2008 Registration Document - Rexel

3. Business descriptionIn each of these three models, the Rexel Group makessales through two distribution types: inventory sales anddirect sales which represented 82% and 18%, respectively,of the Rexel Group’s sales in 2008. Direct sales are notsignificant except in North America, where they representedapproximately 39% of the Rexel Group’s 2008 sales.Regional Distribution centersRegional distribution centers are typically located inregions in which the Rexel Group’s customer base is highlyconcentrated. These centers focus exclusively on logisticsfunctions and warehouse a large number of products, whichare furnished directly by the Rexel Group’s suppliers. Salesactivities are conducted by branches associated with theseregional distribution centers. The Rexel Group’s regionaldistribution centers deliver products directly to customersas well as to the associated branches as needed in order toreplenish their stocks.The Rexel Group created regional distribution centersprimarily in order to improve service to customers through awider product offering and a range of tailored services, thusallowing a significant reduction in inventory and costs.Warehousing areas are located in regional distributioncenters (storage, preparation of customer deliveries andstocking of branches) as well as in branches. The size ofa distribution center mainly depends on the number ofbranches associated with it and the volume of sales andnumber of product references it handles.As at December 31, 2008, further to the HagemeyerTransaction, the Rexel Group had 38 regional distributioncenters in Europe. These centers were principally locatedin France, Germany, Portugal, The Netherlands, Belgium,Austria and Slovenia. The 11 regional distribution centersin France are on average 17,000 square meters in size andeach supplies between 5 and 65 branches. The 27 regionaldistribution centers in the rest of Europe are on average8,600 square meters in size and each supplies between 5and 40 branches.In North America, the Rexel Group has 9 regional distributioncenters in the United States with each supplying between5 and 45 branches. In Asia-Pacific, the Rexel Group has2 regional distribution centers in New Zealand, supplying73 branches. There is no regional distribution center inAustralia due to the country’s geography and to the resultinglow-density network. The Rexel Group also has a nationaldistribution center in Chile supplying 17 branches.Hub and spoke distribution modelIn areas with lower customer concentration (notably inNorth America), the Rexel Group has developed throughthe implementation of a hub and spoke distributionmodel. In this model, each hub branch supplies logisticssupport to satellite branches in addition to carrying out itsown commercial activities. The Rexel Group has 80 hubbranches worldwide (of which 36 were located in NorthAmerica, 41 in Europe and 3 in Asia-Pacific) which servegenerally between 5 and 20 satellite branches. In NorthAmerica, the Rexel Group had as at December 31, 2008,21 hub branches in the United States and 15 in Canadawhich supply 69 satellite branches in the United States and199 in Canada.Stand-alone branchesStand-alone branches are generally located in areas oflow customer concentration or where the use of regionaldistribution centers or hub and spoke branches would notbe economically efficient. Stand-alone branches are thuslocated in certain regions of North America, as well as inEastern Europe, China and Australia. These branchesreceive their products directly from the Rexel Group’ssuppliers and warehouse them on location.Extensive branch networkAs at December 31, 2008, the Rexel Group had 2,472branches. The following table sets forth the change in thenumber of the Rexel Group branches between December 31,2006 and December 31, 2008 by geographic area:(number of branches)Rexel GroupAs at December 31,2008 2007 2006Of whichHagemeyerRexel GroupRexel GroupEurope 1,432 528 930 907– France 456 – 453 443– Outside of France 976 528 477 464North America 649 – 696 703– United States 424 – 466 473– Canada 225 – 230 230Asia-Pacific 308 – 325 301Other Operations 83 60 17 17Total 2,472 588 1,968 1,928PAGE 26 | REXEL 2008