All of the bags are going to be sent over to the Granada Room, which is where we've had lunch the last couple of days. And so to the extent that your flight is a little bit later in the day, if you could kind of pause for a second while folks are trying to get out of here to pick up their bags, that would be much appreciated. So hopefully, that is pretty self explanatory. All right. So with that, I think we're ready to go.
The next presentation. So happy to have here today Granger, DG McPherson, Chairman and CEO, took over as CEO in 2016.
I know, DG, you've got
some slides that you want to run through, so take it away.
Terrific. Good morning, everybody. I have with me Irene Holman, who's the VP of Investor Relations. If you haven't met Irene, I think most of you have. So before I get started, I have the obligatory forward looking statement.
I will be talking a little bit about the future today. So with that, let's get started. So I would say that our top priority far and away our top priority is how to drive profitable, sustainable growth in The U. S. And that includes both through the Grainger brand and through the Zoro brand.
And today, I'm going to talk about where we're putting our energies and our focus over the next three to five years to make that happen. There might be some new things here. I know there's a lot of interest, I've been told from some of you already in short term trends. You've already heard from about 20 of our customers at this. So yes, don't know that I would offer anything new to that, but we can talk about that afterwards if you're interested.
So many of you know us pretty well, but I did want to take a moment to describe who Grainger is for those of you who don't know us. So our purpose is to help keep facilities up and running and their people safe. We simplify that in terms of helping businesses stay working. That's effectively what we do. Now we serve 3,500,000 customers across the world.
We do that through, I guess, you include all of MonotaRO's products, 23,000,000 products in our assortment in aggregate. So there are many, many items that we serve. The good news is it turns out that that's a very difficult problem to solve, matching products to customers in our space, which is why we talk about things like product information and customer information and search so much because depending on the type of customer you are, the product needs you have will be very, very different. Our customers are pretty much any customer. So manufacturing plants, schools, military bases, hospitals, we serve them all.
And we do that through two business models. Our first business model, we call the high touch solutions model. That typically falls under the Grainger brand in The U. S. And that's really focused on serving complex customers and complex customer needs through a team of experts in what we'll call curated digital experiences.
I'll talk about what that means a little bit later. So that's one model, and that's our traditional model. The other model we have is the endless assortment model, and that's where we serve customers who have more simple needs through a streamlined and transparent online relationship. Now we launched this model in Japan in 1998 under the brand name MonotaRO. The partnership was with Sumitomo.
That business is now over $1,000,000,000 growing 20 plus percent. It's valued at $6,000,000,000 on the Tokyo Stock Exchange. So that's been a pretty successful start up venture with that business. We launched that business in The U. S.
In 2011 under the Zoro brand, and that business this year will be $60,000,000,650,000,000 plus in revenue. So seeing similar results in The U. S. And we'll talk about what we're doing to make sure that, that business can continue to grow profitably today, and I'll spend some time on that. So before digging into the models, I think it's important to understand the extent to which we have transformed, strengthened over the last four years.
I think it's this is an important slide today because I think given the price change, that took up all the air over the last two years. All the air for you, almost everything that was written was about the price change. And certainly, the most visible change we had over the last two years was changing our price structure. But we've changed almost everything in the business over the last four years. We've verticalized our sales force.
We've added an inside sales team that is focused on midsized customers. We've centralized off our call centers out of the branches. That enables us to have better service and to scale as volume changes occur. We've restructured our keep stock, that's how we help customers manage inventory, our keep stock program, focusing more on the best opportunities and building new capabilities around managing the entire suite of inventory. Oops, got overly excited there, sorry about that.
And we've done all this in The U. S. By adding by still adding capacity in the supply chain, improving our website and improving our cost structure pretty substantially. Now all of that would be challenging for any business. And certainly, not all of that went perfectly.
Some of it went very well. Most of it went pretty well. But there were instances where those changes had a significant impact on our growth rate over the last four years. The good news, I can confidently say that we are through the vast majority of those changes. We are stronger, we're better.
Our customers are telling us day in and day out that the service we provide in The U. S. Is unmatched. And we feel like we can now turn the page in The U. S.
And really start focusing on growth. And so I'll talk a lot today about what we're doing to drive growth and how that might look a little bit different than what we've talked about in the past. I would also spend just a moment on Canada. Obviously, that's been a very challenging situation. We've completely replumbed that business.
I've been with some customers in Canada over the last few weeks, and we are starting to see service get not only stable but improve. We're hearing some good things from our customers. We feel like revenue is stabilizing based on what we're seeing. That said, there's still a long ways to go, and we know that. We feel like this business, given all the changes we've made, if we can get growth off of the base, is going to be very strong, very profitable.
So we're excited about the path. I would also comment on what we've done in the international portfolio. We have shared about eight different businesses over the last five years that were either unprofitable or we didn't have a chance to create a competitive advantage. The portfolio we feel like we have now is meaningful, it's material and we think we can create a competitive advantage through that portfolio. So we're pleased with the progress we've made certainly, but we also recognize that now we are in a position where we have to grow off of what we have, and that's going to be pretty much the entire focus of this discussion and what we're doing going forward.
I thought I would spend just a moment talking about the way we define the market. It's always difficult to define any market and figure out what it all means. But this is The U. S. Business to business supply market.
You can see that it's $1,200,000,000,000 That is a big number. I'd start to the right, direct spend for products used for OEM new construction, 700,000,000,000. We pretty much don't care about that. We don't pay any attention to that at all. So that is not part of where we focus.
If you go to the left, the $133,000,000,000 market, which you've heard us talk about in the past, is our products to our types of customers. So that's generally the way we define the market. And in the middle, about $370,000,000,000 are indirect categories or specialty products that typically Grainger does not carry. I'll talk about this in a little bit. More and more, Zoro is, in fact, carrying these products and looking to expand in that space.
So let me start by talking about The U. S. Grainger business. So in order to gain share, we are focused on a set of initiatives that are pretty basic, but we think are pretty powerful, and I'm going to talk about those. We put our priorities in three buckets, and I'll decipher some of the code.
The first one is advantaged MRO solutions. And for that, that really means helping customers find the solution quickly and easily. And so that a lot of that has to do with having the absolute best product information in the world and the absolute best customer information for our customers and marrying those two. I won't go through a lot of detailed examples, but if you search for products in our space, you will find it very difficult to find industrial products if you start putting industrial product names in a search bar. That is not an easy thing to do.
And so our effort here is to make sure that we have digital experiences that reflects the products we sell and the customers that we serve. And I'll talk about that investment in a minute. The second pillar is differentiated sales and services. The reality is over the last twenty years, the battle for complex customers has shifted entirely to their place of business. So having teams of sellers who can solve customers' problems and service team members that can provide services that are value added is absolutely critical and will continue to be critical going forward.
And then the last priority is unparalleled customer service. This is one that we do well today. I'll talk a little bit about this later. But this means everything about serving business customers from making it easy to order to getting the product fulfilled to making it easy to pay. We are focused on that every single day and that's absolutely critical to our success.
So let's explore each of the initiatives that we have. We tend to think about what we're investing in and doing in two buckets. One is foundational elements that help keep us competitive or enable the growth initiatives to happen and the other is incremental growth initiatives that actually help us gain share. And as I've mentioned before and I'll mention again now, our goal in the Grainger brand is 300 to 400 basis points of share gain each year. That's what we're shooting for.
Whatever the market is, and the market obviously can fluctuate, but our goal is to gain 300 to 400 basis points of share each and every year. So let me talk about advantaged MRO solutions first. I mentioned the product and customer information. We are investing very heavily. So we've talked at times about digital investments.
I would say the biggest digital investment we have right now is making sure that we have product information that is an advantage and customer information that is an advantage. And that means everything for making sure we have the right product hierarchy, making sure we have the right search algorithms, all of that around the product. On the customer side, to give you an example, if you take something that should be relatively simple, a school district, a school district might have 19 buildings. That would be reasonable. In our system today, we use accounts as the basis for what we use and account for us.
We might have two accounts at that school district. One might be the maintenance shop and the other might be the district office. And oftentimes, we don't have the ability today to see the entire customer
to be able
to market to what might be janitors or other people, maintenance grounds maintenance folks that we should market to. So what we're doing is going through and replumbing our customer information, so it actually reflects how we think about our customers and allows us to do the things to grow. So that's a huge investment for us right now. We're in the midst of making that investment. We're also investing to make it easier to search off the current information that we have.
A lot of that has to do with search terms and making sure we're linking search terms to the proper assortment of groups. And those investments are very important. We've seen pretty significant progress over the last year from a customer perspective in terms of getting our website to have better search. We hear that things are better and continue to get better, which is great. In terms of marketing and the foundation, I would make the point today that marketing for us is a new skill, almost entirely new.
If you looked over the history of Grainger, we have had marketing departments over the last thirty years that have been mostly focused on the catalog, frankly. And oftentimes, they churned, the departments churned very, very frequently. So we're really kind of new to this space. We have a very strong team that we've put in place that is testing, testing what to do with the catalog, digital search, digital marketing, what to do with media, what to do with mass marketing, what to do with pamphlets and those types of things. We are learning very, very quickly.
And building that capability is foundational to us to being able to continue to grow over time. Now to accelerate our growth, on the right side, there's two things that we know. We've learned a lot from marketing. We've learned that we can spend more on digital marketing. A lot of that has to do with the price change because when we are now appointing customers to prices that make sense, we're getting more click throughs and we're getting better conversion rates.
So we're increasing our spend in digital marketing and we're increasing our spend in traditional marketing, particularly radio, which you may have heard some of our ads. The point here is that is incremental spend and that's going to add significantly to our growth rate over the next three, four, five years. So we're pretty excited about what we see there. The second thing I'd point to, and it's new, although it's not fully new, is around merchandising. So we have always had category reviews.
And you've heard about category reviews probably historically in different contexts. Sometimes it's been cost. We do category reviews and we get the lowest cost. Sometimes it's been around expanding products. We have really doubled down this year on making sure that we have a much stronger merchandising capability.
We've got a lot of new talent and we've got a lot of our strongest talent from the past that's really working hard to make sure that we have the right assortment and that it's presented the right way to customers. That sounds like something we ought to have been good at and we haven't been bad at it, but we think we can take it to the next level. So let me give you an example here. Hearing protection, earplugs maybe is one way to think about hearing protection, but there's also earmuffs. There's all kinds of options.
We recently went through an effort to look at hearing protection as a category. We took voice of the customer, went and visited customers. We took our technical product support team that deals with requests every day, reviewed all of those thousands a year. We went to our branches, we went to our sales teams and we developed a perspective on what was going on with the hearing protection category. It was interesting.
We learned that we needed to fill some gaps in hearing protection. We had redundancy in some places that didn't make sense. And we had not organized the category in a way that made sense for our customers. So we've now changed that. We've gone live with that and there's been a significant revenue lift off of that.
I don't want to tell you what it's been right now because we're now starting other categories. I'd like to get more than an end of one done before we can really talk about what it means. I will say, however, that we've now gone through another 20 to 30 categories. We feel like we have a great opportunity to improve the assortments, to improve the way that assortment interfaces with the customer. By the end of this year, we will have implemented about 10% to 20% of the assortment in the new process.
So this is actually a big deal, and we think we can drive growth consistently over the next three or four years through this process. Let me now switch to differentiated sales and services. So foundation for us here, CRM, we've talked about putting a new CRM in, making sure that our sellers have the right information when they show up to visit a customer. We continue to work every day on how to leverage that CRM system to make sure that we're pushing the right information through. That's really, really important.
We're also increasing our efforts to serve specific markets. I'll give you a couple of examples from the past. One is around hospitals. So obviously, hospitals is an important category for us. Our improvement in hospitals over the last five years, and we've gained share very quickly in hospitals, has been largely the result of getting sellers trained on hospitals, what matters in hospitals, getting some products added, getting some services specific to hospitals implemented.
So that's an example where we thought from an industry perspective what should we do and driven some share gain there. We've also done the same thing with public service. We've added some products around public safety, and that's helped us grow with local and state and federal government agencies. And in each case where we've done this, we've seen nice lift. We are now industrializing this process where we're looking more and more at different segments where we have an opportunity to improve the services we offer, to improve the training we provide to our sellers and to improve the products that we have to serve different segments.
So you'll start to hear more about that going forward. We think that's going to be a big lever for us. Also foundational with this is really the effectiveness of our sellers. Our sales force has spent a lot of time over the last couple of years talking about pricing, as you might guess, and making sure our customers understood the benefits of that. Now that we're past that, they're really able to focus on things that drive growth.
All of our sellers in North America have been trained on value based selling in the last six months, and we're starting to see the benefits. We're tracking new contacts. We're tracking new opportunities, and we're starting to see the pipeline look really, really good with our sales force, and that's really important. In terms of inventory management, what we call keep stock, we've gone through a significant process over the last couple of years to make sure we were targeting the profitable opportunities. Now we're really turning our attention to building new capabilities and driving growth through inventory management.
More to come there, but we're really excited about what we're seeing. In terms of an incremental perspective, we're expanding our service offering. We have a bunch of services, whether it's environmental services, safety services. One example here is our aging building and systems offer. Here we're helping customers extend the life of existing buildings and systems.
That's really important in The U. S. It's really important pretty much in any developed economy. And what we find is that customers really value us bringing them solutions like this and we have a great opportunity to add more and more services as we go. We're also looking at expanding our sales force in targeted areas.
This isn't going to be a big sales force add like we've had at times in the past. But we are looking we have certainly we know that having a talented sales force that's interacting effectively with our customers on a day in, day out basis is absolutely critical. And we're really looking at where we can add targeted seller investments and we're going to start doing that, and we're seeing some benefit there. We've seen real benefit with our inside sales team in taking a set of customers that were shrinking and now they're growing substantially. So we have opportunities like that to add sellers.
I wanted to spend just a moment on corporate accounts. Corporate accounts, I think this is the group probably where we've spent more time working with the price changes than probably any group because all corporate accounts are on specific pricing agreements. So we spent a lot of time talking to them about pricing. The good news is we're through that. And now we have a chance to be much more aggressive, much more focused on driving growth with corporate accounts.
And the team is starting to build the pipeline for how we need to go about doing that. So we're pretty excited about the ability to add corporate accounts. We know that when we help customers with product usage, product substitution, inventory management, they will consolidate with us and we can grow. And that's really what we're focused on doing. So our expectation is that the additional services, the additional sales adds and the corporate account focus will add significantly to our growth rate over the next three to five years.
And then the last pillar for us is unparalleled customer service. Here I'd focus on two areas. The first is on delivering a seamless customer experience. We've improved our order to cash first pass yield by about 300 basis points over the last year. We'll improve it about 400 basis points this year.
So we're really starting to get benefits out of the work we're doing. Our customer satisfaction right now and our feedback is the best it's ever been. We continue to get better. We're going to continue to invest in that. And then I would say from fulfillment, we are designed our fulfillment process a little bit differently, a lot differently than most.
We have 600,000 items in stock today. So if you order five items for an application, you're more likely to get them all shipped today and delivered tomorrow in one package, and that's really important for our customers. With Louisville coming on in 2020, we'll be able to stock 800,000 items. And we know that when we stock more items closer to customers, we see a revenue bump. So we're pretty excited about that investment coming on next year.
So lots of good things. We think all of them will help us grow that 300 to 400 basis points. I would make one comment just on sort of historical growth. So if you took a forty year history of Grainger and you looked at our share gain, you would see share gain from slightly negative to 300 basis points during that period. When we have grown at the 300 or above, it has been because we've been adding customer touches consistently and adding products consistently.
And all of what we're talking about here is that, marketing touches, adding sales touches, adding service touches, adding products, improving the assortment, improving the experience for customers. So we feel pretty confident in that 300,000,000 to 400 number over time. And these are the things that we're going to do to really make sure we get there. Let me switch gears just for a moment. I'm going to talk about Zoro.
I mentioned Zoro is the endless assortment business in The U. S. As a reminder, this business competes very differently than Grainger does. It is a business that is has an endless assortment, and by endless assortment, we mean pretty much endless. MonotaRO has 25,000,000 items roughly now in the assortment or they will by the end of the year.
Zoro has $3,000,000 now have $3,500,000 by the end of this year, and they're going to just step on the accelerator. There's no on-site presence here. There's no sales team. There's no services team. They provide customers with a consumer like simple and easy transactional experience.
We're making investments this year. And I would say this is similar to what we did with MonotaRO at this time in its lifespan, so about six years ago. We're making some investments to make sure that Zoro can compete and grow going forward. We're aggressively expanding Zoro's assortment well beyond the $133,000,000,000 market. That means that we are going to be adding suppliers for Zoro that are outside the Grainger portfolio.
So as we go forward, Zoro will become less reliant on Grainger's fulfillment as the only option to fulfill product to customers. That means adding distributors and manufacturers, and we're well on that on the way to that process. That which I think is really an important point. We've got a really good understanding of what happens when we add products both to MonotaRO and Zoro, and we're pretty excited about being able to accelerate our growth when we get through the changes we're making right now. We're also investing in systems and people so that Zoro can be more independent.
They can be much better at marketing, much better at they're going to have total control over adding their own products. We typically have Zoro have had Zoro and Grainger more linked. They will become decoupled and Zoro will be able to do what it needs to drive growth going forward. So we think that we can get to, like I said, 3,500,000 SKUs by the end of this year. I wouldn't be surprised if we're closer to 5,000,000 at the end of next year.
So we're really pushing hard to make sure that we grow the assortment and the capabilities at Zoro. Now when you have $5,000,000 $20,000,000 whatever the number of SKUs is, you cannot provide the level of curation that we talk about at Grainger. You just can't do it. There's just no way to be able to have that level of curation. So we leverage analytics and algorithms to provide the customer experience that we want to provide.
And one example of that is landing pages. So our team in Japan has been working with our team in The U. S. To teach them how to develop algorithmic landing pages. These are pages that guide you from a search term to the Zoro site or the MonotaRO site.
MonotaRO has hundreds of thousands of these today. We now have a couple of 100 a couple of thousand of these in Zoro, and we're seeing very good results with this. And the point here is that there are different ways in this business model that we use to make sure that we get traffic in, convert them to customers and then develop the relationships after that. And we are working very hard on those tools to make sure that Zoro has the capabilities to grow going forward. We expect this to be we know it's going to be a significant drag on profitability in Zoro this year.
We've talked about that. Most of the investments will be made this year, and we expect significant growth and profitability improvement starting next year. So these are not multiyear investments. These are investments we're making right now, right in the middle of it to make sure that we're stronger going forward. So I'd like to spend just a few minutes on close here around my thoughts on culture and talent.
Our ability to execute on this growth is going to be based on our ability to have the right team and the right culture. We have a very strong team, solid reputation for service. You'd be hard pressed to find a better group of people that are focused on serving customers than you would find at Grainger. I would say, however, that historically, we've been a little bit passive in terms of growth. We tend to be an organization that builds the mousetrap and waits for customers to call.
We're going to have
to make a little bit of
a shift here, and we're really talking about how to do that so we are more aggressive in driving growth and driving top line. We're pairing our passion for service with a new focus on growth. And our team, as we start to talk about this, is really excited about that. We know that in order to achieve objectives, we're going to have to make progress more quickly than ever. My team is working very hard on removing bureaucracy and increasing the speed of decision making.
In a company that's been around as long as ours, that is not trivial to do, but we are making progress and we will continue to make progress. Now part of that progress happens as we add to our talent pool. For example, when I talked about reimagining product information or search, that is a capability that requires team members to really have great conceptualization skills, handle ambiguity, iterate. That hasn't typically been how we've hired. And so we've brought in some new folks that are very strong.
We've paired them with some of the great people at Grainger who really understand our business. And that has been very helpful for building the design for the future. We have to continue to bring in new talent, pair them with people who understand our business to get the results that we want to get. I would say additionally, we're rethinking how we house and locate people to make sure that we drive the right culture. We've done two things over the last year.
We've run about 500 customer facing team members in from the field into our headquarters building, which gives our headquarters feeling a completely different feel, and it gives people the chance to link into calls every day to understand what's going on with the customer and that's very purposeful to make sure that we are very focused on the customer. We've also started a new site in Downtown Chicago at the Merchandise Mart and that houses about 800 of our technical folks. That community community is very important there and the merchandise margin center of tech in Chicago, and it gives those team members a community to work with, and it's really a great environment for us to build for the future. So we're very excited about those changes. So this is an exciting time for Grainger.
We've accomplished a lot over the last few years. We are not where we want to be. We really we're focused now on growth, and we're turning the page and focusing on how can we grow the business. That's a set of initiatives that aren't all that complicated, but they're hard to deliver, and we're going to focus on delivering those. And I think we're all energized by what's ahead.
And if we stay focused on what we have to do, we feel like we can gain share consistently and add to the bottom line. So that's really what we're focused on. So with that, I'll open it up for questions. You've led a pretty interesting turnaround. It's been quite dramatic for the last few years.
But one area that's been still kind of struggled is anything outside of The U. S. And you look historically at Grainger every time you guys have tried to other than Japan, obviously, tried to go outside of The U. S, it's been tough. Are there lessons learned that would allow you to go back into those markets at some point down the road?
Or has that ship basically sailed at this point? So for the if you didn't hear the question, what have we learned from international and would we be going back in? So I think we've learned a lot, not international operations, but about acquisitions in general. If you think about Canada, which is probably the most extreme example, we bought the company, never integrated it and now we are, I guess, is the way to think about it. I think what we've learned what I've learned personally is that when you buy a business that is smaller in a different country, oftentimes the paradigms that we have at Grainger don't mesh very well with the paradigms that that business have, particularly at the customer interface.
And so it's been very difficult in some cases to get to make the changes that we would typically make to drive profitability and the right growth in that company. There just aren't that many attractive options outside The U. S. For us in general. And so I would say that Fabry is performing well, reasonably well now.
Obviously, MonotaRO is performing exceptionally well. The UK is an interesting one right now. We are seeing really nice growth in our Zoro U. K. Business, like really nice growth and interesting profitability too.
So there may be something there that interesting. I would say we aren't really looking to necessarily go back into those places right now. We would we're going to see if we can make The U. K. Successful and we're not really looking for other acquisitions.
We've got plenty of growth in The U. S, in Canada, in Mexico and North America. And then with Japan, obviously, we've got great growth opportunities. So we feel like we're where we want to be, and we need to make it successful where we're at. Just as a follow-up.
When you think about your cost structure, you used to be you used to talk a bunch about private labeling and other ways you can drive up margins. And are there initiatives still going on in that front? I don't think you mentioned it in the presentation. Are there other things you can do on the cost side that could help get gross margins to start moving back up again? Yes.
So I think that the thing we're doing when I talked about the merchandising change, that will directly feed into the private brand discussion. If I were to be self critical, I would say that we have at times been focused on initiatives like private brands without saying, well, what's the right assortment for the customer and then what private brands do you feed in. So I think we'll improve growth and profitability if we get the customer assortment right first and then feed that in and the team is working very hard to make sure that we're infusing private brands at the right time.
Hey, DG. Could you update us on the impact of tariffs and what you're seeing in your businesses, maybe large versus medium? In the first quarter, guess, growth disappointed a little bit. Then you talked about price adjustments to medium. Has that in turn helped medium of late?
And then now we've got tariffs back in the 25%. Does that mean your margins are going be under pressure again in the short term? Like what's going
Well, I wish I could tell you exactly what's going on with all that. We are trying to figure out exactly the impact of the tariffs on the new announced tariffs on us. We don't think that they're going to have a huge impact on us given what we've seen. And there's a couple of reasons for that. One is the way we manage costs with our suppliers, we think will mitigate that a little bit.
The other is a lot of the products aren't necessarily relevant to us. We also have alternative sources in some of the cases. So we're working very hard to make sure we've got the right assortment for our customers. I would say that our goal is to gain share without talking about what's going on in the market right now. You know as well as we do what's going on.
I would say that we're pretty happy with what we're seeing from some of our marketing investments around midsize customers. We still think there's a great opportunity to grow and the long term prospects are really strong.
Sorry, just to clarify. So I wasn't talking about the list before, was talking about back to '25. Like I think you guys had planned at '25 and then somehow you would begin lowering prices and that's what's happening on that front?
Yes. We're just looking very closely at what's going on and making changes. We'll make changes if we need to make changes. We're looking at the competitive environment. From a philosophical standpoint, our pricing is now set in terms of market price.
So we are looking very closely at a band of competitors and making sure that we are competitive on pricing. We will continue to do that. And we aren't sure how long it's going to take for the new tariffs to flow through, whether they'll stick. We're watching that very closely is what I'd say.
Okay. And then what about same day shipping as a competitive dynamic in this industry?
Do you mean same day shipping or same day delivery? Because we same day ship almost everything we do already.
I'm sorry, meant delivery.
Delivery, okay. I would say that for our customers, we've run a number of trials. If you order something in Chicago by eleven, you're very likely to get it same day today where we have our distribution centers. So we do same day shipping quite frequently. For our customers, it's not doesn't appear to be all that exciting for them.
There's a couple of reasons for that. One is in the industrial space, whether you're a school or anything, if you order something at one p. M. And you deliver it at 04:30, they may not be there. And so we need to make sure that we can actually deliver what we have.
And so run a bunch of tests. I would say we are very capable of doing same day delivery where it makes sense. We do it every day many, many times, but it's not a real exciting thing for most of our customers today.
Do you have to spend a lot of money to
come out? No, actually, it's every bit as cheap to do it out of big DCs as it is to ship next day.
DG, so the trends in April, we've seen so far have been pretty kind of lumpy. Big box volume is pretty good, industrial not so good. So just give us a lay of the land in terms of what you're seeing in maybe April or May so far? I have a lot of questions Zara.
Yes. So I think we're I'm not going to spend a lot of time talking about sort of daily trends or what we've seen. I would say that you've seen most of our customers describe it and the way you describe it is the way we see it too. So yes.
Good. And then on Zoro, expanding SKUs from three to, I don't know, 15 all the time, Is that sort of scale? High
aspirations, yes. Yes. It sounds like it's a quite
a drain on working capital. And if you're going to be building DCs separate from the Grange network, obviously, CapEx drain as well. Drain, not the right word, investment. But can you maybe kind of scale and size the investments that you envisage in the next two or three years for Zoro? And then if you're going to be moving into construction trades and sort of nontraditional MRO sectors, would you consider doing that via acquisition instead of organic investment?
So we are not going to increase our working capital as a part of what we're doing. So we're actually using third party shippers for most of what we're doing. So we don't intend to build new distribution centers to house product that we don't typically house. And that's exactly what MonotaRO does to build to. They have a core assortment in their warehouse that is for 400,000 items and they have 20,000,000 items that they use third parties for.
So and we would no, I don't think we think about acquiring necessarily and that's certainly not for Zoro, given what we're doing with Zoro. Yes. Morning, DG. A couple of weeks ago, I had the opportunity to take a group of investors into your headquarters on a visit that Irene had set up. And we met with one of your top IT folks who did a demo of the new search engine.
And I think you touched on it in your prepared remarks, but if you could just expand on this because what you all were showcasing was very simply showing search on your new engine and what it would give in terms of very intuitive, helpful selections versus not surprisingly showing what that same search on Amazon Supply would give you. And just there's been a ton of work on your part to be able to simplify, make it intuitive and narrow down searches, and you referenced the ability to search on industry terms and jargon. Just if you could flesh that out more, that would be helpful. Yes. So and it goes back to when I talked about product information and customer information.
So there this will sound like a goofy example, but if you're buying a flashlight, if you're a janitor, pretty much any old flashlight will do. If you're selling a flashlight into a mine, it has to be explosion proof. And so what that team is working on is making sure we have the right information, making sure we have the right collections and we're matching it to the customer terms and the customer information in a way that we actually tee up items that make sense. That is a much harder problem to do. It requires both strong algorithmic work, but also very strong personal intelligence work to make sure that you organize the data the right way.
So that team is working on that. It's going to be something we work on for years. It's a space that we have to win at. We have to have more expertise on our products and our customers than our competitors do. And it has to be a basis of competitive advantage.
You just saw I think some good examples of that and that's an area we're going to continue to invest in.
Good morning, DG. I want to touch upon your targeted seller investments. Could you give us a sense of the number of headcount additions you're targeting, maybe any specific areas of your business that you think that investment would be valuable in? And further, investments expected to read through to your 300 to 400 bps of outgrowth target this year? Or is it more of a longer term opportunity?
So they will have very little impact this year because we haven't added that many folks. So what we've learned about seller additions is we've historically had periods when we've added a whole bunch of sellers. And that has been challenging for two reasons. One is when you add that many sellers, training them is very difficult to do. The other is probably more important.
When you add that many sellers, you end up disrupting coverage for a number of customers. And so what we're doing now is getting on a very small add every year where we're going to add consistently to our sellers every year. Some of that may be in inside sellers. I think right now we're talking about adding some inside sellers to cover uncovered midsize accounts. So that would happen this year.
We would expect it to add to our growth starting next year, but not much this year. And it won't be a big expense like you've seen in the past from some of our efforts, but it will be a consistent add.
Great. And then I just want to touch on the typical heuristic you have of growing sales 2x that of SG and A. When I think about Zoro making it more and more of your business, I would presume that its leverage is much more attractive than that headline metric would suggest. So I guess what is the opportunity for Zoro to potentially augment your ability to lever SG and A?
I would say when we talk about growing sales two times SG and A, there's two reactions to that. One is, I think that's probably great in a normal market growth period. It's sort of two times it doesn't always work if it's fast growth or really slow growth. So but I think generally growing SG and A slower than sales is important and I think we'll be around that for going forward. I would say we separate the Grainger business and the Zoro business.
There will be a different heuristic for Zoro. And you're right, as we accelerate growth in Zoro, if Zoro grows a lot faster than the core, then our SG and A will grow slower and there will be some impact there.
Great. Thank you.
DG, I think with that, we're out of time. Thanks for being here today.