During its 2022 Investor Day, Grainger announced it expects to reach $20 billion in sales by 2025 – a lofty goal for the MRO distributor.
Since 2017, the company has grown by consolidating its portfolio, re-segmenting the business, focusing on its high-touch solutions and endless assortment strategy, and investing in technology.
A significant portion of the company’s revenue comes from what it calls its High-Touch Solutions division, the part of its company dedicated to serving North American customers with complex buying needs via company branches, ecommerce and customer inventory management.
These customers, according to Grainger, are larger and mid-sized businesses that expect product and service depth and breadth, and they are largely focused on total cost of ownership. They want a flawless experience, and they are looking for tangible value through reducing inventory, cost savings and a simpler purchasing process.
Here’s a snapshot of this division:
- 2 million available SKUs in this segment
- 6,000 sales and services team members
- 1.2 million active customers
- 70% of the revenue in High-Touch Solutions comes through digital channels
Grainger’s revenue for the Last 12 Months as of the end of the second quarter for this division was $11.2 billion. It reported it expects to achieve 6-8% CAGR in High-Touch Solutions by 2025.
To achieve this goal, Grainger reported it is focused on five strategic growth engines, including:
- Seller Coverage
- Seller Effectiveness
- Customer Solutions
By combining strategic investments and custom technology solutions, Grainger says it is poised to clinch a 7% market share for the North American B2B supply market in the coming years – an estimated $11 billion value.
Let’s take a look at each of these five growth engines and how Grainger plans to use them to drive its growth.
Grainger’s 5 Strategic Growth Engines for High-Touch Solutions
During the company’s Investor Day, Paige Robbins, Senior Vice President and President of the Grainger Business Unit, and Brian Walker, Chief Product Officer, spoke about how the company uses its five growth engines alongside custom technology solutions to accelerate growth within High-Touch Solutions.
Grainger’s marketing initiative aims to build brand awareness, engage target customers and capture in-the-moment demand. First, the company invests in radio and television advertisements to build brand awareness among current and prospective customers. It also engages customers with targeted messages, including direct mail, catalog and email campaigns. Because many customers begin their journey on Google or other search engines, Grainger also invests heavily in paid search and display-ad retargeting.
Robbins said that Grainger is on a journey to increase and optimize its marketing spend. To do this, the company has been purposeful about testing new ways to attract customers and increase share of wallet.
“We’ve been deliberate and scientific about tracking and measuring every single dollar we spend, so we understand what is working and what’s not. We’ve been able to increase our marketing spend as new initiatives are proven out. We’ve seen an increase in our overall return on investment as we’ve increased the spend,” Robbins said.
She said Grainger’s commitment to a rigorous framework of investing, measuring, adjusting and repeating has allowed the company to see improved returns.
Seller Coverage and Effectiveness
Two of Grainger’s growth engines fall to their salesforce: seller coverage and effectiveness. Robbins said sellers are crucial to providing value to customers. Because sellers are onsite and work closely with buyers to understand their purchasing needs and operations, they can provide more value to save customers time and money.
To improve the customer experience through its salesforce, Grainger has invested heavily in customer data and technology. By doing so, Robbins says the company has uncovered previously underserved locations and sales opportunities.
In addition, to ensure sellers have the tools to serve customers effectively, Grainger has also invested in technologies that will provide sellers with valuable customer-specific information and insights.
Grainger’s customer solutions growth engine involves the teams that interact with customers but do not directly sell to them; they are the people who deliver solutions that drive real operational value.
These include Grainger’s:
- KeepStock Inventory Management team
- Safety and metalworking specialists
- Consulting teams
- ePRO and EDI teams
“These teams add value, drive returns and make Grainger very difficult to replace,” Robbins said.
Sixty percent of High-Touch Solutions 2021 revenue was from customers with one or more embedded solutions from KeepStock Inventory Management or EDI/ePro. In addition, Grainger’s focus on providing competitive, value-added services to its customers has resulted in an enhanced customer experience, with 80% of customers reporting that they are satisfied with onsite representatives.
Robbins also pointed out: “With improved customer information, we’re finding more and more opportunities to continue to embed with customers, which will drive additional, profitable growth.”
During the Investor Day presentation, Robbins spent the most time on Grainger’s merchandising initiatives. She pointed out that merchandising involves having the right product assortment that is organized, accurate and easy for customers to navigate.
When merchandising a category, Grainger teams focus on three key principles:
- Sell the products customers want.
- Organize and present products in a way that is easy for customers to quickly find what they’re looking for.
- Provide the information customers need to select the right product confidently.
In 2018, Grainger began re-merchandising their assortment to align with these principles. For instance, the company used to have 500 different types of earplugs. However, when teams analyzed the company’s product offerings, they discovered that several items had overlapping, redundant functionalities, which confused customers. Additionally, customers had reached out to the company looking for earplugs for specific applications not included in the original assortment.
Robbins said the company eliminated redundant SKUs and added products where there had previously been gaps. In addition, teams improved search functionality online and strengthened content and visuals to help customers identify products. They also provided additional copy and search options to help buyers compare products.
After improving its merchandising efforts, Grainger has seen a revenue lift of 200-700 basis points per category.
“There are now fewer calls [-8%] with questions to our customer centers and technical product teams. In addition, we are receiving fewer returns [-7%], which means customers are ordering the right product the first time more often,” Robbins said.
Custom Technology Solutions
To fuel the company’s five growth engines, Grainger has built unique software systems to help teams provide a flawless customer experience and give buyers greater value.
“The benefits of building custom software are far-reaching. This purpose-built approach allows us to codify and scale our operations, remove waste from our processes, connect team members in disparate parts of our organization and enable us to serve our customers more consistently and reliably – no matter their industry or product or service needs,” Walker, the Chief Product Officer, said.
Walker said one of the most significant benefits of building custom software is the company’s newfound ability to create data models within its own system. Curated data and technology solutions enable the company to continually improve its product and customer information and how it should be organized.
Ian Heller is the Founder and Chief Strategist for Distribution Strategy Group. He has more than 30 years of experience executing marketing and e-business strategy in the wholesale distribution industry, starting as a truck unloader at a Grainger branch while in college. He’s since held executive roles at GE Capital, Corporate Express, Newark Electronics and HD Supply. Ian has written and spoken extensively on the impact of digital disruption on distributors, and would love to start that conversation with you, your team or group. Reach out today at email@example.com.