W.W. Grainger Inc. reported a strong third quarter that sent total sales up 11.7% year over year to $3.37 billion. The sharpest growth came in its Endless Assortment online-only business—Zoro.com and Japan-based MonotaRo.com—which rose 12.9% to $646 million, the company said today.

Zoro, though operating in a “super-fragmented” market composed of larger online sellers, B2B marketplaces, and smaller retailers, is “growing and gaining market share,” Grainger CEO D.G. Macpherson said on a Q3 earnings call with investment analysts.

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

Macpherson attributed the growth at Zoro as well as at other Grainger properties to multiple factors, including Grainger’s ability to source products through the pandemic. He noted that Zoro added 2 million SKUs over the last nine months to expand its online inventory to 8 million SKUs with plans to expand that count to 10 million within the next two years.  Macpherson also suggested that Zoro’s SKU count could eventually reach 15 million or more.

MonotaRO, Grainger’s Japan-based operation, is showing strong growth with large customers and increased sales with them by 37% in Q3 over the year-ago quarter.

Grainger executives said they’ve managed to get through disrupted supply chains over the past year by finding substitute products if needed within product categories, while also ordering extra inventory early in the year. “We’re working with suppliers on a constant basis, taking price increases if they make sense,” Macpherson said.

Taking advantage of multichannel commerce

Dee Merriwether, senior vice president, chief financial officer, W.W. Grainger Inc.

Dee Merriwether, Grainger’s senior vice president and chief financial officer, said the company has been able to pass on increased costs “pretty effectively” to contract customers as well as web-based customers.

Grainger also noted that sales processed through the company’s inside sales team “had a nice bounce-back” this year, adding to the online sales activity. “The way we service customers in a multichannel way is boding very well for us,” Merriwether said.

Grainger said its High-Touch Solutions business, which offers more extensive and personalized services and includes its sales through its flagship ecommerce site Grainger.com and its sales reps, increased 12% to $2.66 billion.

Grainger didn’t break out total ecommerce sales for the third quarter. But it has said recently that electronic sales account for about 75% of total High-Touch Solutions sales.

In its 2020 annual report, Grainger noted that its High-Touch Solutions business includes 32% from ecommerce sites including Grainger.com, 28% through electronic data interchange and e-procurement, and 15% through KeepStock, which includes vendor-managed inventory, customer-managed inventory, and on-site internet-connected vending machines that are designed to automatically record retrievals of products by a client’s employees and trigger replenishment orders.

On the Q3 earnings call this week, Macpherson said Grainger was “investing significantly” to continue improving its KeepStock technology and operations.

For the third quarter ended Sept. 30, Grainger said gross profit increased by 16.4% year over year to $1.25 billion, resulting in a gross margin of 37.1%, up from 35.6%.

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