Parts Town Goes Full-Tilt on E-Commerce Marketplace Model

Run by its innovation division, Red Lightning Group, the e-commerce platform aims to improve the supply chain, grow OEM and bring in new verticals for the food service distributor.

  • Parts Town’s new Marketplace will help it expand into other verticals, such as HVAC parts, janitorial supplies, water filtration, technician supplies, and residential appliances.
  • The Red Lightning Group division of Parts Town — responsible for the Marketplace creation — formed in 2020 to speed up its innovation efforts both internally and for its customers.
  • The marketplace is available through the Parts Town website as well as the company’s mobile app, and incorporates technology from Mirakl and SAP Commerce platform.

Parts Town’s marketplace platform is firing on all cylinders with the official launch of its e-commerce marketplace in September, but the work under the hood started in 2019 when it came up with its marketplace strategy.

The new e-commerce platform — accessible on the Parts Town mobile app and through — provides customers a one-stop shopping experience for its OEM foodservice replacement parts as well as products across a variety of new categories. Instead of logging on to multiple websites to find parts and supplies or jumping in the car to make local pick-ups, customers now have access to additional sellers on who will ship their products directly to them through Marketplace.

Addison, Illinois-based Parts Town started developing its investment in the concept of marketplace two years ago with the launch of a physical marketplace initiative, Parts In Town, which enables one-hour local parts pick up from service companies and distributors. The marketplace is an online extension of Parts In Town. However, the sellers for Parts In Town and Marketplace are different: the former are local, the latter can be anywhere.

Red Lightning Group, a division of Parts Town that launched last year to accelerate innovation in the foodservice industry and other verticals, developed Parts Town’s Marketplace. The Marketplace is built using the platform of cloud-based e-commerce software from Mirakl, but the strategy, development, seller acquisition, and other elements are handled by an internal team, according to Emanuela Delgado, senior vice president and general manager of Red Lightning Group. To create Marketplace, Mirakl’s technology integrated with Parts Town’s existing e-commerce site.

In addition to foodservice parts and products, Marketplace will also offer parts and other related products from adjacent market sectors, including HVAC, janitorial, water filtration, technician supplies, and residential appliances. The marketplace currently includes more than 35,000 residential appliance parts from brands such as Whirlpool and Frigidaire, as well as 6,000 janitorial and sanitation products.

Ongoing innovations

Founded in 1987, Parts Town prides itself on supplying genuine OEM parts to its customers, and on its track record of innovation in the B2B distributor space. As one of its first eight employees, Delgado has witnessed firsthand Parts Town’s hockey stick revenue growth over the years, from about $3 million a year in the early days of its founding as a restaurant equipment parts distributor for local service companies to now more than $1 billion.

While Red Lightning Group was initially staffed with internal employees from Parts Town, Delgado says it plans to expand its staff to 17 employees by bringing in outside talent from other sectors, such as B2C, to help drive innovation. “Parts Town has always been about growth and innovation and technology,” Delgado says. “However, what we decided to do is start a new division so that we can have a team of people that’s just solely focused on that so we can move faster.”

The growing team is tasked with strategy, development, seller acquisition, and other development elements of Marketplace, according to Delgado. “Sellers are going to be able to add their products, their offers or inventory into the Mirakl platform in several different ways,” Delgado says. “It’s going to offer items that have in-stock availability, and a price is going to appear on our sites.

“When an order is placed, that order is sent through directly to the seller, and they can either manually go into Mirakl to fulfill that order, or they can build an API into their system. Mirakl controls a lot of the operations from the seller side of getting that order and fulfilling that order.”

Nuts and bolts

While some B2B distributors have moved to Amazon-like marketplaces that feature multiple product offerings from sellers as a means to attract new customers, that wasn’t the founding motivation for Parts Town.

Delgado says Parts Town’s Marketplace is the result of requests from its customers to edge-out into new verticals, such as HVAC parts, janitorial, water filtration, technician supplies and residential appliance parts. For the new verticals, Parts Town and Red Lightning Group are offering the infrastructure and the know-how to the sellers that are adjacent to its core foodservice parts and products.

One of the concerns for a distributor creating its own e-commerce marketplace is that it puts pricing in the hands of the sellers, which can lead to a drive to the bottom of pricing. That’s not the case for Parts Town, as the sellers come up with their own prices that eventually settle into a range.

For Parts Town’s Marketplace, Mirakl also handles the commission rates between Parts Town and its sellers, as well as the categorization of the products that are offered. Marketplace is also a means for providing sellers and B2B customers with digital tools and e-commerce capabilities without building and developing them on their own.

A tool for other B2B companies

Marketplace “allows us to be more specialized and provide some differentiation in trying to help B2B customers procure the parts that they need,” Delgado says. “There are many B2B businesses today that are looking for ways to get involved digitally. Many of them don’t have the commerce sites or digital strategies.”

Providing the infrastructure and digital tools for the e-commerce marketplace is half the battle, according to Delgado. “We can be a tool for those other B2B companies that are trying to get into the digital space with very little investment and risk,” she says. “The more expensive portion is driving that traffic.

“We have the customer base. That’s why we’re focusing on the products that our existing customers use. We also have the expertise to drive traffic to our e-commerce and app capabilities.”

Off to the (physical) market

Interestingly, it was the brick-and-mortar initiative Parts In Town that served as a phased approach for the e-commerce marketplace. Conceptualized in 2019, Parts In Town enables one-hour local parts pick up from service companies and distributors. Instead of Parts Town opening its own branches all over its footprint, it’s using Parts In Town as an extension of its branch network by partnering with sellers that already have local inventory.

“We did a soft launch in the beginning of January 2020,” Delgado says. “We started off with only a handful of sellers because we wanted to learn and refine, and then the pandemic hit. By the end of the year, we had a couple dozen sellers, and now we’re up to 88 for the Parts In Town model.”

While Parts Town carries a vast inventory for its core customers, Parts In Town locations typically carry the parts that are the most critical for customers’ operations.

“This was the first use-case of the marketplace, and it was to meet a very specific need for the industry; picking up parts within one hour on the same day,” Delgado says. “It also helps our service partners. As an example, we were able to get some data from many of our partners and we found that 87% of the customers that were placing an order for Parts In Town were net new customers for that service company.

“If they can transition some of those customers that came to pick up their part into a potential service opportunity in the future, that’s also a lead generation tool for them as well.”

History of innovation

As part of its legacy of innovation, Parts Town launched PartSPIN in 2013. PartSPIN is a 360-degree imaging technology that’s equipped with technical diagrams, “smart manuals” and a mobile app to help customers find and view equipment manuals and parts while in the field.

“We were the first to create an e-commerce site for our industry,” Delgado says. “We created an app and launched an app in 2010, which was far advanced compared to others in the B2B space.

“We also have this OEM to OCM tool that helps with providing guidance to customers looking for parts and making sure that they’re genuine OEM parts.”

In August, Parts Town announced it developed a new tool with Davisware that integrates and streamlines the entire parts purchasing process. The tool, called PartsPath, is designed to save service providers significant time and money.

PartsPath allows service companies to automate purchase orders, acknowledgments and AP invoices in three steps without leaving their Davisware field service management software.

“Davisware is an operating system that is used by many of the service companies in our industry,” Delgado says. “ It also serves some of the HVAC industry. This is something that will really help make things easier for existing customers that are on the Davisware platform, but also for new customers on Davisware or new Parts Town customers. It will help with the expansion into HVAC as well.”

On deck for marketplace

As part of its international expansion, last year Parts Town hired Martin Rohde as president of Parts Town International. Rohde was previously general manager for commercial customers for Amazon Business, and he also had an e-commerce career stop at Hewlett Packard Enterprises.

“That’s the other great thing about marketplaces, they can be a tool for some of the other initiatives we have, and they certainly will be a tool for our international expansion,” Delgado says. “For the next year, or the next 18 months, much of what we are focused on is the expansion of our Marketplace strategy with things like adding additional product categories, adding services and also additional functionality.”

The additional functionality could include giving customers the ability to ask for higher quantities or adding different products. While Delgado couldn’t get more specific on Parts Town’s roadmap, innovation will still be at heart of those efforts.

“We demand of ourselves to continue to innovate for our industry,” she says. ”We don’t innovate just to innovate. We’re not just looking for the newest bells and whistles.

“We innovate and build technology to help solve problems or to help our customers and our industry be more efficient. It’s something that we’ve always done and we will continue to do, but we’ll be able to accelerate it even more with the Red Lightning Group that’s dedicated to it.”

Originally posted on October 6, 2021, by Mike Robuck, MDM