\u201cTo be recognized as the team that changed the restaurant equipment parts market by setting extraordinary new standards in customer experience, web-based solutions, and supply chain partnership [1].\u201d<\/em><\/p><\/blockquote>\n <\/p>\n While this is no small feat to achieve, these strategic operating focuses are what sets PT apart from its competition and has allowed PT to generate a revenue compounded annual growth rate (“CAGR”) of 35% over the last decade [2]<\/em>.<\/p>\n <\/p>\n Supply Chain Partnerships and Pricing [3]<\/em><\/p>\n Parts Town has become a value-added partner to restaurant equipment OEMs by taking on the mantle of \u201cmaster distributor\u201d (either on an exclusive or semi-exclusive basis) and allowing OEMs to get out of the parts distribution business, which they generally dislike. These master distribution relationships end up being a win-win for the OEM and for Parts Town. The OEM does not have to manage the distribution and logistics associated with supplying thousands of small SKUs (historically\u00a0via 50+ different dealers) and servicing a broad customer base. Parts Town, on the other hand, is able to pick up all of the OEM\u2019s customers and further build its position as a \u201cone-stop shop\u201d for restaurant replacement parts, while offering price savings and better service to these end-users.<\/p>\n A key component of these relationships is the pricing benefit Parts Town receives in return for being the trusted partner for the OEM\u2019s parts distribution. While I cannot disclose specifics, Parts Town receives a significant discount to the list price and in turn has a pricing structure that varies by customer type (i.e. independent restaurants tend to pay full list price, while larger customers can buy at discounts to list while still leaving good margin for PT). Furthermore, the industry focuses on percent discount versus the dollar list price, so PT benefits from the OEM-generated list price increases that occur annually. Overall these exclusive or semi-exclusive relationships are a key driver\u00a0behind PT\u2019s success and allow PT\u00a0to command higher gross margins than your average distribution business.<\/p>\n <\/p>\n eCommerce Platform and Innovation<\/em><\/p>\n Parts Town\u2019s website is the industry leading platform and a key competitive differentiator, in an otherwise behind-the-times industry. The website has 360\u00b0 views of more than 25,000 parts and is more user-friendly than the competitors with features that make identifying parts simpler (a big deal in this industry!) and tracking past orders more efficient [4]<\/em>. In addition to the Company\u2019s public site, PT also offers customized restaurant chain partner websites where franchisees\u00a0can find\u00a0a curated offering of parts that fit the specific pieces of equipment\u00a0in their restaurant\u2019s kitchen. Other recent innovation initiatives include the launch of PT\u2019s mobile app and a mobile image recognition system leveraging the 360\u00b0 images (pictured below), which allow\u00a0for even easier identification and re-ordering of commonly needed parts [5]<\/em>.<\/p>\n Customer Service and Corporate Culture<\/em><\/p>\n Across all customer categories, PT is heavily focused on customer service. as this is a key source of value for end-users (and indirectly OEMs because if customers are happy, OEMs are happy). PT offers same-day shipping on all orders placed before 8:00pm, a policy that the traditional dealer distribution system could never fulfill and is extremely valuable for restaurant owners who oftentimes can\u2019t operate effectively when a piece of equipment is down. PT also has a \u201cthree ring\u201d answer policy (i.e. they do not use automated systems) for customer service calls and technical support, in addition to other high touch consumer outreach programs used to increase loyalty.<\/p>\n Lastly, the Company\u2019s culture is an important part of the model as it ties together the other operating initiatives via the high value placed on innovation and customer service. \u00a0The Company\u2019s culture resembles more of what you would expect from a tech start-up than you would from a traditional distribution business and as a result,\u00a0PT\u00a0has remarkably low turnover rates (even within the call center department), implying high employee morale and savings on hiring and training costs.<\/p>\n <\/p>\n Conclusion<\/strong><\/p>\n While most may not find the restaurant equipment parts distribution industry to be anything exciting, I continue to be impressed by Parts Town\u2019s ability to carve out a unique and sticky role for itself in the industry. Through a focus on OEM exclusive relationships, industry leading innovation and best-in-class customer service tactics, Parts Town adds value to both ends of the supply chain, and as a result has achieved\u00a0a revenue CAGR of 35% over the last decade with annual sales of over $100 million in 2014 [2] [6]<\/em>. \u00a0While Parts Town\u00a0has\u00a0plenty of runway left within this market, who knows which other sleepy distribution markets they can disrupt next!<\/p>\n <\/p>\n <\/p>\n Sources:<\/span><\/p>\n [1]\u00a0http:\/\/www.partstown.com\/about-us<\/a><\/p>\n [2]\u00a0http:\/\/www.chicagobusiness.com\/article\/20140531\/ISSUE02\/305319973\/fast-fifty-2014-no-34-parts-town<\/a><\/p>\n [3] Personal discussions with CEO, December 2013.<\/p>\n [4]\u00a0http:\/\/www.partstown.com\/about-us\/its-finally-here-partspin<\/a><\/p>\n [5]\u00a0http:\/\/www.prweb.com\/releases\/2015\/08\/prweb12920719.htm<\/a><\/p>\n![\"Source:](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/2015-12-091.png\")
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