E-commerce is playing an increasingly important role at W.W. Grainger Inc., where pressure on pricing is pinching total sales and gross profits, company executives said today.

Total net sales inched up 1.4% year over year to $2.541 billion for the first fiscal quarter ended March 31, as e-commerce accounted for “about 51%” of total sales, a spokesman says. By those figures, e-commerce sales in the quarter came in at about $1.296 billion, up around 14.7% from about $1.130 billion a year earlier.

D.G. Macpherson, CEO, W.W. Grainger

Grainger pointed to particularly strong growth in its U.S.-based off-price e-commerce operation, Zoro.com, and its Japan-based MonotaRO.com, which are part of the company’s “Other Business” unit. Combined online sales at Zoro and MonotaRO increased 23% year over year in the quarter, CEO D.G. Macpherson said on a conference call today with stock analysts, which is available on a recorded webcast on Grainger.com.

To address customers’ concerns about Grainger’s traditionally high pricing and improve its overall competitive standing, Grainger has been adjusting pricing downward. In recent months it has issued lower “web pricing” on 450,000 SKUs available to customers who either log on to Grainger.com or call into a sales rep. The lower pricing pinched gross profits in Q1, but spiked order volume in a way that Grainger expects to continue this year at a rate of 6%, Macpherson said. “It’s a huge change for Grainger, but absolutely the right thing to do,” he said.

Ron Jadin, chief financial officer, added on the conference call that Grainger will “accelerate” its competitive pricing strategy this year to cover more SKUs and publicize the move through aggressive marketing. That will “drive faster volume growth” this year, he said.

Grainger doesn’t break out e-commerce sales by its e-commerce sites, which include its flagship site Grainger.com, Canada-based AcklandsGrainger.com, MonotaRO.com and Zoro.com. Zoro also operates a site in Canada at ZoroCanada.com. Grainger’s Other Business unit also includes online and offline sales to customers in Europe, Asia and Latin America.

Grainger’s figures on e-commerce sales don’t include sales through the company’s internet-connected KeepStock vending machines placed at customer locations. With KeepStock sales included, e-commerce accounts for more than 60% of sales, Macpherson has noted.

For the first quarter ended March 31, 2017, Grainger reported:

• Total net sales increased 1.4% to $2.541 billion from $2.507 billion.
• Gross profit fell 2.5% to $1.019 billion from $1.045 billion;
• Net earnings declined 4.6% to $182.85 million from $191.64 million.

Grainger is No.

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