Great preso Pete. my 2c for what it is worth.
Distribution companies are usually cost of capital biz's at best with a few good ones eg BAP and a very few exceptional ones eg REH. so why the difference?
great customer service is a given, any co not servicing their customers will be out of biz or struggle for years. what else?
there are 3 things IMHO
REH built its strength on savvy exclusivity deals. now why a producer would sign these is something to contemplate,-- better volumes, increasing their share as the distributor outperforms is the attraction. so the arrangement becomes of mutual benefit.
Scale is important, as volume discounts and bargaining for exclusivity can be put on the table. i followed the ANN and Grainger tie up. ANN willing to forgo margin and some product exclusivity to Grainger, Grainger guarantees volumes that underwrite share gains. have to be big and good to get these deals, like Grainger is.
the last point is more difficult to describe and identify and depends on the product being supplied, its importnace, its volume used/availabity, and ability to source and deliver that puts some bargaining power in the hands of the distributor. if a business is built around a good set of products that are specilaised or have some other attractive chracteristics then a better than cost of capital return can be sustained by the distributor.
in summary i think for SGI depends on how well it acquires add ons. if it does well it will scale (which is reqd) and can better its competitive position, if it buys a dud it can go backwards quite quickly.
good luck on the journey
