Intelligent Growth Strategies for MRO & Industrial Distributors

The maintenance, repair and overhaul (MRO) and industrial distribution industry is massive and continues to grow at a steady pace. Despite this positive outlook, individual MRO distributors aren’t short on their own challenges when it comes to retaining and growing their market share. In this blog post, we discuss how growth is hindered in this dynamic industry and then provide intelligent strategies for retaining and growing share.

Complexity, Competition and the Skills Gap in the MRO Market

Look around any office, auto shop, manufacturing floor, building or other business and you’ll see products of the maintenance, repair and overhaul (MRO) and industrial distribution industry in every nook and cranny. MRO distributors have turned the nuts, bolts, cogs, washers, screws, and literal millions of replenishable objects required to power industries of all varieties into a formidable market force.

A massive global industry, it’s projected to continue steady year-on-year growth at a CAGR of 2-3%, according to Beroe Inc., a procurement intelligence firm, which also estimates that the MRO market will reach $657.23 billion by the end of 2024.

Despite the steady uptick, which certainly is a welcome positive outlook compared to many industries dealing with pandemic-driven disruption, MRO distributors aren’t short on their own challenges when it comes to retaining and growing their market share. There are several hinderances in play. These include pricing complexity, a highly competitive environment, and an ever-increasing skills gap.

In this blog post, we will discuss how growth is hindered for MRO and industrial products distributors and provide intelligent strategies for retaining and growing share. First, we’ll take a closer look at the unique challenges of MRO/industrial distribution.

Growth-Hindering Dynamics

Complexity

MRO distributors are typified by their large customer and SKU counts, with some boasting up to 1 million unique items for sale. SKU counts have grown to epic proportions in part due to growth via acquisition, but also due to variety of product sizes. For example, one single product type, like a washer for instance, may be available in up to 20 sizes. The good news is that inventory and availability are key competitive advantages. Having the right products when customers need them - not earlier or later - forges solid customer relationships over time.

Product and customer complexities are compounded by the many ways orders are priced which include direct bid business, system pricing, customer-specific pricing agreements and deviations or overrides of system prices. These complexities result in an environment where generating relevant prices for each selling circumstance is nearly impossible with the traditional go-to methods of generic manual spreadsheets and tools. Relying on these dated tools often results in overly general pricing, which only pushes sales teams to request more customer-specific pricing and overrides or deviations. Pricing teams then focus on compliance to system pricing, tying up valuable time that could be used devising more sophisticated pricing strategies.

Competition

Many B2B industries are plagued by online giants, such as Amazon Business. But MRO is particularly threatened, given typically small product sizes that fit neatly into small packages, which is Amazon’s logistical wheelhouse. Customers increasingly enjoy the ease of ordering online where they can compare products and pricing as well as get speedy delivery of must-have items. As such, Amazon has put MRO distributors on the defensive when it comes to providing customers with the ease of a B2C-like eCommerce experience.

Remaining competitive in the eCommerce space requires not only modern digital and operational capabilities, but also a level of intelligence in terms of the selling experience. Customers expect to see prices that reflect their unique relationship with the company, as well as a personalized shopping experience based on their needs, which is possible with the right B2B data science solutions at hand. Additionally, as global economic uncertainty remains, MRO distributors need to ensure all sales channels – online, in-person with a sales rep or otherwise – can grow wallet share, retain more customers and purchase volume, and increase the average size of each transaction from a line-item perspective.