Even with the unprecedented environment of the past two years, Global Industrial is thriving. With its stock price up substantially, the company has taken advantage of the challenging market to create its own path to success. Barry Litwin, CEO of this distribution powerhouse, walked us through his approach in a recent Wholesale Change episode.
Litwin has a diverse background across industries and roles, which led to a greater understanding of the consumer retail and distribution environments. Having both a consumer and B2B perspective has also given him a great foundation for building effective customer experiences and leveraging ecommerce to power Global Industrial’s growth.
Distribution Strategy Group: We track ecommerce trends in distribution, and we’ve been hearing this drumbeat since about 2000, but it’s actually happening: By mid-decade, we might have entire sectors deployed on ecommerce and that’s a very different game.
Litwin: Yes, and I think it’s only going to accelerate. 2020 drove a huge adoption rate in overall ecommerce, but we’re really not out of the pandemic. You’re still seeing a fair amount of remote work going on. Buyers today are leveraging the web to do more and more of their work. They’re very efficient using the web. With shipping and fulfillment systems connected to ecommerce, it’s a lot more convenient for business buyers to transact online.
DSG: You talked about the pandemic and how Global did really well during this time while a lot of your peers struggled. How did you do this?
Litwin: When I think back to the end of Q1 and Q2 of 2020, when we really started to feel the pressure from the market, our first priority was always our associates’ health and safety. The biggest piece was being able to address, what does this mean for our company and our people? Recognizing that, we knew we had to operate in a remote fashion – and we did that within 24 hours even though we were not a company used to working remotely.
Once we got everybody remote, we started making sure everybody was safe and thinking about what our customers needed. Global has an over-70-year history of being a company that is nimble with a “roll-up-your-sleeves-and-get-it-done” attitude. That sensibility really helped us out during that period. Sourcing was constrained. Obviously, everyone was looking for hand sanitizer and masks. We had a fair amount of that product since we have some supply chain set up overseas to bring it in, but not at the levels that we were dealing with. So, we put a team together and everyone rallied. We worked with countless factories across the globe to find good sources, and once we finally locked in, we were able to get that product for our customers. And that drove the momentum in the business.
At that point, we found that if we could work hard and be creative with how we get product in, that we could come out ahead. It turned out that we had a record year last year. From a standpoint of getting it done, our people and our sourcing came to play and did a great job.
At the same time, we had been building on our Accelerating the Customer Experience (ACE) strategy and developing the marketing function in our organization. We brought on a Chief Marketing Officer, Klaus Warner, to help us out. We asked, how do we reposition our value at that point in time? We came up with our three-step marketing strategy. With that foundation already in place, we knew where we wanted to go, but we had this pandemic we had to deal with. So, we had to pivot around it.
We realized that we had an opportunity to share a different value proposition with our customers. We said to them, “Look, we can help your employees return to work. We can help you rebound the business because we provide all the back-office products that you need for your company to ready your environments to help associates come back.” And that was a massive boom. That was the first signature campaign that we launched, and it really resonated with our customers at the time. What we found was they not only came to us for PPE and sanitizer, but they started buying our partitions. They started buying all of our furniture screens. We were selling the full gamut. We were able to activate a portion of our assortment that became really valuable during that time. And we just kept tripling down on that. And that helped us and has continued to help us.
Certainly we have a great assortment for the pandemic and for protecting the environment into 2021. That whole notion created a rally cry in the organization and galvanized our company. We realized that we could find a path amidst the chaos, and we just kept hitting that gas pedal. For us, it was one of those moments where if you believe you can get to the next level, you can. We used the moment to reposition our business. The way we sit today, we’ve rebranded the whole company.
We’ve now activated the brand at a massive level. That’s helping get a lot of awareness in the marketplace. It taught me that you can be caught in the pretzel and in a stuck position, but you have to realize there’s always a move. Sometimes it’s not obvious, but you bring your team together and you find a couple of cracks in the armor to get yourself out of it. Everyone contributed and felt like they were doing good things because there were a lot of companies out there that were struggling. They needed these supplies, and we were in the right spot to help them.
DSG: One thing that’s impressive about what you’ve done is that a lot of companies saw PPE as part of their mix go up in 2020 for obvious reasons, but they also took a bit of a margin hit. It seems like you not only didn’t take a margin hit, you maybe even grew it a little bit.
Litwin: If you recall, people in the street were talking about crazy prices. Manufacturers were raising prices coming in overseas because they had the opportunity to do so. You had to try to save some of that money for your customers, but at the same time, it drove a little bit of improvement in margin. We had a lot of other product that didn’t sell at that time because it wasn’t in favor. That was high-margin product. We just happened to be fortunate that when you’re selling constrained product, you’re usually taking a little bit more of a margin. And when that ends up becoming a little bit bigger, part of your overall balance of sale, it results in an aggregate margin lift.
DSG: You’ve disclosed that you have about 40% private label, and you have been very successful with that.
Litwin: Our company has been a leader in product for years, developing unique ways to take a product that’s a commodity and slightly change the spec to add a little bit more value. We call it the extra chip in the cookie. We have a very strong product development arm that scours the market for products that our customers want and then figures out how to overengineer it or change the engineering a bit to add a little bit more value. We typically sell that product at a value price in the market.
We started doing some brand test studies and found that our customers and customers who don’t buy from us really preferred the Global private brand name. And they liked the quality of these private-label products, as well as the innovation. This gave us confidence that we had something that we could triple-down on and help create some differentiation for us in the market.
We brought in a new SVP of Merchandising, and he comes from the consumer retail space, which typically has very strong capabilities like brand rationalization, private-brand strategy and overseas buying. We’re increasing our capability as we continue to provide customers what they want. We have a strong arsenal of commercial brands. We have 1.7 million items in our total assortment online. For us, it’s not so much the SKU count that matters, it’s more the quality of the assortment. Today consumers have massive choice. In our space, it’s becoming more about curated assortments and getting the right items. You need to have the right items and tee it up to a customer so that it becomes convenient. Sometimes too many SKUs can overwhelm people.
DSG: Have you had a hard time recruiting talent?
Litwin: I think most companies on the distribution side are probably challenged with this. We’ve certainly had to relook at our pay structures, like most companies. We’ve been able to secure the labor we need at this point. I see the labor challenge, not just being us, but also our supplier partners that are having challenges getting labor for manufacturing. If they’re having trouble getting labor and that translates to delays in the overall supply chain. It’ll be interesting to see how this shakes out. As the stimuluses draw to a close, we won’t be competing against them. Hopefully that’ll start to free up labor, and we should see the country getting back to full employment or a little bit better.
DSG: How are you dealing with the supply chain disruptions that we’re hearing about from virtually every distributor CEO these days?
Litwin: It’s an interesting point in time for us. We’re seeing a huge surge and recovery in the United States in terms of demand and buying. That’s put a major pinch point into the supply chain area for most companies. It’s hit everybody in America. Everybody is facing supply chain challenges. We’ve had a very strong supply chain, good partners for a lot of years where we’re facing it head on just as we did with our roll-up-the-sleeves approach in 2020 with the pandemic. We look at this as the same opportunity to leverage our partners and get creative, so we can continue to ensure that we get product to our customers quickly.
The shortage certainly has had an impact on the dropship community, as well. There’s a lot of manufacturers and distributors who have extended lead times in the market. We’re very transparent with our customers and let them know if orders are going to be delayed. They’re not always happy about it. Also, nobody’s happy about price increases. On the raw materials side, I think every supplier is getting hit. We’re going to continue to adjust through it and do our best to find our way.
DSG: To what extent are you able to distinguish true demand versus hoarding, and how does pricing play into that in this environment?
Litwin: I’ve had a lot of companies that have been out of office for a long time. They haven’t updated anything. So, you are seeing a surge in general. We have a pretty good understanding of year-over-year comps by categories. What we are seeing is surge demand versus regular demand pricing, and that’s just the output of the economic situation we’re in. Whenever you have constrained products, you’re going to have increasing prices. It starts with rising raw material prices and goes from there. We try to make sure that we pass on whatever savings we can to our customers. Our value proposition is to be a valued player to them. We’re not the highest, we’re not the lowest; we’re in a competitive price position.
We’ve had to look at pricing a lot more aggressively over the last six to seven months. We try to manage that so our customers get the best value at any moment. I’ve sent out probably two emails to our customers keeping them aware of the fact that we are seeing supply chain challenges in the market, just like everybody else, and we’re trying to keep our availability high for them. We’re trying to keep our prices at a point where they can still buy with confidence and we’ve been holding true to that.
Watch our interview with Litwin in this episode of Wholesale Change: