The 2020 Mid-Year Economic Update_long

Walmart Should Buy Grainger

This is not a rumor, its a suggestion and its not one Ive previously heard.

Walmart should buy Grainger. This is not a rumor, it’s a suggestion and it’s not one I’ve previously heard.

In contrast, I am often asked if I think Amazon will or should buy Grainger. I have no idea if they will, but it would surprise me if it happened. Despite the occasional purchase (like Whole Foods), Amazon is not a very acquisitive company; Bezos & Co. prefer to grow organically. Also, Amazon has hired many employees from major distributors and e-procurement companies and has developed substantial in-house expertise.

Unlike Amazon, Walmart has not announced a strategic move into B2B markets. I don’t know their plans, but they appear to be far behind Amazon, which is aggressively developing the capabilities to sell to businesses, agencies and institutions. Buying Grainger would be a huge shot of B2B vitamins for Walmart.

Wholesale trade is an enormous market. As reported in MDM’s annual Economic Benchmarks for Wholesale Distribution, total U.S. sales by distributors was $5.7 trillion in 2017. By comparison, the U.S. Census Bureau reported that 2017 retail sales (excluding gas stations, restaurants and car dealers) was less than $4 trillion.

It’s not news that Walmart is way behind Amazon in building online sales volumes. What may surprise you is that it’s going to get even more difficult for Walmart to close the gap, for two reasons. First, Amazon Business is very focused and rapidly building momentum in B2B. Second, the role of artificial intelligence in the purchasing process is growing and Amazon is in the lead with these technologies. Increasingly, consumers are going to place orders via voice commands and with the cameras on their phones.

You can try out this technology today by downloading the Amazon app, clicking on its camera icon and pointing it to a product you want to purchase. Or you can hit the microphone icon and describe what you need. In either case, Amazon does a great job taking you to matching items on its website that you can buy with one-click ordering.

Walmart has voice ordering on its app, but its camera functionality is limited to bar codes, receipts and shelf tags. The camera won’t identify an object for you.

If you want to order via smart speaker, you can put an Amazon Echo in your home or business and buy via voice by talking to Alexa. Obviously, all of these purchases go to Amazon. If you want to buy by voice from Walmart, you use the Google Home speaker – the name shows that it’s intended for retail, not B2B. Google and Walmart are allies in the fight against Amazon, but their current capabilities are not only aimed at retail, they are more limited.

Grainger is a $10-billion company, but it could play a hundred-billion-dollar role in helping Walmart and Google battle Amazon. Here’s why: Grainger has the best combination of expertise, scale and assortment in “tail spend” in industrial distribution. Buying Grainger would enable Walmart to supercharge its entrée into the B2B market, meaning it could quickly generate much larger returns to help justify increasing its expenditures in artificial intelligence and machine learning.

The problem for Walmart and Google is that the longer they wait to get serious about developing distribution capabilities, the harder it will be to catch Amazon. Not only is Amazon aggressively investing in and growing their B2B capabilities, they’re making customers very comfortable with using the same purchasing tools for their personal and business purchases. You can voice order groceries from Alexa at home and office supplies from her (it?) at work.

Jeff Bezos and his team have demonstrated remarkable agility and they keep outmaneuvering their rivals, including Walmart. If Walmart wants to get serious about B2B and – most importantly – avoid being closed out of an enormous market that Amazon can mine for many billions of dollars in sales – then buying Grainger would be a great start.

What’s in it for Grainger? Well, it’s going to be very difficult for them to compete in tail spend B2B without state-of-the-art artificial intelligence, machine learning and Internet of Things technology capabilities. Indeed, distribution executives at some companies would be hard-pressed to define those terms accurately.

Additionally, although Grainger has aggressively invested in value-added services over the years, it is still vulnerable to pure digital players. Too many of Grainger’s transactions follow three simple steps: order on a website; fulfill from a distribution center; deliver on a common carrier. The company is very, very good at this business but no one’s better at it than Amazon. That leaves Grainger vulnerable to Amazon in fighting for the small, repeat tail-spend orders it dominated for many years.

Unlike Walmart, I don’t think Amazon needs Grainger to continue their explosive growth in wholesale distribution. Amazon Business is a highly-competitive and capable B2B distributor on its own. However, Amazon might consider buying Grainger just to keep it out of the hands of Walmart. In any case, Grainger holds a tremendous amount of value that Walmart and Google could leverage to vault into the B2B fight. In return, Grainger would get inside access to a huge third-party marketplace to sell through and the benefits of Google’s artificial intelligence capabilities.

This would radically change the game in wholesale distribution, giving Amazon Business a truly robust rival and an alternative third-party marketplace for distributors. Sounds like a natural fit to me.

As always, I’d love to hear your feedback. You can comment below or reach me at





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