W. W. Grainger: A Leading-Edge Industrial Distributor1

W. W. Grainger is one of the largest B2B distributors in the world. With over 700 branch locations throughout North America, over 2 million customers, 1900 customer service associates, and a robust line of 1.2 million products (tools, pumps, motors, safety and material handling products, and lighting, ventilation, and cleaning items), Grainger is the leading industrial distributor of products that allow organizations of all types to keep their facilities and equipment running smoothly. Grainger’s objective is to grow by capturing market share in the highly fragmented North American facilities maintenance market. With sales of $10 billion, Grainger is a Fortune 500 company and a perennial member on Fortune’s list of Most Admired Companies.

• Its large sales force and product line allow Grainger to meet customer needs in a highly responsive manner. For procuring maintenance and operating supplies, the company offers multiple channels:
• Branch Network—Customers can go directly to their local Grainger location to pick up their order or have it shipped directly to them, often within hours.
• The Grainger Catalog—An icon in the industry and on the shelf of virtually every procurement manager in North America, the catalog includes over 300,000 facilities maintenance products.
• Grainger.com—Customers can access detailed descriptions and order from a massive collection of more than one million products online. The products can be shipped directly to the customer’s business or to the local branch for pickup by the customer. Grainger’s annual e-commerce sales exceed $3 billion.

Grainger represents one of the strongest brands in industrial distribution because customers believe that the firm can get them what they need, when they need it.

1Kwame Webb, “Grainger Gets a Wide Moat Rating Based on Its Network Effects and Cost Savings,” Analyst Report, pp. 1–2, Morningstar, Inc., July 17, 2014, accessed at http://www.morningstar.com on April 1, 2015.

1)Grainger performs the selling function for over 3500 suppliers (that is, B2B firms). Under what conditions might a supplier choose to bypass Grainger and sell direct to a customer?

2) Grainger is increasing the amount of emphasis it is devoting to large customers but those customers are quite demanding, posing a threat to profit margins. What strategies might the firm take to attract and retain large customers while enhancing profitability?