Dan Florness: If there was a camera in the room, sometimes you might chuckle at the reactions you get from Dan [ph] and Holden looking a [indiscernible] during a question because I kind of gave Holden look, that’s in there. And I say it that way, because back in about 2014 — 2013, we really came to a conclusion we had too many locations for the market. And we felt a better way to grow into the future was through the Onsite strategy. And we tempered the desire to close the locations too fast. And these weren’t large locations. We tempered it from the standpoint of the biggest limiting factor for Fastenal historically, hasn’t been opportunity, i.e., size of the market. It hasn’t been financial ability to pull it off. It’s been talent acquisition and talent development.
That’s why we have a very thoughtful process of how we recruit, and we have our own corporate university to develop talent, because that’s what we bring to the market, talent, and that talent is armed by a great supply chain system behind them to help them be really, really effective. And so we tempered the closures really to — because we felt that talent could slide over into the other — into branches that are growing, but also into this new Onsite growth element because we had the talent to move. And if we had closed a bunch of locations, we’d have lost that talent. What we also tried to do is, we try to be very thoughtful about what it meant from the perspective of moving that. If we have a community with two or three Fastenal locations, in a perfect world, we would like to keep that business in the other branches.
Now, if the business goes to an Onsite that’s because there was a larger opportunity in the first place and it moved into an Onsite. I don’t know that closing branches led to Onsite or growth of Onsites. I’m not sure with a customer there. And sometimes we close branches because it was a remote market. And the only reason we were there was because of two customers. And we went Onsite with those two customers, and we closed that branch. That did happen. But usually what happened is those two customers were doing 30,000 a month with us each and now they’re doing 130,000 a month with us each and that was the appeal of the strategy. But there were trade-offs in that. For the annual meeting this year, I do plan on sharing some insight on some of the trade-offs we’ve made as an organization, as we’ve closed locations, because this is a piece that doesn’t always get talked about.
But if I go back and when I have district manager conversations, I get a whole bunch of stats from our statistics folks [indiscernible]. And I get it district by district. But if I look at it at a company level, in 2007, cash customers, so that’s somebody that comes into a branch, it is a purely retail customer. In 2007, our total sales with that customer, it was 4% of our revenue. It was $76 million. Five years later, that $76 million had grown to $78 million. And the reason it didn’t grow very much, we weren’t opening very many locations because we pulled our location growth way down in 2007 and that customer was kind of stagnant. Interestingly enough, that $78 million, five years later had grown to $111 million that was 2017. Two years after that in 2019, the year before COVID started, that had dropped to $106 million, so it dropped 5% in that two-year period.
During COVID, that business was pummeled because we closed all our front locations and the marketplace decided to order — to buy more through e-commerce than to buy retail. And I think we all know that in our own personal life that $106 million went to $75 million, it’s now 1% of our sales. We made the strategic decision to keep the doors closed. And when I say closed, they’re open, but we made the decision to deemphasize going after that and redeploy those resources on other things. Just like restaurants in today’s world have made the decision, they’re not open on Monday, Tuesday, Wednesday anymore because they can’t afford, they can’t find the staffing and they can’t afford it. So that $75 million that we did in 2021 was $45 million in 2023.
That was a trade-off. That didn’t go to another brands because if you’re coming in and shopping at Fastenal like it’s a hardware store, and we don’t have a location, three the locations in town and the two that are left are 10 minutes instead of five minutes away, you lose some of that business. Customers under $500. This is where they have an account number with us. That was $336 million back in 2007. 10 years later, that was $395 million. Last year, that was $153 million. Now some of that is our customers that we lost. Some of that is customers that now are doing $1,000 with us or $2,000 with us or $3,000 with us because we moved them out of that bucket. But those are trade-offs of business makes. We think it’s the right trade-off because it set us up to be really special because if you think of all the growth drivers we’ve introduced in the last 15 years when we deemphasized back in 2007 opening locations, vending doesn’t grow a retail customer.
Vending doesn’t even grow a $400 a month customer, but it might turn out $500 into a $5,000. It might turn a $10,000 into $20,000 because between FMI and Onsite you’re unlocking more business with that customer. And I would probably on more of a tangent there than you anticipated with that question. But I think that’s a critical piece to understand of the strategy of Fastenal for the last 10 to 15 years and how it’s played out.
Holden Lewis: It absolutely is. And I would just look at the language to suggest our traditional branch count is likely to be stable to slightly up over time. As we add international, maybe there’s the odd location domestically that we want to add every now and again, too. The primary growth in those end markets locations will be because of the addition of additional Onsites. You’ll just see the rate of growth ramp up because those Onsites keep coming on and you’re not having the reduction in branches. That’s what that was intended to get by.
