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Grainger's New Growth

W.W. Grainger has always made full-line electrical distributors a little nervous. While electrical products account for a relatively small percentage of its $5.5 billion in annual sales, the company counts a blue-chip roster of electrical manufacturers as vendors and always seems to be a leader of the pack in the distribution field in applying the latest technologies and operating strategies to its business advancements.

While many electrical distributors were still arguing if EDI was worth the investment in the early 1990s, Grainger already had satellite dishes on all of its branches transmitting sales data back to its headquarters in suburban Chicago. Grainger was among the first in the digital waters of the Web, launching its corporate Web site in 1995. The company also was one of the first distributors in regional warehousing and as a master of in-your-face advertising, will saturate a market with radio advertising campaigns when it wants to build a presence.

In its branch-expansion campaign now rolling out across the United States, Grainger is “supersizing” many of its nearly 600 branches in key markets. In 2004, Grainger launched initiatives in 10 markets — Atlanta, Denver, Seattle, Houston, St. Louis, Tampa and four California markets — adding more than 600,000 square feet in branch showroom and warehouse capacity.

The company increased the total square footage of its branches in Southern California by a whopping 65 percent. Grainger expects the sales growth in these markets to be 5 percent to 10 percent greater than its growth in the rest of the country. For fourth-quarter 2005, the market expansion program contributed approximately 1 percentage point to the 10 percent growth the company experienced in its branch-based business unit.

James Ryan, Grainger's group president, said the expansion program would boost sales by $120 million to $140 million in 2005, and have revenues of approximately $245 million to $275 million in 2006. “By 2013, we expect this program to deliver approximately $1.1 billion in sales and $200 million in operating earnings,” Ryan said.

The newly remodeled Lenexa, Kan., branch is typical of many branches remodeled in the expansion program. The counter area of the 25,500-square-foot branch, which has seven full-time workers and three part-time employees, was increased from 700 square feet to 2,500 square feet and is painted in Grainger's trademark gray-and-red colors.

Approximately 500 customers and 15 vendors exhibiting products attended the branch's grand reopening celebration in July 2005. Says Larry Points, branch manager, “We have been serving local business customers and contractors from our Lenexa location for nearly 30 years. We're very excited about how our new showroom will help customers get the products they need more quickly and conveniently.”

The counter area's aisles utilize state-of-the-art merchandising strategies, with seasonal items in end caps to promote impulse buying, plenty of tools that customers can play with and “good-better-best” signage to help with product selections. The counters use an innovative “saw tooth” design with computer monitors recessed beneath the counter surface, eliminating the familiar computer barriers so common in counter areas. The recessed screens also allow counter workers to handle products more easily and create a more open environment. Adding to the counter area's airy feel are high ceilings and a large window along the back wall looking into the company's 30,000 SKUs in the warehouse.

Points and Kurt Norem, regional onsite services manager, say opening up the wall between the counter area and warehouse is a subtle but effective reminder for customers of how much inventory the branch stocks. They say customers can also access Grainger's formidable 250,000-SKU online inventory or 3,700-page catalog if the branch doesn't have a product in stock. Approximately 20 percent of the products that Grainger branches carry are products that you would find in an electrical distributor's warehouse. But because of Grainger's diverse market focus, the company also stocks hydraulics, safety supplies, office maintenance supplies, pumps, and many other industrial and commercial MRO products.

The company's overall sales are broken down as follows: 13 percent contractors; 20 percent commercial; 8 percent retail/wholesale; 11 percent light manufacturing; 16 percent heavy manufacturing; 17 percent government; 4 percent transportation; 8 percent resellers; and 3 percent other.

Says Kurt Norem, “If you are in business, you can do business with Grainger. As the economy and business cycles change, people change their businesses, too. Grainger can flex to that.”

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