Building a Ferguson for the Future - Modern Distribution Management

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Building a Ferguson for the Future

Through its technical investments, Ferguson, No. 1 on MDMs Top Distributors List in 2019, is working to create seamless connections with customers across all touchpoints.
The Plumbing, HVAC and industrial products giant reported fiscal 1Q sales of roughly $7.9 billion, compared with $6.8. billion a year prior.

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Through its technical investments, Ferguson, No. 1 on MDM’s Top Distributors List, is working to create seamless connections with customers across all touchpoints.

For Ferguson, one of the largest distributors in the U.S., digital transformation is more than just a growing buzzword, it’s a customer-driven imperative. Digital transformation has always started with the customer, says Chip Devine, senior vice president, eBusiness and Omni-Channel.

Now, it includes giving customers the ability to connect with Ferguson seamlessly, be it in store, over the phone, on a computer or over mobile. “How are we actually making it easy for them to connect with us however they want? That’s how we think about digital transformation and utilizing digital technology. Utilizing our stores, utilizing our people, are foundational in that digital transformation,” he says.

In many ways, Ferguson’s digital efforts are an extension of what the company has already been able to provide offline. “Before websites, we had the most knowledgeable people in our specific industries. is an extension of the actual business that was, one day in time, just a face-to-face, in-person relationship. We’re now extending that into the digital world,” says Devine.

A Personalized Experience

Ferguson has a team of digital merchants who take that long-built institutional knowledge of how products are curated and the appropriate taxonomy within industries, and digitize it in order to personalize the online experience specifically for an HVACR contractor or a waterworks contractor, for example. “When you think about businesses that are moving into the digital world, and digitizing that experience that could have been face to face or in store, if you have that knowledge and expertise, you can translate that into the digital world,” Devine says.

Ferguson does not want customers coming to their website to feel as if they’re visiting an anonymous megastore. Instead, the goal from the onset is to connect the customer with the actual products that they want to buy — personalized by the industry that they’re in and organized specifically around the job the customer is trying to complete. The Ferguson site requires a login, so that the company can know the customer and curate the site differently, wherever they identify across the seven business segments that Ferguson serves.

For example, the No. 1 product a plumber will install is a water heater. “When a plumber goes on our website to buy a water heater, do we want to show them a water heater? Or do we want to show them a water heater and then the products that he or she may need to do that installation — reorganizing that project for that contractor so that it is a much easier experience to navigate,” says Devine. “They’re not [separately] searching for half-inch copper 90s, copper pipe, a water heater, flex tube — all of the different products that they’re going to need. Because we actually know what they need. Being in the industry for 60-plus years, we can reorganize that website to meet that project need versus a specific product.”

Ferguson Ventures

Come January, it will be two years since Ferguson launched its venture capital wing, Ferguson Ventures, with the vision of improving innovation within the industry, and digital development is a key element. With multiple startup company investments, 25 proof of concepts and an innovation lab on the campus of Georgia Tech as well as other university relationships, the enterprise is just getting started, says Mike Brooks, Ferguson’s chief marketing officer.

The goals of Ferguson Ventures — including to help improve customer and contractor productivity and to build connected relationships across all mediums — align well with the ongoing digital innovation initiatives happening at Ferguson itself. The investments Ferguson Ventures makes will filter back into the larger Ferguson digital ecosystem, says Devine.

As an established national firm, Ferguson came into the startup community with capital to invest. Its presence in all 50 states, more than 1,440 locations, over a billion dollars in inventory and 3,000+ salespeople, have been assets in helping to launch the startups Ferguson Ventures chooses to work with. The money is a benefit for sure, but it’s the other elements that are key differentiators, says Brooks.

Startup companies often have fantastic ideas and product demos, but can lack true industry knowledge. That’s where Ferguson’s six decades in distribution comes in. “The ability for Ferguson to really help accelerate some of these startups by leveraging the fact that we understand the industry, we have vendor relationships, we have 300,000 intimate customer relationships, so we can help the startup to really understand how to fine tune their product,” Brooks says. “… Capital is important. But our understanding, our institutional knowledge can really make winners.”

For example, Ferguson Ventures made an equity investment in Payzer, a management tool for contractors, but it also uses the outside salesforce of Ferguson to introduce Payzer among its established contractor customers.

Other publicized Ferguson Ventures investments include:

Whisker Labs; a sensor and data technology company focused on protecting families and homes through the development of Ting, a sensor that monitors a home’s entire electrical network to help prevent electrical fires and proactively detect maintenance issues with major home systems.

HOMEE; a real-time, GPS-based mobile platform that links homeowners and property managers with qualified heating and air conditioning, plumbing, electrical and general handyman services.

GTP; a provider of software, hardware and services that extends Building Information Modeling (BIM) capabilities from the office to the fabrication shop and to the jobsite for all construction trade contractors.

The Right People

A small team of industry-wise associates run Ferguson Ventures, with employees across the country, including Silicon Valley. There is crossover in main Ferguson departments such as the outside salesforce, as well as its legal department and M&A group, where Ferguson Ventures can draw expertise and best practices.

To be a part of the Ferguson Ventures team, it takes an individual with an entrepreneurial spirit. Not necessarily a technologist, says Brooks, but someone who can see the big picture and understand how technology can better be applied to existing business practices and to develop new ones. An ideal participant is an innovator who can synthesize and communicate excitement to the larger company, he says.

Ferguson Ventures needs someone who “doesn’t get lost sometimes in the details of today,” Brooks adds. “We have a lot of our associates working every single day to satisfy our customers, to make sure the products are delivered on time, when they need it. But this is really about where do we want to be in three, five, seven years?”

Many of the people Ferguson has hired for its internal digital team come from outside the industry as well, but with strong merchandising knowledge and digital expertise, says Devine. They work hand in hand with Ferguson’s existing product and market experts. Ferguson has acquired a number of digitally native companies that has helped to fuel its talent as well, he adds.

The company continually partakes in active, ongoing recruiting. For example, Devine sits on a board at Virginia Tech, a top school for Ferguson recruits.

Ferguson Ventures has university relationships as well, such as an innovation lab at Georgia Tech, as well as an innovation challenge now it its second year at the College of William & Mary, located just miles from Ferguson’s Newport News, Virginia, headquarters.

The Full Picture

Ferguson’s digital transformation efforts fall under one of the company’s larger strategic pillars known as Omnichannel. “Omnichannel meaning we have the ability to touch and make a seamless frictionless experience for a customer in any way they find, buy, receive support for their business,” says Devine. It is not a temporary project, but rather a long-term initiative that will continue to iterate and improve.

Part of that process includes investing more in mobile capabilities as customer preferences shift in that direction. It is critically important, Devine says, to make the Ferguson mobile experience as seamless for customers as it is on a laptop or desktop computer. Ferguson has developed a native mobile app that mirrors the experience as well as a mobile-optimized available through any phone’s web browser.

The app also reinforces Ferguson’s commitment to omnichannel. The company is working on a capability that will allow a customer to walk into a Ferguson store and self-serve with a SKU identifier that will be built into the mobile platform. “We’re trying to make it frictionless for the customer when they interact with us in a digital way, including in a store,” Devine says. “Those are really powerful tools that, quite frankly, are not that prevalent today, and I think create differentiation for us versus our competitors.”

It’s all about providing a consistent experience for customers, whether in person, online or through the mobile app. In order to do that, Ferguson is working on tracking the customer journey through multiple different touchpoints in order to bring them all together seamlessly. When a customer walks into a sales center, the information from their online activity should be available, and vice versa, to provide a holistic customer picture.

Making Connections

Like the larger Ferguson omnichannel pillar, one of Ferguson Ventures’ initial investment theses centers around creating a connected ecosystem. For example, joining a consumer who is interested in getting a job completed with a contractor who can do the work, and then connecting that contractor with technology-driven companies that can help them run their business more efficiently and profitably.

In pursuing this goal, Ferguson Ventures has established a number of different partnerships. These may be companies that don’t fit the company’s criteria for an equity investment but where it still makes sense to bring them into the connected ecosystem as a partner, says Brooks.

Two other areas that make up the Ferguson Ventures investment theses include creating a digital experience — such as through both commercial and residential Building Information Modeling (BIM), and emerging technologies — the underlying technology of the Internet of Things (IoT) to create smart homes, smart building and smart cities.

When deciding where and how to invest, there’s the financial consideration of finding a company that is likely to bring a positive return, but there’s also a strategic element involved that may not bring a financial payoff, says Brooks. Ferguson Ventures is slightly more on the strategic side, he says, with a focus of bringing innovation, learning and relationships into the company.

Initially, a key challenge was just getting the word out that Ferguson Ventures was open for business. The company brought in a Silicon Valley-based employee to network, partnered with incubator RocketSpace to improve engagement and build relationships and attended a number of venture capital conferences.

The result is now a robust funnel that is creating a flywheel effect of potential deals flowing in, says Brooks.

Immediate Goals

Over the next year, Brooks says Ferguson Ventures will continue to focus on deal flow, making quick decisions on whether or not to work with a startup and the best ways to proceed.

Continuing to strengthen the connected ecosystem framework, bringing the innovations from Ferguson Ventures into the larger company fold, is also a top priority. For example, Ferguson Ventures has worked with startup companies to help customers visualize, say, a bathroom remodel, before moving on to product purchase and installation. The connected ecosystem comes into play when the customer is able to visit a Ferguson store, speak with an associate about what they want to do, use augmented reality and AI to visualize it in their space and then be connected with a contractor who can make it happen.

“We’re helping the contractor get a job — not a lead — so it’s very, very valuable to them,” says Brooks. “And from the consumer side, we’re helping the consumer with an overall solution. Not just selling the product, but selling the product installed when they want it with the contractor that can help.”

Overall, it’s about getting the word out that these digital capabilities exist. As Devine puts it, the majority of Ferguson customers are “not millennials,” but rather more seasoned industry vets who require more field education on Ferguson’s continually developing digital capabilities.

There is a lot of training on how to use the technology to make their business better, including signage in all of Ferguson’s buildings advertising the mobile and online capabilities.

“A lot of times, if they’ve never really used it, they don’t know the time they can save,” says Devine. “They don’t know the convenience of placing your order and picking it up should be the same way you have a retail experience, whether that’s picking up food you buy online or picking up in the store at Target or Walmart. You can have that same experience in your business-to-business world with Ferguson.”

Right now, a bit over 20% of Ferguson’s business runs through its digital channel. Devine calls it “pretty strong,” but wants to bring as many customers into the fold as possible. The No. 1 goal is to create the best possible experience for the customer, measured by share of wallet.

The more value Ferguson can deliver to the customer, the more they are rewarded in additional business and loyalty. “Getting the customer to use the digital tools and experience them is probably our biggest goal internally from a digital standpoint,” he says, “because that’s the value we believe we can drive to the customer and ultimately drive that customer satisfaction and that loyalty over time.”


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