Shaped Up, Shipped Out
Early in 2002, they refined the catalog's focus to just the metal-cutting tools niche of the MRO business. They also began selling off some of the companies that J&L had acquired in the '90s, such as ATS Industrial Supply and Strong Tool Co.
"The company was in a tremendous level of flux, which led to a high [order-taking] error rate," Wessner says. "The retail model didn't make a lot of sense, because it's not a retail-type business. We needed more centralized inventory. The metal-working business is a long-tailed business, requiring thousands of SKUs."
Having built up a retail chain of 35 locations by the middle of 2001, J&L began shutting the stores down in favor of building up the direct and online sales channels. It also began to fix up its fulfillment center, which was shaky at best at that time.
J&L kissed away $50 million in sales — about $42 million in retail and some $8 million in major MRO accounts. It's also winding down sales to original equipment manufacturers, having shrunk sales from more than $8 million in fiscal '03 to less than an estimated $2 million in fiscal '06. By fiscal '07, sales will be far below $1 million.
But all the changes would prove to be valuable investments. The company's call abandonment rate was 3.8 percent for fiscal 2001, ended June 2001. In comparison, that figure dropped to 1.9 percent for fiscal 2005. Even more striking was J&L's error rate in fulfillment, which was 6,000 to 8,000 for that year, compared to just 175 to 200 last year. And the company's fill rate was just 78 percent back then compared to 96.4 percent last year. For fiscal '01, sales had fallen 9.6 percent over the prior year.
By getting out of the $400 billion MRO market and focusing on the $7 billion metal-cutting tools niche market, J&L's focus has been on a fragmented market that gives it a chance to grow through customer penetration, product line expansion and customer acquisition — all of which are considerably greater in scalability.