November 11 - 13, 2020
JW Marriott Marquis Miami, FL
W.W. Grainger Is Pushing Against Amazon's Rise in B2B Ecommerce
Brought to you by WBR Insights
Since Amazon first launched in 1994, it has continued to disrupt industries around the globe. From bookstores to clothing, household goods, and more recently grocery, pharmacy, and finance, there's barely a sector that isn't feeling the "Amazon effect" in some form or another - and B2B ecommerce is no exception.
First appearing on the scenes in 2015, Amazon Business - the ecommerce behemoth's online B2B operation - has grown up fast. Hitting $1 billion in annualized sales in its first year, in September 2018, Amazon reported that Amazon Business had already surpassed $10 billion in annualized sales. To put that in context, the company's retail unit took seven years to reach that milestone, while Amazon Web Services (AWS) took ten.
For industrial supply incumbents like W.W. Grainger - whose global sales amounted to $11.2 billion in 2018 - the concern is that in just a few short years, Amazon Business has grown from a looming threat to a full-blown competitor. As you would expect from the benchmark-setter of all things ecommerce, when Amazon Business launched, it promised to make ordering supplies as easy and price-transparent for B2B buyers as it does ordering trash bags and laundry detergent for consumers over on Amazon.com. And this is forcing Grainger to revamp its online strategy to keep up.
Grainger and Zoro
Speaking at the Electrical Products Group Conference in Miami in May this year, Grainger CEO D.G. Macpherson outlined several steps the company is planning to take to drive profitability and sustainable growth in the US over the coming months and years.
The first is to invest more in Zoro.com - Grainger's US-based ecommerce site, which caters to smaller businesses than the larger customers that tend to use the company's flagship website Grainger.com. The plan is to further develop Zoro's staff, improve its website features, expand its web analytics and digital marketing, and expand its number of available SKUs.
Zoro operates internationally. In addition to the US site, it also has dedicated ecommerce sites in the UK and Germany and maintains an online shop on the Zoro section of eBay Canada. Currently, Zoro.com has about 2.5 million SKUs but plans to double this to 5 million by the end of 2020, eventually hitting about 15 million at some point beyond that. The goal, Macpherson said, is to build an "endless assortment" model comparable with Grainger's Japan-based MonotaRO.com, which has well over 20 million SKUs, does more than $1 billion in sales, and is growing at a rate of more than 20%. "[MonotaRO] has 20 million items on their website, and we are making investments in Zoro to be able to expand our offering [on Zoro.com] dramatically over the next several years," Macpherson said in a conference call in January.
Modernizing Marketing Efforts and Digital Talent Investments
Other strategies include improving and integrating product and customer data to help Grainger.com customers find what they're looking for more easily amongst the millions of items available. To do so, Grainger is recruiting new digital and web technology talent to help the company's existing product experts improve online merchandising displays and the overall search functionality on the website. Macpherson said the strategy includes organizing product category assortments "in a way that makes sense" for customers, as well as tailoring Grainger.com to better service specific markets, such as hospitals, government agencies, and public safety departments.
Finally, Grainger will be looking to overhaul its marketing efforts. In the past, Grainger has largely relied on traditional marketing strategies such as its paper catalog. But as it faces the superior digital prowess of Amazon, the company knows it needs to branch out into digital marketing, internet search media, and mass marketing. "Marketing for us is a new skill," said Macpherson. "We are learning very quickly."
Such strategies have already been effective at Zoro. The business's digital marketing efforts have attracted a number of new mid-size customers in recent times. Speaking in January about Q4 2018 results, Macpherson commented: "I would say the new-customer acquisition has been very solid over the last quarter, and we expect that to continue. Most of that is acquiring new customers digitally, and then building a relationship with those customers."
It's no secret that B2B ecommerce sites and platforms are rapidly becoming key channels for wholesalers, distributors, suppliers, and manufacturers. But even as incumbents build out and invest in their ecommerce capabilities, the Amazon effect - or in this case, the "Amazon Business effect" - is setting the bar high when it comes to delivering seamless and convenient customer experiences.
Since adjusting its pricing in 2017, Macpherson is confident that with 3.5 million customers worldwide, Grainger is well positioned to remain competitive in terms of price. The challenge now is to continue to progress the functionality of its ecommerce site - along with its digital marketing capabilities - in order to improve relationships with both new existing customers, and it will be interesting to see whether its new strategies and investments will help the company achieve these goals and continue to keep pace with the rising competition from Amazon Business.
As Macpherson puts it: "When I speak with customers and team members, I am hearing that price is no longer the primary part of the conversation, and the focus is squarely on how we can add value and help our customers solve problems."
Digital marketing and ecommerce strategies are set to be hot topics at B2B Online 2019, taking place this November at the JW Marriott Marquis Miami, FL.
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