The purpose of this short article is to give the industrial distributor the tools to grow and retain sales while competing with the giants of the industry. These titans are targeting your customers with a lot of resources at their disposal. The ardent move that put Grainger in the driver’s seat for e-commerce sales didn’t just happen, it was well planned and financed. When most industrial distributors were trying to implement an Enterprise Resource Planning (ERP) system to track sales, inventory and accounting functions, Grainger was thinking much further down the line. With a vision that websites via the internet would eventually become the source of information for decision makers’ purchases, Grainger made the commitment to allocate $125 million to develop a web-based information system.
With a world class catalog that could be found in virtually every contractor’s office, MRO site and in the industrial and commercial supply chains, supplying vast amounts of information was nothing new to Grainger. A strategy of information dissemination was king and their catalog delivered just that while also driving profitable sales with little commission or delivery costs. When the internet ‘baby in a basket’ showed up on their doorstep they welcomed it with open arms. They realized the cost savings from catalog printing and distribution and an even bigger opportunity to acquire more customers and increase the wallet-share of their current customer base.
It is rumored that Grainger now has over $200 million invested in their system and I am confident that no one there is second guessing their internet play. Reaching the status of being one of the 15 largest e-retailers in North America is more than just commendable, it is hands-down the biggest accomplishment an industrial supplier could have. As industrial and construction supply dealers, what do we learn from this? First, acknowledge that Grainger is a competitor and is spending many dollars to grow their market-share and acquire your customers’ business.
The next time you are on a jobsite, in a jobsite trailer or in your contractor’s office, open your eyes. Almost every jobsite trailer and office I have made sales calls to have empty Grainger boxes in them. The Grainger catalog is always present, and even if it is being used as a door-stop it does not mean your customer isn’t using the Grainger website to access information and makes purchases. From the e-commerce numbers Grainger is pulling, I would consider them a real threat to your sales, growth strategy, and long term success.
(Click here to read what other suppliers have done to protect their sales from the Grainger e-commerce dominance)
During the late 1990’s, White Cap was trying to develop an internet strategy and a budget to support it. When we got wind of the amount of money Grainger was investing our jaws dropped. At that time our sales were only $240 million with an advertising budget just north of $4 million. Most of that budget was used for monthly mailers and a 500 page catalog. We really struggled with what investment we should make on the website frontier. A website then had to be built from the ground up with expensive programmers and non-industry support. White Cap placed their bet and set aside $10 million but only spent $4 million; still a significant investment. The internet play was eventually defunded because of the impact of 9-11 and the uncertainty it brought to the economy. White Cap’s e-commerce development had only maintenance attention until this year. That original website was just recently replaced and at a lot less cost. What did White Cap get for their $4 million investment in 1999? A clunky website that got 30,000 visitors each month that lasted for 13 years. Just over 50% of White Cap’s biggest customers were using the site for large purchase decision making and 16% of new customers came to White Cap through web searches. Using the data of 360,000 visitors per year for 13 years equates to a per-contact-cost much less than direct mail advertising and catalog distribution with a return on investment that could easily measure new customer acquisition.
Even with the meddling of Investment bankers and non-industry management, White Cap’s sales have grown six-fold since 1999. They have always looked at Grainger as a competitor and taken the right steps to compete; and one of those steps was using the power of the internet to keep current customers and acquire new customers at a lower cost than by traditional methods of the past.
How does the smaller supplier with a limited budget compete with two behemoths on the internet? Simple; use the experience, knowledge and products from 48WS.com to grow your sales and make your phone ring first. Many of our clients use the same strategies as Grainger and White Cap for free. How can that be? Do you think that Grainger and White Cap shoulder the whole cost of their on-line marketing? The answer may surprise you. Call us to discuss.