Welcome to Conversations with Dusty, a new column in which Bitcadet founder Dusty Dean speaks with senior executives about their experience selling direct to their customers, the major challenges they face and the lessons learned along the way.
Barry Litwin is CEO of Global Industrial Co. (NYSE: GIC), a 70-year-old-plus value-added industrial distributor offering more than a million industrial and MRO products, including its own Global Industrial exclusive brands. Litwin is no stranger to running e-commerce operations at major brands. Prior to Global Industrial Co., he was CEO of Adorama Inc., a multichannel retailer of professional camera, audio and video equipment. He also served in executive roles overseeing the e-commerce businesses and digital strategy for Sears Holdings Inc., Office Depot and Newark Electronics Inc.
Dusty: Congratulations on reaching $1 billion in revenue last year. That’s an incredible milestone, Barry. What do you believe is the main driver in reaching this goal?
Barry: We operate in a fairly fragmented industry of industrial supplies. So that means there’s lots of suppliers, lots of customers and no one company dominates the space. That’s a good situation for a company like ours that wants to tighten our strategy and to start investing in areas that we think are going to be really important to customers over the next five to 10 years. E-commerce has been the backbone of our business for a long time. We’ve created a formalized three-to-five-year strategy for the company. And I think that’s given us a “north star” on where we need to compete in the market.
Customers today are looking for an online experience that mirrors their consumer experience at home (e.g., with Amazons and Best Buys of the world). I think our multichannel sales model is another big component of our strategy. That’s the one-to-one experience customers get when they work with an account manager. And that manager provides solutions and content knowledge to help them provide the right products within their facility.
Another ingredient for us has been fulfillment and distribution, which is the backbone of Global Industrial. We focus on warehouse efficiency and deploying our inventory closer to where our customers are so that we can provide more competitive freight rates, improved lead times and offer the experience that customers get in what I call the Digital Supply Chain.
Dusty: I love that. Fulfillment is such an important part of this experience. I listened to a couple of your earnings reports and you are very clear about the importance of creating a stellar customer experience. You stress that it increases the lifetime value of the customer developing brand loyalty and ultimately lowers your customer acquisition cost.
But what I find interesting is this doesn’t just end when the customer places their order — you’re also taking customer feedback and creating private-label products that you know your customers need. Can you tell me more about how you view your private-label products and e-commerce working together?
Barry: You touched on something really powerful for us. We started designing and developing our own products back in the 1980s. It’s a competitive advantage for us and a big part of our strategy as we go forward.
I think that the world is evolving more towards private-brand products, both in the retail and distributor space. We listen to the customers about how they’re using their products. We try to find some unique piece of value or area that we can develop into — that makes the product more valuable. And then we sell it at a value-based price. We’ve been accelerating private brands in general within the company. We think it’s not just a margin play, but it’s really a competitive differentiator for us, and it really creates high retention rates.
Today we have over 1.7 million products. We have a great portfolio of brands and manufacturers that we’ve worked with for a long time. It’s a really healthy marriage between the two, and one that gives the customer the best value of the best range.
Dusty: You’ve demonstrated that creating a vision for a world-class customer experience while investing in digital customer acquisition strategies can be transformative for companies. But this strategy requires buy-in from the board and the teams involved. You’ve had experience, whether it’s Adorama, Office Depot or Sears, leading e-commerce changes within organizations. You’ve been able to communicate the value of e-commerce in a way that’s really resonated with shareholders and the board. Please give some advice to the people who may be who you were 10-15 years ago, as you were making a pitch for this.
Barry: My roles in e-commerce over the years were fairly new, and it was pretty hard to get kind of a strong voice across the organization because nobody took it seriously. At the time I really thought it was going to be something as profound as it is today. And I’ve always said it’s the customer strategy. It’s really not ours. We need to pivot to where the customers buy online, and that’s where we’ve got to go.
But I think it’s the attitude and the recognition of online that’s well ingrained today. I’m sure you’re right. I’m sure there are companies that struggle with their digital strategy. They say they’re in digital, but they really are not. I think there’s levels of that. But I think in our company, particularly with Global, our board and our management team has been aligned to that for a long time. There definitely are times when you’re in there educating people about the value of investing in mobile and digital marketing and those things.
So, I think in our case, we’ve done extremely well in this area. We have a management team that understands the power of the web, digital marketing and the impact it brings to the overall customer. And that’s helped fuel some investment for us in terms of continuing to expand resources to support both our desktop and our mobile site and the technologies and capabilities that lie underneath it.
But I think to your point, it definitely requires some buy-in. People need to understand how digital ties in with the full strategy. You know, you could say you have a website, you could say you have a mobile site. But how does the actual strategy help drive acquisition or retention? And particularly with an industrial supplies company where many are multiple channels, how does that e-commerce experience help to drive efficiency in the organization? And how does it play with the other channels?
Dusty: How have you navigated your competition? E-commerce is going to compete with other channels. What’s your philosophy?
Barry: If web sales are commissionable within the sales channel, that can become very combative, right? You’re creating a divide between the two where in that case, the web is really a transaction vehicle, so it’s a really cheap one. You just click a button and check out — you don’t need salespeople necessarily processing orders manually. If you can develop the right compensation structure within your sales channel — how they negotiate and work with the website can become a tool for the sales force.
I think the days are over for companies seeing the website as competition, or thinking it is going to take over all the transactions, eliminating a need for salespeople. I think that was a lot of the fear early on, but I don’t think so as much anymore. Our website is both transactional and a way to reduce order processing costs. It also provides better choices, great places for customers to discover new items. We now have the Global Industrial Knowledge Center, which offers helpful content all the way through the purchase.
Dusty: You have over 1.7 million products. Many of them are larger products. Not small packages but large items that aren’t easy to ship. Some of the most popular e-commerce retailers have steered clear of larger, more industrial products because of these challenges. You clearly know your customers and have success shipping these larger items. How do you see this as being a competitive advantage for you?
Barry: We’ve been shipping big and bulky products for over 70 years. We actually think it provides us with a competitive advantage. Most of our core products that we sell today don’t really fit on a conveyor belt. Things like pallet jacks, floor scrubbers, shelving and racks. We ultimately want to deliver more of a consumer-related experience to customers who are buying, whether it’s a big or small item.
We prioritize quality control processes within our facilities along with strong relationships with our transportation carriers — particularly on items where you see high breakage or damage. We spend a lot of time making sure that our products arrive in good shape and not damaged. We’re really in the supply chain business. We see it as a key differentiator for us, and we spend just as much time focusing on that aspect of our business as our sales and marketing.
Dusty: There was a pre-pandemic report from Forrester’s research that an increasing percentage of customers prefer to buy directly from the manufacturer. And more interestingly these customers were willing to pay more to buy the product from them. From where you’re sitting are you seeing similar trends?
Barry: Would customers prefer to go direct versus broad line distributors? I think there’s a massive value in broad line distributors. We consider ourselves one, but we also have a hybrid nature to us that we produce our own products, too. I think we have a second arrow in the quiver, so to speak, in our global branded products. And I do think it creates loyalty.
Dusty: One last question. With the ocean freight supply chain issues that are going on right now, what are things looking like from where you’re sitting? How significantly impacted are you right now? And how do you feel about things as we go into 2022?
Barry: Well, look, I think the whole country is facing a supply chain challenge. We see it in every aspect of our lives, even things that you’re probably waiting for, like products for your kitchen have been delayed. We’re all backed up, and I think we’ve seen this develop because of this incredible snapback of post-pandemic demand, which has created a surge on the supply chain, and it’s impacted every aspect of our lives.
I wish I had a crystal ball to kind of know when this would end, but I don’t. We have manufacturers who suffered domestically and internationally for a long period of time. And just like in 2020, when we needed pandemic products, we worked really hard and found them. We’re working doubly hard this year to work through our extensive supplier base to make sure that we can get the right products for our customers. But our customers are certainly aware of the challenges. We’re informing our customers about lead times and things like that, but we’re hopeful that it starts to smooth out over time.