From manufacturing to D2C: Grainger Tools Success Story

Amidst the harsh impacts of recession on manufacturers, the idea of launching a new D2C distribution channel appears to be a promising solution. However, fear of losing contracts with established retailers poses a significant challenge. Many brands are reluctant to take the risk, as retailers would definitely see the move as competition and retaliate. Grainger Tools faced exactly the same challenge in 2007. They made a leap, however, and by 2011 were named among the top-10 DIY retailers in the USA. This is how they managed to succeed.

Testing the environment

Just like every business in the US, W.W. Grainger Inc was hit hard by the global financial crisis of 2007. Loans became not that easy to obtain, hundreds of businesses, including DIY retailers who were the main source of revenue for the company were going through a period of disruption. To make things even tougher in 2008 a mortgage and real estate crisis struck which threw hundreds of thousands of construction companies (another reliable source of Grainger’s revenue) out of business.
Company’s management had nothing left but to start thinking of opening a sales channel that would be more manageable, predictable and profitable than what they had by then. They started thinking of spinning off into D2C.
And just like every manufacturer they had reasonable concerns about the whole idea. Wasn’t a rocket science to figure out that their traditional customers — big retailers — wouldn’t be excited about the manufacturer becoming their competitor, especially taking into consideration tough economic conditions the whole country was thrown into.

On the surface, they had 2 options:

  • To start selling directly to consumers little by little, testing waters
  • Or go all-in with a more aggressive approach and hope they would get a considerable market share before their ex-partners realize what was happening

Many companies would go down the first road. And most probably fail. As noobs in retail business are killed fast and efficiently by more mature players. But going all-in is still too risky as it might not pay off, and the company would become bankrupt after losing all the traditional partners and failing to gain new customers fast.

This is exactly why Grainger came up with the third option — test the whole thing in a safe environment. That is, outside their main market.

The company chose Japan as a reasonable “playground” for their D2C experiment. It was a well-developed economy, pretty close to the USA in terms of consumer expectations and behavior. And it was close to China-based manufacturing facilities, which turned logistics from a nightmare into a walk in the park. In June 2009 Grainger invested $4M into purchasing 53% majority share in MonotaRO, a Japan-based family-owned maintenance, repair and operating (MRO) supplies seller. And the life-and-death experiment began.

Fishing for customers

First thing the new Grainger management did was to assure the old Japanese team who had experience in selling directly to customers that their positions were safe.

The second important thing was to open an online store www.IHC.MonotaRO that was completely B2C (integrated in in September 2020).

 Old team suggested an interesting marketing strategy that can be described in 3 words known by every fisherman in the world: bait-hook-pull.

“Bait” was the well-known brands and products everyone was looking for. For example, a consumer was looking for Stanley Black & Decker or DeWalt hand tools on the internet. They landed on www.IHC.MonotaRO website where they were excited to notice that certain items were priced reasonably well. After adding the desired item to the shopping cart they suddenly encountered the “Hook” — an offer to buy a similar tool at the ⅓ of the price of the original one. The only difference was that the latter was manufactured by Grainger.

Quite a big portion of consumers who had high price sensitivity level saw this deal as a no-brainer and chose a Grainger-made version. After several purchases they became familiar with a brand and were pulled into its customer base. There was no specific secret behind this set-up: Garinger could afford to maintain extremely low prices on its own brands because “the middleman” or a distributor was missing in it. And they could afford to subsidize reasonably low prices on all other brands as they did not look at them as at “cash cows” but rather marketing-related expenses.


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How efficient was this strategy? Here’re some telling numbers.

A business that started with less than $1M in annual revenue in 2009 by the end of 2012 reported $120M earnings, and in 2018 generated > $1B in revenue.

In 2022 the company reported almost $2B in annual revenue still being one of the most profitable branches of Grainger business.

Going back to the US

As soon as Grainger’s team learned how to do sales directly to consumers and created a giant safety net for their US-based business, it was time to start conquering their native market. In 2012, a website that more or less copied MonotaRO’s strategy – – was launched, and the B2C brand Zoro Tools was established. Already knowing all the pitfalls and tricks, Grainger went hard on ex-partners and now competitors with a very aggressive pricing strategy. They were prepared to hear multiple curses from retailers, they were prepared for lawsuits for breaking their own MAP pricing policies. They calculated all the risks and went all in.

The strategy paid off. Already in 2012, Grainger reported record results for the year ended December 31, 2012. Sales of $9.0 billion increased 11% vs $8.1 billion in 2011. Net earnings of $690M increased by 5% compared to 2011. Operating cash flow went up 9% and reached $816M.

And mind you, that was the year when the Eurozone debt crisis wreaked havoc with the U.S. stock market, and the uncertainty around new tax regulations almost froze all economic activities by the end of 2012. “Despite a slowing of business activity in the back half of the year, 2012 was a record year for Grainger,” reported then Grainger’s Chairman, President, and Chief Executive Officer Jim Ryan. “We achieved solid results while continuing to invest for future growth due to our new sales strategy.”


The growth never stopped since then. The group’s overall revenue in 2013 reached $9B, in 2015 – $9.6B, in 2020 – $11B, and in 2022 – $15B. Several new B2C brands like Cromwell Tools in the UK were acquired. The company is considered to be not only one of the largest tool manufacturers in the world but also one of the Top-10 DIY retailers.


As you can see, their success was not easily obtained. Their secret was to be very strategic with their pricing policies in different locations and integrating price optimization into all business workflows: from marketing to purchasing competitive brands for their stores to CPQ. And this is exactly how leaders are born.

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