’s your company name again?”) or data that should already be stored in the system. Complex, error-prone transactions greatly reduce your ability to compete with Grainger’s bullet proof operational excellence.

When’s the last time you analyzed what it’s like to interact with your company from the customer’s point of view? Have you done “mystery shopping” to benchmark how easy and accurate your process is compared to Grainger or McMaster Carr?

Having a robust, state-of-the-art, intuitive and fast ordering process will result in customers choosing to call you more often. Grainger can process orders quicker than just about anyone. By reducing the gap in this area, you will offer faster, more accurate transactions, thereby increasing sales and reducing your costs.

Related from MDM: The Business Case for Better Data

Technical Support
I really view this as an Achilles’ heel for Grainger. I’m convinced that every customer service and sales person who works for a distributor understands how vitally important technical competence is in doing his job. Grainger simply doesn’t get this. Even when I was their Marketing VP, I couldn’t seem to get executives there to understand how important it is for front line personnel to understand what they are selling.

Grainger has a great technical support group in Chicago, but that’s no substitute for having well-trained people on the counter and phone. It is not difficult to have better technical prowess than Grainger, but most distributors don’t take credit for it. Train your people well, brag about it in your sales and marketing literature and prove it everyday and you will win customers.

By the way, this is one reason Grainger has such a terrific catalog and website. In some ways, these are a “crutch” to augment their dearth of technical knowledge. Some Grainger branch managers used to joke that we should start answering the phone with the phrase, “Stock number?” just to drive home the point that customers should look up the item in the catalog before they call.

These are straightforward, simple ideas to help you compete more effectively with Grainger without making fundamental changes to your business model. They won’t necessarily help you beat Grainger at what they do best – but they will help you earn more of the transactions you should be getting anyway.

Get Grainger news and analysis at www.mdm.com/grainger.

Ian Heller has worked with distributors for more than 20 years, serving as VP, Marketing for Grainger, Newark Electronics and Corporate Express. As the founder of Real Results Marketing, he has consulted for many leading distribution companies, focusing on strategic planning and multi-channel growth initiatives. He holds an MBA from the Kellogg School of Management at Northwestern University.

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