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E-tailing Deeper Penetration Implications,
Strategies and Comparative Analysis Pure e-tailing
(e.g., Amazon)
Manufacturers
(e.g., Schneider, ABB)
Distributors and
wholesalers
(e.g., Grainger, Wesco)
Customers/
Contractors
Manufacturers have typically had an indirect relationship
with customers even built to specication products
would be sold through distributors
Consolidated supply means manufacturers have the
scale to go direct-to-customers
106 out of the 120 largest manufacturers in the segment
are selling through Amazon, and Schneider has over
20,000 SKUs available at Amazon
Distributors see their dominant position (70% of
products ow through them) at risk with the growth of
pure e-tailing players
Brick-and-mortar wholesalers are increasingly challenged
to compete on price with e-tailing
E-tailing
(pure online players
+ distributors) is
now responsible
for 13% of sales
Amazon has
77,764 listings in
wiring connectors
compared to 2,855
listings for an
average top
distributor
Industrial electrical products value chain
Grainger case study
Grainger, a Fortune 500 industrial supply company, competes by leveraging advantages in assortment
and customer experience, but pricing issues continue to cause growth stagnation and margin e
rosion.
% change in revenue (vs. same quarter previous year) -5%
0%
5%
10%
15%
20%
2015 Q3 began continuous streak of YOY EBITA margin decline
2016 E-tailing was responsible for 47% of Grainger’s sales, but pricing caused 2% revenue decline
2017 Share price went from $256 in Jan to $159 in Aug
2018 80% of Grainger’s suppliers are selling on Amazon
2010 2012 2013 2014 2015 2016 2017 2011
Source: Company nancials, Earnings call transcripts, expert interviews
Grainger’s assortment is better than Amazon’s in many categories, including specialized products. On the
customer experience front, Grainger has integrated with customer procurement systems, and tailored to B2B
workflow with knowledgeable reps (in s
ome cases with one-to-one relationships), as well as in physical stores
when product is needed immediately. Yet, to quote Grainger’s CEO, D.G. Macpherson, “You can’t keep digital
marketing if the price you feature is always higher than everyone else’s. Our list prices are too high right now,
so we’ve moderated some of those.”
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