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What impact will AmazonSupply and Google have on the electrical market? That’s a multi-billion dollar question that will attract lots of attention in 2014.
These two companies have been in the news lately because of their new interest in electrical products and other industrial MRO supplies. AmazonSupply wants to offer the “Earth’s largest selection of essential products for businesses, labs, workshops and factories.” While Google entered the industrial supply game a bit later than Amazon, it also plans to revolutionize online shopping.
Their potential as new digital channels in this market caught the attention of the 70-plus distributors, manufacturers and reps who contributed to the benchmark report recently published by Farmington Consulting Group, Farmington, Conn., and excerpted by EW in this month’s issue (See “Sea Changes in the Electrical Channel,” page 17). The list of industry executives who contributed to this study reads like a Who’s Who of the industry, and their thoughts about Amazon Supply and Google as potential competitors — or business partners — carry lots of weight. As you will read in that article, several of them are convinced AmazonSupply and Google will reshape how electrical products are sold online.
Amazon and Google may someday provide a viable online channel for manufacturers who want to market their products directly to customers and for distributors who want to utilize the online infrastructure that Amazon and Google offer (for a rather pricey cut in merchant fees) to create online storefronts, but I believe over the long haul W.W. Grainger Inc., Lake Forest, Ill., has more potential.
Grainger has made a massive investment in ecommerce and I think they will sell more industrial MRO supplies online than Amazon or Google because of a business model that blends the best of bricks and clicks. The company, which has more than 700 branches around the world and sells over a billion dollars annually in electrical supplies (no less than 15% of its 2012 annual sales of $9 billion), offers customers access to about a million products at
grainger.com. Online sales account for 30% of all Grainger sales, and the company expects web sales to account for 40%-50% of all sales by 2015. That’s an amazing statistic when you consider that very few full-line electrical distributors approach 10% in online sales.
Also of note is the fact that Grainger is not only the king of ecommerce in the MRO distribution arena, but according to Internet Retailer magazine is the 15th largest web retailer overall, with $2.7 billion in web sales. Grainger is also already #93 on the magazine’s 2014 Mobile 500. Internet Retailer says Grainger hit $35 million in mobile sales in 2013 and it will be looking at future website development with a “mobile-first” strategy. To maintain this sort of presence, Grainger continues to make huge investments in ecommerce, and Internet Retailer says in 2012 the company committed to a $40 million, four-year investment to build out its ecommerce presence.
Where Grainger really differentiates itself from Amazon and Google is its national branch network and sales team. Internet Retailer reported that 30% of Grainger’s mobile orders are picked up at one of its local branches. If customers have any technical questions they can talk with product experts, and Internet Retailer recently reported Grainger now offers an iPhone app, Live Chat with Photo, where customers can “chat with trained Grainger customer service representatives and send reps photos of products for the reps to identify.”
Most electrical distributors will eventually need to offer some sort of online shopping capability. If they want to see what it takes to run a fully functioning online storefront, they don’t need to look any further than grainger.com. AmazonSupply or Google have the potential to disrupt the industrial distribution arena, the way Amazon obliterated the channels for the sales of books, music and other retail niches. But until they prove themselves in this arena, my money is still on Grainger’s blended approach of bricks and clicks.