With its customers continuing to fight an uphill economic battle, The Fastenal Company saw tepid sales growth and declining profit in the second quarter. But the difficult climate also presents an opportunity for the Winona, MN-based distributor to further embed itself into customers' business by adding more on-site locations.
By growing its on-site presence, Fastenal can "have an even more intimate relationship (with each customer) than we've had in the past," CEO Dan Florness told analysts on this week's earnings call.
Fastenal's on-site business, which it defines "as dedicated sales and service provided from within the customer's facility," includes more than 300 locations. And while it isn't quite halfway to its goal of 200 new locations for 2016, the company has signed 48 on-site contracts in the first quarter and 44 in the second quarter – already more than the 80 on-site customer locations it signed in all of 2015.
"We are making very good progress on changing the organization to build … that momentum that we'll need" for 2017, 2018 and beyond, Florness said. That goal means signing "200, 300 on-sites a year" that could turn into "$1 million to $1.5 million revenue growers," he added.
"A piece of our business would migrate there, but more importantly, that would provide us, I believe, 5 points of growth when we were looking at this three and four and five years out," Florness said.
Look for the company to further invest in vending capabilities, as well, to bolster its strategy of countering the struggles Fastenal customers continue to face in today's slow-growth environment. The company's FAST Solutions machines grew 15.3 percent in the second quarter to 58,346 vending machines.
"We believe vending is an example of engagement with our customer, just like on-site," Florness said. "We believe we are building momentum that will serve us well in the years to follow."