What We’re Reading

Amazon is Poised to Unleash a Long-Feared Purge of Small Suppliers1

"Two months ago, Amazon.com Inc. halted orders from thousands of suppliers with no explanation. Panic ensued -- until the orders quietly resumed weeks later, with Amazon suggesting the pause was part of a campaign to weed out counterfeit products. Suppliers breathed a sigh of relief.

Now a larger, more permanent purge is coming that will upend the relationship between the world’s largest online retailer and many of its long-time vendors.

In the next few months, bulk orders will dry up for thousands of mostly smaller suppliers, according to three people familiar with the plan. Amazon’s aim is to cut costs and focus wholesale purchasing on major brands like Procter & Gamble, Sony and Lego, the people said. That will ensure the company has adequate supplies of must-have merchandise and help it compete with the likes of Walmart, Target and Best Buy.

The mom-and-pops that have long relied on Amazon for a steady stream of orders will have to learn a new way of doing business on the web store. Rather than selling in bulk directly to Amazon, they’ll need to win sales one shopper at a time. It’s one of the biggest shifts in Amazon’s e-commerce strategy since it opened the site to independent sellers almost 20 years ago. While the plan could be changed or cancelled, it’s currently moving forward, the people said."

Read more from this article here.

Leadership in the New Distribution Future2

"“If firms ignore the profit opportunities in the existing business, they are severely limiting their ability to take part in the new distribution future.” No one can hit you over the head with common sense in such a nice way as distribution profitability expert Dr. Al Bates. In his article in this issue, he stresses that management needs to do a better job getting the team aligned around the existing opportunities to improve profitability — basic blocking and tackling. 

He shares his research that “it is not uncommon for half of the firm’s key managers to feel that prices should be reduced to gain sales volume, while another half feel that prices should be increased.” And with his trademark level of understatement, he sums up: “With such disparity of understanding, there is little chance of making meaningful improvements.”

In any time of disruption, there are countless shiny objects that will appear as the definitive answer for solving the fundamental challenges the business faces. Some companies seem to bounce from one solution to the next like a pinball; others are gridlocked into the lack of consensus and “same-old” operating procedures Dr. Bates prescribes a cure for."

Read more from this article here.

GE Appliances Expedites iInvestments to Lead a New Era of Smart Distribution3

"GE Appliances (GEA) recently opened its new $55 million Area Distribution Center (ADC) in Commerce, Georgia. This smart warehouse is the newest addition to the company’s $150 million national investment to expand its distribution network. The latest investment in Jackson County gives GEA’s expanded distribution network the ability to deliver in one day to 90 percent of the U.S.

“GEA has the leading distribution network in the appliance industry, and we’re applying the best in smart technology to take a quantum leap forward on our journey to serve customers better,” says Mark Shirkness, vice president of distribution for GE Appliances. “Today’s consumer researches, shops and buys across various channels—from physical stores to online stores. In this omnichannel world, consumers are empowered, and they want their products now—or as close to now as possible. At GE Appliances, the owner is boss, and our infrastructure investments are designed to exceed our owners’ expectations.”"

Read more from this article here.

Public Comparables & Trading Valuations

Key Trading Stats

As of July 14, 2019 ($ in millions, except per share amounts)

Specialty Distribution Public Comparables4

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Stock Prices

As of July 14, 2019

Trailing Twelve Months Stock Price Performance5

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M&A and Public Market Trends

Distribution Trends

LTM EBITDA as of July 14, 2019

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M&A Trends

Recent M&A And Private Equity Trends6

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  • 2,142 private equity deals closed, totaling $297.1B
  • Median private equity deal size jumped to $275.7M in the first half of 2019, versus $190.0M in the first half of 2018
  • 371 private equity exits occurred in the first half of 2019, coming in below the number of private equity exits in the first half of 2018
  • 69 funds, totaling $102.8B, were raised in the first half of 2019
  • Median fund size for the first half of 2019 declined slightly from 2018 to $292.7M

M&A Transactions

Announced M&A Transactions4

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Economic Update

A Snapshot of Key Economic Indicators

As of July 14, 2019

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Note: A Manufacturing Inventory Index figure greater than 50 indicates expansion;
A Backlog Index figure greater than 50 indicates expansion.

Select HW Transactions by Sector

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1. Bloomberg

2. Modern Distribution Management

3. Industrial Distribution

4. Factset

5. FactSet Transcripts

6. Pitchbook

7. United States Census

8. U.S. Federal Reserve

 

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