The distributor of industrial and construction supplies said its ecommerce sales grew 27% in the first quarter, bringing sales on Fastenal.com to a record 10% of total sales in March. Other internet-based sales, such as vending machines, bring ecommerce to 35% of total sales—a share expected to grow fast, executives said.

Fastenal Co., a wholesale distributor of industrial and construction supplies, reported solid first-quarter increases of more than 20% in ecommerce. Plus, overall safety product sales helped drive a 4.4% increase in total sales to $1.37 billion.

I see ecommerce being 60%, 70% and 80% of our business.
Holden Lewis
chief financial officer, Fastenal
DanielFlorness-Fastenal

Dan Florness, president and CEO, Fastenal Co.

Sales processed through the company’s ecommerce site, Fastenal.com, hit a new record for the website as they reached 10% of total sales for the first time in March, CEO Dan Florness said on an April 14 conference call with investment analysts. For the full first quarter ended March 31, Florness added that sales on Fastenal.com were nearly 10% of total sales, or more than $130 million.

But when factoring in other sales that Fastenal also considers ecommerce, including sales through its internet-connected vending machines at customer locations and vendor-managed inventory programs, Fastenal figures ecommerce sales are now at 35% of total sales, or $478.45 million, in the first quarter.

Amid COVID-19 pressures, ecommerce sales are on course to surge

And that 35% share will more than double, Fastenal says.

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HoldenLewis_Fastenal

Holden Lewis, chief financial officer, Fastenal

“Over time, I see [ecommerce] being 60%, 70% and 80% of our business, simply because it’s a more efficient means to procure,” Holden Lewis, Fastenal’s chief financial officer, said on the conference call, adding, “I believe we’re positioned really well for that.”

Lewis noted on the conference call that Fastenal hadn’t seen a noticeable shift to ecommerce sales related to the coronavirus pandemic. “I expect [ecommerce] to grow faster; I don’t know if COVID-19 accelerates that or not,” he said.

The company also noted in its Q1 financial statement that, because of the pandemic, it restricted access to some of its physical sales branches and closed down some of its OnSite facilities where it manages inventory at customer locations, “which negatively impacted sales at the end of the quarter and may negatively impact sales until the COVID-19 pandemic moderates.”

Fastenal also said in its quarterly financial statement that the pandemic is “shifting demand patterns to favor our low-margin products, which is producing a reduction in our gross margins.” It added that it is taking several steps to maintain financial liquidity and considering cuts to spending and hiring activities.

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Florness noted on the call that ecommerce has “been growing rapidly, as we continue to really present to our customers what the possibilities are on our ecommerce platform. And so, we do expect that to continue to be the case.”

Florness went on to clarify that Fastenal will continue to offer local service that directly engages in person with customers, and that “ecommerce plays a supplemental role” to that level of service.

“But there are customers that want to use ecommerce” for certain parts of their purchasing needs, he said. The improvements Fastenal has made to its ecommerce technology over the past three years, he added, has helped to increase ecommerce sales while also improving how Fastenal serves its customers overall.

For the first quarter ended March 31, Fastenal also reported:

  • A 10.4% increase in its number of installed industrial vending machines to 92,124 (not including more than 15,000 vending devices deployed as part of Fastenal’s lease-locker program);
  • Daily sales volume through its vending machines grew at a “low-double-digit” pace;
  • Gross profit increased by 1.9% year over year to $636.8 million, resulting in a gross profit margin of 46.3%, down from 47.7%;
  • Net earnings increased by 4.4% to $202.6 million.

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