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Grainger: Growing wiser

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W.W. GRAINGER INC., which turned 75 this year, has learned that advanced technology, while crucial to success, cannot be allowed to get in the way of customers. The past few years have reminded the company to keep its messages simple and consistent, especially when marketing across multiple channels on the Internet.

Grainger, Lake Forest, Ill., is the largest industrial distributor in North America, with 2001 revenue of $4.8 billion. Founded in 1927 by William W. Grainger, the company has grown from an eight-page parts catalog to the leading distributor of supplies for maintenance, repair and operations (MRO). It sells more than 500,000 products through 590 branch offices, 1,200 sales reps, a 4,000-page print catalog, 12 call centers and an Internet site. Online sales make up roughly 10% of its total business.

Among the company’s biggest marketing challenges is finding ways to integrate its various sales channels so customers can find what they’re looking for quickly and easily, and have a consistent experience with the company.

“For many companies, buckets, pumps and heaters are not mission-critical,” said Jim Ryan, exec VP-marketing, sales and service for Grainger. “Companies don’t want to keep those kinds of products in stock, but when they need it, they need it,” he said.

An innovator from the beginning, Grainger has used technology internally to facilitate operations and externally to sell products.

“We use technology as a way of differentiating our service to our customers,” said Wesley Clark, Grainger’s president and COO.

Along the way, the company has learned valuable lessons about what works and what doesn’t work. Particularly with e-commerce, into which Grainger rushed headlong in 1996, the company has learned that less is more.

From the failure of several ambitious Web efforts, such as an online auction site, to the streamlining of its Web site in July, Grainger has realized the importance of sticking to basics. “We found that Grainger, like many others when they first started into the Web as a channel of distribution, set up different procedures and processes,” said Carol Rozwell, VP-research director at Gartner Inc., Stamford, Conn.

E-marketplace attempts

In 1999, at the height of the dot-com frenzy, Grainger set up multiple Web businesses, including OrderZone, a horizontal marketplace; FindMRO, an online source for hard-to-find items; and MROverstocks, an auction site. It also established relationships with e-procurement software vendors such as Ariba Inc. and CommerceOne, and partnered with multiple e-marketplaces.

In 2000, Grainger launched Total MRO, an online distribution network catalog, and created Material Logic as an umbrella entity for all its online ventures except the core company site.

“Grainger customers were confused,” Rozwell said. “They offered such a wide variety of products, customers needed guidance to navigate [the various online businesses].”

When customer adoption rates weren’t as high as expected and the dot-com market deteriorated, Grainger pulled the plug on Material Logic, leaving only FindMRO, which it incorporated into a service on Grainger.com rather than keeping it an independent business.

From that point on, the distributor decided to focus on its core Web site for its Internet business, making it as easy as possible for customers to use.

“We tried to take the Web site from a transaction-based world to one that accommodated the world in which the customer lives,” said Carl Turza, VP of e-business at Grainger.

To do this, Grainger.com devoted much time to re-creating the experience customers have when they walk into a Grainger branch to place an order, from selecting products in stock to specifying preferred shippers and special requirements.

It also launched a feature called Personal Lists, which lets customers set up inventory lists of commonly ordered products. And, in the latest version launched in July, it streamlined the site by taking out many graphics and other features that were slowing down processing time.

“We’re taking an aggressive look at removing anything the customer would find not to have significant value so the site will perform at a faster speed,” Turza said.

Since launching its first site with an initial investment of $5 million, Grainger has invested more than $180 million in Internet technologies. Last year it took a $23.2 million charge for discontinuing Material Logic and a $13.4 million write-down for other digital investments.

But e-marketplaces have been just one area of technology investment at Grainger.

More broadly, the company is using technology to integrate all its sales channels, so the purchasing experience is consistent whether buyers are ordering via phone, online or in a branch.

In 1999, Grainger began implementing SAP software for order management and distribution for its branches, and in 2002 integrated the SAP architecture with its e-business. Now, Grainger uses the SAP system and proprietary software to manage inventory and order transactions across all channels. It will soon implement a CRM module, based on SAP software, to further integrate customer data into its marketing channels.

“They have done a good job integrating the different channels,” said Gartner analyst Rozwell. “The other thing they’ve recognized is that they’re dealing with people who maintain facilities. They don’t need bells and whistles. They need a way to quickly get things handled.”

Old fashioned event marketing

To reach customers and prospects, Grainger will spend more on marketing this year than it did last year, although it declined to reveal its marketing budget. Ryan said most of the marketing dollars have been consolidated into event marketing.

That indicates a big shift away from trade advertising. In 2001, Grainger spent $1 million on b-to-b magazine advertising, down from $4.9 million in 2000, according to data from Taylor Nelson Sofres’ CMR. The bulk of Grainger’s marketing dollars will be spent on sponsoring NASCAR driver Greg Biffle, who will move up from the Busch Series to the Winston Cup Series in 2003.

Grainger has sponsored Biffle since 1998, when he drove for the NASCAR Craftsman Truck Series. “One of the biggest challenges for us is getting our message through to the people who maintain facilities,” Ryan said. “With the economies of advertising and marketing, for us to get to 2 million businesses [the number of Grainger customers] is very expensive and cost-prohibitive.”

That’s why sponsoring the NASCAR driver makes sense, Ryan said. The demographics of race enthusiasts map closely to the demographics of buyers of MRO equipment, he said.

“Valuewise, the number of exposures we get from NASCAR is as good or better than any other advertising we do,” Ryan said. “It helps us integrate all of our channels.” And that helps drive more business for Grainger.

How Grainger’s systems rallied on Sept. 11

The Port Authority of New York and New Jersey, which operates the World Trade Center site, is a customer of Grainger.

“When Sept. 11 happened, the head of purchasing for the Port Authority got off the 70th floor [of the WTC], took out his cell phone and made two phone calls,” said Wesley Clark, president and COO of Grainger. “The first call was to his wife. The second call was to Grainger.”

Grainger got to work immediately sending supplies to help with the rescue effort, from hard hats to rubber boots to pry bars, Clark said, even hand-delivering a hard-to-find electrical device for a phone system after having the part flown on a company plane to New York.

“Sept. 11 was a real galvanizing event for our company,” Clark said. “We took our company and pointed it at helping Manhattan get back up and running.”

By Sept. 14, Grainger had delivered 150 truckloads of inventory to Ground Zero. Clark attributes the fast response to Grainger’s network of 1,200 suppliers, its branch offices across the country, a state-of-the-art inventory system and a customer-centric philosophy. —Kate Maddox

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