Grainger spruces up branches; now has retail look and feel
Market expansion expected to add $1 billion in sales
Staff -- Purchasing, 7/14/2005 2:00:00 AM
Purchasing professionals who buy maintenance, repair and operations (MRO) items at Grainger branches in certain areas of the country may have noticed that the facilities are now larger and brighter, carry more products and have a larger sales staff. The new retail look and feel is part of a multi-phase market expansion initiative that the industrial distributor embarked upon two years ago.
"Our goal is to have local businesses think of Grainger as their neighborhood re-source for the solutions they need to deal with the unexpected," said Richard L. Keyser, chairman and CEO of the $5 billion Grainger, at the company's 2005 annual stockholders meeting in April.
"Over the next three to four years, we will reconfigure our presence in key markets to expand our coverage and penetration," Keyser told those attending the meeting. "We do this by looking holistically at each market—the location and size of our branches, the deployment of inventory, merchandising and sales coverage." Already Grainger has reconfigured its presence in Atlanta, Denver and Seattle. Other areas where it's begun similar efforts include southern California, Houston, St. Louis and Tampa.
Leading the initiative is Laura Brown, vice president of marketing at Grainger. "We started two years ago by looking at ways to grow our business locally and gain market share. We developed a process to assess a market's current and potential performance. Historically, we had a tendency to look back and rank our locations against one another as opposed to evaluating customer density within a specific market."
Brown points to Houston, a market selected for phase three of the market expansion initiative, as an example. Grainger viewed Houston as one of its better performing markets and not an area that was in need of improvement. The company had reasonably high market share in Houston relative to other markets. It was a profitable market for Grainger. As a result, some company officials were asking Brown, "Why are you looking at Houston for this program?"
Houston, she explains, is the fourth largest metropolitan area in the country and is growing at a tremendously fast pace. "When we looked at our footprint there we found gaps," she says. "So, we made a fairly significant investment in Houston. Facilities that we expanded or retrofitted with new showrooms now are growing at more than 20% over the previous year. It's a great success story."
For phase one of the market expansion initiative, Brown and her team created a go-to-market plan for Grainger's locations in Atlanta, Denver and Seattle. They pitched a business case for funding an aggressive investment strategy to grow the markets to the company's executive team and later to its board of directors.
"They were so pleased with the recommendations that we are taking the initiative to our top 25 metro markets, which represents about 50% of the $100 billion maintenance supply industry," she says.
Grainger expects the market expansion initiative—along with recent improvements to its distribution center and technology infrastructures—to add an incremental $1 billion to annual sales by 2013. Already, the distributor is seeing improved results, especially in markets in phase one of the initiative—an increase of five to six points relative to the company average at the locations, says Brown.
The market expansion initiative has seven phases. Implementation takes 12 to 18 months, and Grainger is about halfway through the process nationwide. The company has completed phase one in Atlanta, Denver and Seattle and is working on phases two, three and four in other metropolitan regions around the country. "We are assessing the next group of markets which we will announce later this year or early next year," says Brown.
The team developed a prioritization process with which it ranked Grainger's top 25 markets. It evaluated each market on complexity, potential and internal capacity (local leadership, reliance on the company's distribution centers, etc.) It also looked at the last time the company made a change in the market. "It really wasn't about whether we picked the right first three locations because there was really great opportunity across the board," she says.
In many cases, the team found that while Grainger may have located branches in the "right" part of a market 20 years ago, the market may have shifted over time so that the sites are no longer easily accessible for customers. The company also may have located some facilities at the back of industrial parks where they were not clearly visible to customers.
During the first phases of the initiative, Grainger has added 25 branches, moved 30 branches to locations more accessible to customers and expanded some others. Before the initiative, the average footprint of a Grainger showroom was 1,000 sq ft. Now, the standard size is 2,500 sq ft., with some showrooms as large as 7,500 sq ft.
"The showrooms are brighter, making it easier to see products on display, and service has been improved, reducing customer wait time," says Brown. What's more, the locations now have about 20% more inventory, expanding the company's breadth and depth of product offerings.
Grainger also invested in its merchandising competencies. Brown says in the past locations were small and branch managers simply decided where to locate supplies and that seemed okay. But with these larger footprints, Brown says more thought has to go into product positioning and traffic flow.
The team also conducted an assessment of Grainger's sales force, and added 400 new sellers in all markets. "We reduced the number of customers they service, to approximately 35," says Brown, adding that two years ago the average salesperson handled 1,000 customers. The sales staff has also received additional training, part of a significant investment made by Grainger in recruiting and training over the past two years.
The team created a comprehensive marketing plan to improve customer awareness of the expansion. As such, Grainger has sponsored sporting events and added training and certification programs for customers to draw them to the new and improved locations.
Brown relates anecdotal feedback from customers who are pleased that the distributor is now in markets that it wasn't in before the market expansion initiative. "One customer was driving to a branch in Los Angeles and heard on the radio that we had opened a branch in Torrance, Calif. He turned his car around and went to the Torrance branch instead," she says. "While Grainger has the capability to meet the needs of national and large customers, we're very much a local business. We have to think and act locally as well as nationally."
Other customer studies have resulted in Grainger testing the use of bilingual customer service agents in some markets such as Houston, Southern California and Florida.
MRO buyers' 30-day price expectations
Commodities voted most likely to rise in price
| Up | Down | Same | Index | Change** | |
| Above 50=rising, below 50=falling. **From last month SOURCE: PURCHASINGDATA.COM |
|||||
| Nonfriction bearings | 33% | 0% | 67% | 66.7 | Up |
| Gears | 29% | 0% | 71% | 64.3 | Up |
| Speed reducers | 29% | 0% | 71% | 64.3 | Down |
| Valves | 27% | 0% | 73% | 63.6 | Up |
| Grinding wheel | 25% | 0% | 75% | 62.5 | Up |
| Temperature controls | 22% | 0% | 78% | 61.1 | Up |
| Lighting fixtures | 20% | 0% | 80% | 60.0 | Up |
| Pumps | 20% | 0% | 80% | 60.0 | Up |
| Lift trucks | 17% | 0% | 83% | 58.3 | Up |
| Special fasteners | 15% | 0% | 85% | 57.7 | Down |
| Lift truck batteries | 13% | 0% | 87% | 56.3 | Down |
| Test instruments | 11% | 0% | 89% | 55.6 | Up |
| Pressure instruments | 10% | 0% | 90% | 55.0 | Up |
| Adhesives | 9% | 0% | 91% | 54.5 | Up |
| Filters | 9% | 0% | 91% | 54.5 | Up |
| Seals & gaskets | 8% | 0% | 92% | 54.2 | Up |
| Lubricants | 8% | 0% | 92% | 53.8 | Up |
| Cutting tool inserts | 14% | 7% | 79% | 53.6 | Up |
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