Analyst Meeting 2016 November 11, 2016

2

9:00 a.m. - 9:45 a.m. Strategic ContextDG Macpherson

9:45 a.m. - 10:30 a.m. U.S. Business Panel Deb Oler, Elizabeth Ubell, Paige Robbins

10:30 a.m. - 11:00 a.m. Canada Business Update John Kaul

11:00 a.m. - 11:15 a.m. Break

11:15 a.m. - 11:45 a.m. Financial Update Ron Jadin

11:45 a.m. - 12:30 p.m. Q&A

Agenda

3

All statements in this presentation, other than those relating to historical facts, are “forward-

looking statements” based on our current view of the competitive market and the overall

environment. Factors that could cause our actual results to differ materially from those statements

include, among other risks and uncertainties, a major loss of customers or suppliers, competitive

pressures, legal proceedings, changes in laws and regulations, general economic, industry or

market conditions, technological or operational disruptions, natural and other catastrophes and

other factors that can be found in our filings with the Securities and Exchange Commission,

including our most recent Forms 10-K and 10-Q, which are available on our Investor Relations

website. We disclaim any obligation to update or revise any forward-looking statement, except as

required by law.

Safe harbor statement

Strategic Context DG Macpherson – Chief Executive Officer

5

~$560B global market

for products

consumed by

businesses for

maintenance, repair

and operations (MRO)

that are offered by

Grainger

5

Africa $14B

Middle East $22B

North America $146B

South America

$35B

Western Europe $115B

Eastern Europe $15B

Northern Europe $14B

Pacific $13B

East Asia $100B

South Asia $13B

Northern Asia $12B

South East Asia $20B

Japan $37B

Source: Grainger Analytics and Global Insights. Data as of 6/30/2016.

Global MRO market concentrated in industrialized regions

6 6

GWW Sales

MRO Market

All Other

~$329B

$0.4B

Germany

~$30B

$0.0B

Mexico

~$10B

$0.1B

UK

~$18B

$0.4B

Japan

~$37B

$0.6B

Canada

~$11B

$0.7B

U.S.

~$125B

$8.0B

% of GWW Sales

79% 7% 6% 4% 1% 0% 3%

Market Share

~6% ~6% ~1% ~2% ~1% <1% <1%

Note: MRO market data as of 6/30/2016. Grainger sales data is 2016E. U.S. sales include Zoro and Specialty Brands.

Grainger’s presence concentrated in developed regions

7

+6.3

+7.7

+5.4

+6.9

+5.1

+6.1

+3.0

+3.3

+3.2

+4.0

-0.1

-0.9

-1.7

-2.3

+2.0

+1.8

Total Growth %

Mix Adjusted %**

F F -6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

2010 2011 2012 2013 2014 2015 2016 2017

US MRO Market Growth

Industrial / Export

Services / Consumer / Construction

Government / Healthcare

*Grainger’s internal estimate of MRO market performance. **Mix Adjusted index represents MRO market estimate adjusted for Grainger’s U.S. sales mix.

U.S. MRO market growth*

8 8

Broad liners more profitable

vs. other distributors

Fragmented market with

broad line players taking share

13% 18%

All others

2015

Broad liners

~$125B

2007

~$114B

U.S. MRO market share

2007–2015

2015 financials: broad line vs. other

industrial distributors

Broad line

Other industrial

distributors

OE% ROIC FCF / Sales

18%

4% 7%

20%

6%

8%

Broad line MRO continues to be an attractive space

9 9

Key commodities Prices indexed to 100 in Q2 2015

77

84

55

25

50

75

100

125

Oil

‘Q1’16

Ind

exe

d t

o 1

00

in Q

2 2

01

5

Q3’15 Q4’15 Q2’15

Copper

Iron Ore

U.S. and Canada MRO markets have

grown in long term but slowed recently

20

17

F

80

100

120

140

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

F

~$11B

~$101B

Canada

~$8B

~$125B

U.S.

MR

O M

arke

t in

dex

ed

to

10

0 in

20

05

U.S. and Canada MRO Market 2005–2015

Deflationary environment

in the U.S. today

MRO Market indexed to 100 in 2005

Although market has grown in the long term, currently seeing challenging conditions

10 10

Customers shifting rapidly

to digital channels

Large customers expect us to

compete at their place of business

Customers more

aware of competitors’ prices

Percent of lines

by channel

Google web

search results

Grainger order origination lines

(CAGR, 2010–2015)3

30

40

50

60

702

01

5

20

14

20

12

20

13

20

11

20

10

% o

f G

IS L

ines

by

Ch

ann

el

60%

40%

Digital Channels1

Traditional Channels2

Dewalt Positive Clutch Screwdriver, RPM 2500,6.5

15%

30%

(5%)

(4%)

KeepStock®

EDI / ePro

Branch

Phone

1. Digital channels include Grainger.com, EDI/ePro and KeepStock. 2. Traditional channels include all others (phone, branch). 3. Line CAGR shown for Large customers (>$60K in MRO potential).

Customer behavior is changing

11

2006 2016

Single demand generation paradigm

Segmented demand generation to target verticals and different size customers

Orders originated largely via branch and phone

Orders originated largely online

Fulfillment via branch and shipping

Fulfillment dominated by shipping

Customers come to us We serve customers at their place of business

We have changed with customer shifts

12

Against that backdrop, we have five distinct businesses

U.S. Large

U.S. Medium

Single channel

Canada

International

12

2016E Rev Growth 2016E Revenue 2016E OE% 2016E ROIC

$6.1B

$0.9B

$0.7B

$1.1B

15–20%

25–30%

(5–10%)

~10%

~0%

(10–15%)

(15–20%)

30–35%

$0.9B 0–5% ~35%2

$10.2B 10–15% ~2.0% TOTAL COMPANY3:

40–45%

(10–15%)

~50%1

>10%

~25%

1. ROIC shown is for MonotaRO, which serves as a proxy for the overall single channel business. 2. International includes eight months of Cromwell acquisition. 3. Total company also includes Specialty Brands, eliminations and unallocated expenses.

13 13

Today Over the Next Three Years

Improved customer experience • Competitively advantaged product offer and

delivery performance • Leading digital experience • Simplified pricing

• Share gains driven by U.S. Large customers and single channel online model

Creating unique value for a broader set of customers • Stronger volume growth across more customer

types and geographies

• Multichannel company with strong digital capability

• Competitively advantaged product offer and delivery performance

• Operating earnings contraction driven by gross profit pressure

• Strong free cash flow growth

Improved financials • Operating earnings expansion driven by stable

gross profit margins, SG&A leverage • Strong free cash flow growth

Grainger over the next three years

14 14

Our strategic priorities guide our execution

15

Strategic priorities for the company

Unique value for

different

customers

Effortless

customer

experience

Reduce

cost

U.S. Large U.S. Medium Single

channel Canada

Grow spot-buy volume via relevant

pricing and digital capabilities

Grow with large,

complex

customers

Re-engage

mid-sized

customers

Turn around

business

Continue to

build online

model

Improve the end-to-end experience for our customers

Reduce cost structure throughout the company

International

Optimize

portfolio for

profitable

growth

Help each other

grow and succeed

Responsible

stewards

Instill leadership behaviors and ensure focus on team member

development and engagement

Maintain highest standards of ethics and integrity

16

Expense % of COGS

Strong cost management

35%

40%

45%

50%

55%

35%

40%

45%

50%

55%

01 02 03 04 05 06 07 08 09 10 11 12 13 14 1516E

COMPANY

U.S. SEGMENT

eCommerce shift,

KeepStock improvement,

productivity,

structural reductions

17 17

Touch points where Grainger has

Clear Advantage

Touch points with

Opportunities for Incremental Improvement

Sales representatives

Branches

Website and Search

Determining the right price

Fulfillment

We lead the competitive set in critical elements of the customer experience

18

U.S. Large customer item purchase frequency

Customer item purchase frequency1

Repeat / Planned

Spot buy

’16E Sales V% ’16E GP%

~35%

~45%

~50%

~55%

Customers are increasingly using Grainger for planned or negotiated purchases…

…. and less for more profitable spot buys

7%

43%

27%

23%

1

2 to 5

6 to 9

10+

’16E Lines

1. Represents how many times an item was bought by an account in a given year. 2016E showing rolling 12 months as of September 2016. Note: GP reflects pure product GP, not externally reported GP.

Large customers using Grainger more for high volume items

19

14

5

-6

-15

0

15

30

Volume CAGR 2011-2015 (%)

Less

competitive

price

More

competitive

price

U.S. Large customers

Total • Good growth seen with

more competitively priced products

• Moderate overall growth,

but with significant sales force attention to pricing

% of total 44 56 100

19

This pricing dynamic is impeding growth and profitability with large customers

Current Status

20

U.S. Medium customers

1. 4 Year cost of goods sold (COGS) CAGR (11-15); 2. 2015 data Note: Excludes sourcing Source: Teradata; BCG Analysis

• Medium customer business has been declining for some time

• Higher-priced products are a barrier to acquiring new customers

• Growth attained where prices are competitive

% of total 77 23 100

20

-8 -6

-15

0

15

30

1

Less

competitive

price

More

competitive

price

Total

Pricing dynamic also has a negative impact on medium customers

Volume CAGR 2011-2015 (%)

Current status

21

• Began introducing market-based pricing into contracts 18 months ago

U.S. Large

U.S. Medium

• Medium program launched in 2015

• Enhanced with inside sales model the past six months

21

Pilot results Recent pricing programs

Competitive price

Less competitive price

Annualized volume growth %

Customers on pricing program

Customers not on pricing program

Annualized volume growth %*

* Early results represent a very small sample.

Market based pricing programs have shown strong results

22 22

Single channel model focuses on small customers with a simple web solution and

competitive pricing while leveraging our back-end capabilities

MonotaRO

Launched in 2000 in Japan, Grainger owns 51%

Our most mature single channel online business

2016E Sales:

$600M

Zoro U.S.

Launched in 2011, leveraging expertise from

MonotaRO and U.S. businesses

U.S. supply chain enabling faster growth than Japan

2016E Sales:

$400M

Zoro Europe

Launched in 2014 to expand online model in Europe with

small facility in Germany

Business in start-up mode

2016E Sales:

<$20M

Cromwell Direct

Launched in 2016 to expand online model in U.K. by

leveraging Cromwell business

Business in very early stage

2016E Sales:

<$5M

Single channel is a ~$1B business in 2016

23 23

Operating margin expansion also expected along with strong revenue growth

Single channel revenue projection

0

500

1,000

1,500

2,000

2,500

2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E

Zoro Germany

CromwellOnline

Zoro (U.S. andCanada)

MonotaRO

$ in

mil

lio

ns

Single channel model expected to grow to ~$2B by 2019

24 24

Before After

Cromwell integration update

25 25 25

Unique value for a broader set of customers

• Stronger volume growth across more customer types and

geographies

Effortless customer experience

• Competitively advantaged product offer and delivery performance

• Leading digital experience

• Simplified pricing

Improved financials

• OE expansion driven by stable gross

profit margins, SG&A leverage

• Strong free cash flow growth

Where we are headed

U.S. Business Panel Deb Oler – VP & President, Large Customer & Direct Sales

Elizabeth Ubell – VP & President, Medium Customers, Marketing & eCommerce

Paige Robbins – SVP, Global Supply Chain, Branch Network, Contact Centers & Strategy

27

U.S. Large: Focused on multisite, largest single sites and institutions

Largest business at Grainger with

healthy profitability

$6.1B

40-45%

15-20%

Revenue

GP%

OE%

U.S. Large focused on sites with >$60K in MRO potential or part

of a multisite contract

2016E Financials Part of a

multisite contract

~$1.1B

~$0.3B ~$0.1B

~$0.7B

~$4.3B

~$0.6B

Single-site/

local

Large (>$60K)

Size (MRO potential

in $ / year)

Medium ($10-60K)

Small (<$10K)

~$5.4B

~$1.3B

~$0.4B

Total

In total, Grainger’s U.S. Large business plays in a

~$75B market with ~8% share at $6.1B

Represents 2016E

revenue1

1. Multichannel only. Does not include Zoro and Specialty Brands. Note: Numbers may not sum due to rounding.

28

U.S. Large: Seller configuration

• 200 contract account sellers

• 2600 field sellers

Sellers

+ Vertical Alignment

• ~90% of sellers aligned to industry verticals e.g., Healthcare, Manufacturing, Commercial and Government

• Customized training for sellers

• Customized offer to customers

= 180 basis point improvement

• Verticalized sales packages yield sales performance that is 180 basis points better than traditional (geographic) packages

29

U.S. Medium: Focused on single site customers with <$60,000 in MRO potential

Modest sized business with

high profitability

Revenue

GP%

OE%

$0.9B

50-55%

25-30%

2016E Financials

In total, Grainger’s U.S. Medium business plays in a ~$30B market with ~2% share

and a ~$20B Small business market with ~1% share

Part of a

multisite contract

~$1.1B

~$0.3B ~$0.1B

~$0.7B

~$4.3B

~$0.6B

Single-site/

local

Large (>$60K)

Size (MRO potential

in $ / year)

Medium ($10-60K)

Small (<$10K)

~$5.4B

~$1.3B

~$0.4B

Total

U.S. Medium focused on <$60K

in MRO potential

1. Multichannel only. Does not include Zoro and Specialty Brands. Note: Numbers may not sum due to rounding.

Represents 2016E

revenue1

30

Offer Roll-Out

U.S. Medium: Building the medium customer offer and team

Q2’2016 and Q3’2016 Q4’2016 2017

Inside Sales Start-Up

Transitioned sales coverage

Began contacting

~100,000 customers with inside sellers

Begin tailored marketing offers

Cover ~10,000

additional customers

Covering ~50,000 additional customers

Team

M

em

be

rs

Q4’2015 and Q1’2016

Team Launch

Formed offer and marketing team

Signed lease for inside

sales center

<20 <2001 <230 <330

Act

ivit

y

1. Balance of the 275 inside sellers added in 2016 are assigned to medium multisite contract customers.

31

U.S. Large: Driver activities – consistent execution

Sales Management System

• All sellers managed against driver activities that correlate to profitable revenue growth.

• Leaders at all levels view and coach to driver activities.

• Dashboards in Salesforce.com are updated in real time to most recent activities.

• Consistent metrics aligned on activities that drive growth and reduce execution variation.

% of customers touched

New contracts acquired

Pipeline close rate Customer contacts, touches increasing

Starting to see impact to daily

sales results

32

U.S. Medium: Types of medium local customers

Number of

customers

Revenue

Non-Customers Low/Med

SOW Uncovered

High Share of Wallet

(SOW)

Active GWW Customers

$19B $8B

<50K

Zero today ~$200M ~$300M

Low/Med SOW Covered

$2B

~$100M

$1B

<65K <375K 1 Million

MRO Potential

Covered by inside sellers by year end 2016

Performance

’16 ’17 ’16 ’17 ’16 ’17

2016E

33

U.S. Medium: Low/Medium covered customer – Impact of new pricing program

Sales

Orders

GP$

GP%

Newsprint manufacturer in the southeast U.S. signed up on new pricing program called Red Pass Plus (RP+) in April 2015.

Pre RP+

Post RP+

85%

21% Pre RP+

Post RP+

75% Post RP+

Pre RP+

55%

Post RP+

Pre RP+

52%

Average Order

Volume 31%

Pre RP+

Post RP+

Customer Example:

Low/Med

SOW Covered

Pre RP+ Post RP+

Cleaning Abrasives

HVAC Cleaning

Lubrication Electrical

Motors Fleet & Vehicle

Safety Hand Tools

Welding Lighting

Lubrication

Material Handling

Motors

Plumbing

Pneumatics

Power Transmission

Safety

Welding

Product segments

purchased

34

Ord

er

Ori

gin

atio

n

Branch

Phone

Grainger.com

KeepStock®

EDI/ePro

2011-2015

Line CAGR

2015 Line mix %

30%

27%

19%

14%

10%

U.S. Contact Center Network

(10%)

8%

29%

13%

(10%)

Customer Channels: Order origination shift

Adjusting Contact Center location strategy to:

• Increase flexibility to manage volume and changing work as customers migrate to digital channels • Enable better service, team member engagement and efficiency through fewer, larger locations

35

Customer Channels: Order fulfillment shift

411 419 422 406 385 355 353 353 345

306 252

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Plan

U.S. Branch Network*

61%

18%

16%

5%

Pick up at Branch

DC to Zoro Customer

DC to KeepStock®

DC to Customer

*Reflects core U.S. business; excludes acquisitions and specialty businesses

2016E

Ord

er

Fulf

illm

en

t

2011-2015 Line CAGR

2015 Line mix %

0%

29%

(12%)

>40%

• Branch network right-sized for current and future volume • Repositioned branches to serve distinct customer needs

36

Supply Chain: Industry-leading B2B supply chain

Unmatched service

• Best-in-class availability on large assortment that is continually increasing and evolving

• Network designed to ship complete and deliver quickly

• Capability to provide specialized documentation and delivery options for large, complex customers

• Breadth and flexibility to support multiple businesses and channels

Strong productivity

• Automation that reduces cost per line and improves safety

• Standardization across the network

North American distribution network

37

Registration:

Creating a faster experience

Search and Select:

Improving terms and presentation

• ~30% of Grainger.com revenue impacted by year end • +100bps improvement YTD in Search to Cart

• Registration required for personalized experience • 50% improvement in conversion in 2016

eCommerce: Improving the digital experience for all customers

38

Large Contract Customers

• Drive greater contract realization through sales force vertical alignment

• Expand business development team to bring more customers under contract

Key focus areas going forward

1

2 Large Non-Contract Customers

• Improve customer coverage • Accelerate volume growth with market-

based pricing

U.S. Large continues to outperform market

but share gain has slowed recently

2016E 2015

0.9%

(0.1%)

2011-14

8.8%

4.0%

(1.5%) to

(2.5%)

Market1 Grainger

GWW delta vs. market

~480 bps ~100 bps ~130 bps

1. Market refers to the MRO market for all large (>$60K in MRO potential) and multisite locations; 2016E showing U.S. Large growth YTD September 2016.

U.S. Large: Actions in place will enable progress toward returning to historical performance against market

(0.7%)

39

Grow more consistently with different customer segments

Improve the customer experience

Laser-focused on execution

Summary: U.S. business panel

Canada Business Update John Kaul – VP & President, Acklands – Grainger

41

Oil and gas, natural resources and Canadian dollar decline

79.40 94.87

94.11 97.91

93.26

48.69 41.15

3.5%

3.0%

2.0%

2.1% 2.4% 1.2% 1.3%

6.9%

12.0%

4.4%

(0.7%)

1.6%

(4.1%) (2.8%) -6%-4%-2%0%2%4%6%8%10%12%14%

$40

$50

$60

$70

$80

$90

$100

$110

2010 2011 2012 2013 2014 2015 2016 YTD

Oil price, GDP and MRO correlation

USD Oil Price / barrel {WTI} Real GDP Growth {2007 Prices}MRO **

300

400

500

600

700

800

900

400

900

1,400

1,900

2010 2011 2012 2013 2014 2015 2016 YTD

Commodity price indices

Energy Metals and Minerals

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

2010 2011 2012 2013 2014 2015 2016 YTD

CAD/USD Average Exchange Rate

Canada: Macroeconomic challenges

42

86%

60%

14%

40%

0%

20%

40%

60%

80%

100%

Overall Market AGI

NaturalResource

Other

20%

80%

Customer Size (2015)

Medium/Small

Large

Canada volume from natural resources is ~40% vs. 14% of the Canadian MRO market (2015)

38%

62%

Regional Sales (2015)

East

West

Over-indexed to natural resources, affecting sales and earnings Canada: Disproportionate mix in west and with large customers

43

2014-15: Investment

• SAP

• Toronto distribution center

• Warehouse management system

2016: Stabilization

• Direct to customer fulfillment path

• SAP transition

• Business restructuring

2017: Growth

• Build stocked assortment

• Customer diversification

• New eCommerce platform

• Price increase (to offset FX driven COGS inflation)

• Grow share in high opportunity areas of Canada • Leverage Grainger U.S. scale and expertise • Deliver a business less susceptible to market volatility

Delivering sustainable growth Canada: Repositioning the business

44

0

5

10

15

20

25

30

35

40

45

50

Jan Feb March April May June July Aug Sept Oct Nov

Percent of lines fulfilled DTC

Opportunity to simultaneously reduce cost, improve service Canada: Stabilizing service – direct-to-customer (DTC) fulfillment

On pace to exceed 50% DTC fulfillment at year end

2016

45

• SAP surfaced legacy challenges

– Undefined assortment and fulfillment

– Master data

– Non-standard work

• Dedicated teams stabilizing customer experience

– Product availability

– Open and rejected orders

– Invoice disputes

• Customer example: Ontario-based utility company

- Assortment and fulfilment challenges

- Improvement driven by stabilization efforts and DTC fulfillment

89%

77% 77%

55%

80% 83%

92% 92%

50%

60%

70%

80%

90%

100%

March April May June July August September October

2016 Customer fill rate

Bringing an effortless experience to our customers Canada: Stabilizing service

46

• Historically decentralized assortment

– 170 different assortments

– ~80% of transactions from stocked assortment and ~20% sourced

• Improving stocked assortment

– Today, 92% of lines filled in Canada come from stocked offer

• Enables better customer experience, diversification and scale

The right product, at the right place, at the right time Canada: Growth – improving stocked assortment

47

Current web experience

New acklandsgrainger.com

New acklandsgrainger.com launches in December 2016 Canada: Growth – transforming the online experience

48

• Diversification pilots – Food and beverage

manufacturing (launched)

– Chemical and pharmaceutical manufacturing (Q1 2017)

• Leveraging Grainger U.S. business – Product assortment

– Offer development, marketing

– Customer service

Western Canada1

• ~40% of MRO market • >90% of oil & gas

market • 62% of AGI

volume

Eastern Canada1

• ~60% of MRO market

• <10% of oil & gas market

• 38% of AGI volume

1. Data as of 12/31/2015

Diversifying by customer type and geography Canada: Growth – transforming Acklands – Grainger

49

• Operating expenses down ~10% year-over-year, adjusted for restructuring costs

– Closed 26 branches in the past 18 months, expect further optimization

– Restructuring resulted in reduction of 250 team members, or 10% of workforce

• SAP enables additional productivity improvements

– Working capital utilization

– Centralization of key functions

– Other indirect procurement opportunities

• Moving to more variable cost structure

Positioning the business for sustainable growth Canada: Resetting the cost structure

50

• Address systemic and macroeconomic challenges affecting business performance

• Leverage foundational investments to diversify and support long-term growth

• Reduce cost structure, while improving service

• Focus on execution and profitability

Addressing fundamental issues, getting back to growth Canada: Path to sustainable profitability