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Distribution Cost Advantage

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Distribution Cost Advantage
A source of competitive advantage that depends on the efficient delivery of a product or service to customers.

Distribution Cost Advantage
A comparative advantage that one company has over another because of its ability to deliver goods or services more quickly and less expensively. For example, a flower delivery service in the town where the order was placed has a distribution cost advantage over an identical service out of state, as it can deliver flowers more quickly and cheaply.


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We observe from our own studies, for example, that companies selling $4 billion or more of annuities enjoy a 35 to 70 basis point distribution cost advantage over smaller competitors--which may translate into a 1% to 2% improvement in return on equity.
They have certain customer base and distribution cost advantages that can be exploited to gain market share at the expense of traditional insurers.
From a purely financial perspective, a distribution cost advantage of 50 basis points translates directly into an increase in return on equity of nearly 1.
 
 
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