At the Morgan Keegan Industrial/Transportation Conference last week, Chicago-based distributor Grainger outlined its plans to continue building on both its product portfolio and its service offerings.
Grainger U.S. President Michael Pulick says the company is aiming for up to 500,000 products in its portfolio. That would be up from 85,000 in 2005.
In recent years, the distributor has added products in plumbing, fleet maintenance and metalworking, among others. It has also added to current categories with products that boast different features or functions.
Grainger also plans to continue growing its private label offering, Pulick says. Right now, private label accounts for 23 percent of Grainger’s overall revenue. One key to success with its private label is to “buy better,” Pulick says. Currently, globally sourced product accounts for less than half the revenue that private label brings in.
“We have demonstrated discipline when it comes to gross margin, and we will continue to do that,” he says. One way to do this is to increase the percentage of its private label sourced from outside of the U.S.
However, while Grainger will continue to grow the number of products it sells, it also plans to accelerate growth in services.
Products and services are no longer considered independent of each other, Pulick says. He says the distributor has been researching how customers view services.
But the key to consolidating products and services, and therefore increasing spend with existing customers, is to make sure those services have a “natural adjacency to our product line,” Pulick says.
“Services push Grainger further into the supply chain,” he says. “It makes us sticky with our customers. They also make us a credible solutions provider.”
Grainger sees the consolidation of products and services as a growth opportunity. One example provided by Pulick was the distributor’s recent acquisition of Alliance Energy Solutions, Oxford, CT, a lighting retrofit company.
Grainger’s priorities for service expansion include:
Safety. Pulick says: “We know that when we go against small safety specialists, they beat us. They can provide a total solution of products and services. We have a strong desire to build out our services to complement our product offering (in this area).”
Sustainability. Pulick called this a “big issue for customers” and that Grainger has a strong foundation for services in managing resource use in Alliance Energy.
Business continuity and emergency preparedness. Grainger wants to help customers be prepared before a disaster hits, Pulick says.
Inventory management. The distributor has completed 10,000 vendor managed inventory installations in the U.S. “We’re just getting started,” Pulick says.
Other Growth Areas
E-commerce is an area of growth for Grainger, Pulick says. “It’s our fastest-growing channel twice as fast as any of our other channels.” It’s also Grainger’s lowest cost-to-serve channel, making e-commerce an attractive focus for the distributor.
Pulick says that 25 percent of Grainger’s revenue is now online, and customers who use the channel buy 14 to 17 percent more than other customers. He says that a generational shift will mean more customers will feel more comfortable buying online.
“The adoption will continue to accelerate because of this,” he says.
Another area of growth for Grainger is with small- and mid-sized customers. Historically, Grainger’s traditional sales representatives have called on larger customers and focused on growing Grainger sales with those customers, he says.
During the recession, Grainger experimented with a new sales coverage model, which targets higher-margin small- and mid-sized customers. It has expanded its sales force to accommodate this goal. “We’ll continue to experiment with this sales coverage model until we get the right return on investment,” Pulick says.
“We know that customer intimacy drives growth. We have a unique value proposition and it applies to customers of all shapes and sizes.”