Of the numerous takeaways from Grainger’s third-quarter earnings report, released late last week, perhaps the least interesting ones had to do with the company’s financial metrics.

Yes, the Chicago-based industrial distribution giant notched 3Q sales of $3 billion, up 2.4% compared to the year-ago quarter, or 4.6% on an organic daily basis compared to the third quarter 2019 (excluding divestitures).

Sure, Grainger’s profit increased 3% to $240 million, while diluted earnings per share of $4.41 were up from $4.25 in 3Q 2019, and the company outperformed analysts’ expectations for earnings per share as well as revenue.

And, OK, gross margin headwinds weighed heavily on investors’ minds as evidenced by shares of Grainger (NYSE: GWW) slipping on those margins falling 160 basis points compared to 3Q 2019.

But the most intriguing headline to come out of the company’s 3Q report is how it has continually found new ways to navigate COVID-19, the latest of which revolves around Grainger’s relentless pursuit of refining its customer acquisition strategy.

Like many distributors, Grainger has made some strategic pivots over the last seven months, from making its facilities safe for employees to increasing its PPE offering to offering pandemic-driven services such as curbside pickup. Perhaps the most important one, however, was finding new ways to attract new customers. Grainger has done that with aplomb.

The company’s U.S. segment saw daily sales increase 3.1% in the quarter. Pandemic-related product sales grew 53% in 3Q while traditional (read: non-pandemic) product sales dipped 8% in the quarter “but continued to show meaningful improvement from April lows,” CFO Thomas Okray told analysts on the call.

What’s more, he added, is that Grainger is making headway with customers it has only brought into the fold recently by winning their loyalty.

“We’ve also seen a significant uptick in new customer acquisitions with some encouraging signs of repeat buying,” he said. “From a customer perspective, we saw improved growth with both large and midsized customers, with the latter growing 6% in the quarter, an improvement from the 6% decline year-over-year we saw in Q2 2020.”

Customer Acquisition Hinges on Two Things

CEO D.G. Macpherson credited the increase in customer acquisition to favorable inventory positions for the company during the pandemic. That brought new customers to Grainger, Zoro and MonotaRO — and new revenue to the top line.

“The good news is that those who have repeated, the number is much higher than in the past,” Macpherson said on the earnings call. “The repeat rates are similar to the past, but we have a much bigger funnel, and we’re starting to get those customers to be regular purchasing customers. So, we’ve seen nice, attractive customer acquisition through this period, and we think that helps bode well for the future. We feel very confident in our 300 to 400 basis point outgrowth in the U.S. business and the 20% growth expectations for the endless assortment, and we have no reason to change those right now. This year, we’ve been higher than that number in the U.S. We would expect to be in that range and shoot for higher but be in that range moving forward.”

One trend Grainger is seeing: A blurring of B2C and B2B customers, which the company has leveraged as part of its overall customer acquisition strategy.

“One of the things that I would say that’s muddled the pandemic a little bit in terms of results has been with so many people working from home, sometimes, the business and the consumer tends to blur,” Macpherson said. “I’ve listened to a bunch of contact center calls. And it’s fascinating that there’s a lot of people at home maybe buying things for businesses, but also sometimes delivering to their home. So, we think we’ve had more consumer acquisition than normal. We don’t re-market to consumers, whether in Zoro or Grainger. What we do know is that the business customer acquisition has been very solid, very strong. And the attractiveness of those customers has been every bit as strong as we’ve seen in the past.”

But how to get those customers to stick? Macpherson said the key is analytics and marketing, both of which have proven effective in Grainger’s efforts.

“Marketing has been a large contributor of our U.S. share gain over the last few years,” Macpherson said. “We have improved effectiveness in both media advertising and paid search and plan to further invest in marketing given these strong returns. We continue to deepen relationships with our customers to our large customer multisite growth initiative, enhancements to our KeepStock offering and improvements to our sales strategy and effectiveness. We know that when we embed one or more of our service offerings with our customers, we foster deeper and longer-lasting relationships. Over 60% of our U.S. revenue is generated from customers with one or more embedded solutions.”

Couple that with the analytics capabilities to know where to market and who to market to, and the company expects to continue firing on all cylinders — as long as the pandemic lasts and once the country has come out of it.

“We’re doing all kinds of things there with analytics and marketing to get that second, third, fourth order and starting to get real traction there,” Macpherson said. “So those are far and away the two most important things with the endless assortment business that we track, and we’re seeing progress on both of those.”