Systemax Inc., an industrial products distributor that relies heavily on its e-commerce channel for sales, finished the first quarter with year-over-year revenue down 2.1% to $227.3 million.

Barry Litwin, CEO, Systemax Inc.

Although revenue picked up “modestly” through early March, things changed quickly when the effect of the pandemic and “shelter-in-place” mandates disrupted its market. By mid-March, overall customer demand for the company rose as demand surged for cleaning products, personal protective equipment and other items related to COVID-19, the disease caused by the novel coronavirus.

“However, given the worldwide constrained availability of many of these products, our backlog has also increased substantially as we were unable to fulfill many of these orders, which would have mitigated other softness in the market,” CEO Barry Litwin said on a conference call with investment analysts yesterday, according to transcript of the call from Seeking Alpha. Through the final weeks of the quarter, he added, Systemax experienced “low double-digit revenue declines, which now appear to have stabilized at approximately 20% in April.”

Flexible distribution system

Going forward, Litwin said he’s confident that Systemax will get through the pandemic as it focuses on meeting customer needs through a business model built around its ecommerce operations. The company, which sells products ranging from forklift equipment to power tools and has a long history in ecommerce, operates several B2B ecommerce sites including IndustrialSupplies.com, Nexelwire.com, its flagship brand GlobalIndustrial.com and the Canada-based GlobalIndustrial.ca. In the past, it also operated retail ecommerce sites, and it now uses that business-to-consumer experience to enhance how it serves B2B customers online, a spokesman says.

“Our foundation as an ecommerce-centric business is a competitive advantage that positions us to serve customers in the current environment,” Litwin said.

“We are taking customer orders in real time, responding to and solving individual customer needs and constantly updating COVID-19-specific landing pages and emails so our customers are made aware of changing or replenishing stock,” Litwin said.

The company’s ecommerce sites play a core role in virtually all sales, as even sales handled by sales reps routinely rely on the ecommerce sites to place orders, a Systemax spokesman says.

The Systemax distribution system, Litwin said, supports its ecommerce channel with the ability to shift operations as the market demands. “As with most essential businesses, we have needed to temporarily close certain distribution centers to ensure the continued safety of our employees and perform cleaning activities,” he said. “The redundancy built into our distribution network has allowed us to reroute order fulfillment as needed with minimal delays to our customers.”

Litwin added that the company’s supplier-sourcing efforts and supply chains are “working tirelessly to secure high-demand products for medical, healthcare and business-critical operations equipment.”

A program to help customer re-open

To help customers hit by the pandemic as they plan to re-open their facilities, Global Industrial, which sells maintenance, repair and operations (MRO) products, launched last week its R3 program. The program provides “guidance on room-by-room best practices for working in the post-COVID-19 world, including product solutions for cleaning and sanitizing requirements, indoor and outdoor maintenance, social distancing aids such as signage and separators, and how to configure floor plans for everything from bathrooms and break rooms to lobbies, common areas and supply closets,” Systemax says.

Global Industrial said this week that it is also temporarily waiving shipping charges for “everyday essentials” such as janitorial and sanitation products, packaging supplies, safety products and select tools.

For the quarter ended March 31, Systemax reported:

● Net sales declined 2.1% to $227.3 million;

● Gross profit declined by 4.5% to $76.7 million, resulting in a gross profit margin of 33.7%, down from 3.4.6%;

● Net income declined by 15.5% to $8.2 million.

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