In an HBR blog post this week, Bill Taylor asks the question: What’s the highest performing stock in the United States since the 1987 market crash? Is it Starbucks? Microsoft? Apple? GE? How about a company named Fastenal? What? Fastenal? Many readers won’t even know what they do. Fastenal is the leading distributor of nuts and bolts in the United States. Yes, you read that correctly. Nuts and bolts. The company’s stock has risen 38,565 percent since October 1987. Taylor explains that Fastenal has been successful because it has been “deeply committed to a one-of-a kind strategy.” I don’t disagree at all. However, I think there is more to the story.
Fastenal is a retailer/distributor, with 2,600 stores at which they sell their products. Of course, we all know the story of many brick-and-mortar retailers that have seen their businesses fundamentally disrupted in the Internet age. We have all watched as Netflix and RedBox delivered a one-two punch to Blockbuster, for example. However, Fastenal has done an amazing job of innovating its business model before someone else came along to disrupt them. On the one hand, they have brought the Red Box model to the fastener business. According to the 2011 President’s Letter:
In 2010, we installed 1,358 machines, representing a 240% increase over 2009. In 2011, we picked up the pace and installed 5,528 machines, an increase of 287% over the 2010 number. Why are so many customers utilizing our FAST SolutionsSM (industrial vending)? I believe it’s simply a better way to buy industrial supplies. Think of it as a fully customized and automated Fastenal store within the customer’s location.
On the other hand,Fastenal has embraced the internet as well. According to the Annual Report, “Fastenal.com generated an average of 1.15 million visitors per month in 2011 (up from 727,000 per month in 2010), and the value of our web orders grew more than 500%.”
How many brick-and-mortar retailers have done that type of remarkable job reinventing themselves, while not at all denigrating the service provided to customers in their traditional retail locations? To me, that ability to reinvent, while maintaining and enhancing the core business, is what makes Fastenal stand out.
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