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CORRESP
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Response to SEC comments

      Suite
      2800 1100 Peachtree St.

      Atlanta
      GA 30309-4530

      t
      404 815 6500 f 404 815 6555

      www.KilpatrickStockton.com

      April
      18, 2005

      direct
      dial 404
      815 6587

      direct
      fax 404 541 3186

      REaddy@KilpatrickStockton.com

VIA
EDGAR

Securities
and Exchange Commission

Division
of Corporate Finance

450 Fifth
Street, NW

Washington,
DC 20549

Attention:
John Cash, Accounting Branch Chief

      Re:

      Responses
      to the Staff Comments on Industrial Distribution Group, Inc.,

      Annual
      Report on Form 10-K for the Fiscal Year Ended December 31, 2004,

      File
      No. 1-13195.

Dear
Sirs:

At the
request and on behalf of our client, Industrial Distribution Group, Inc. (“IDG”
or the “Company”), we provide below responses to the Staff’s comments to the
Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2004. As
requested, these responses are keyed to correspond to the Staff’s comment
letter, with each of the Staff’s comments set out below and followed by our
response. A copy of this letter is being sent to the Staff by overnight
delivery.

Unless
the context requires otherwise, references to we, our, us, IDG or the Company in
the responses below refer to Industrial Distribution Group, Inc. In addition, in
the case of all responses to comments and the acknowledgements at the end of
this letter, the use of third person pronouns reflect statements of IDG as if it
were the signatory of this letter (rather than this firm on its
behalf).

    1.

      General
      instructions for responding to comments; no response
      required.

Liquidity
and Capital Resources, page 19

Comment

    2.

      Please
      include in future filings a discussion of the cash requirements for
      interest. See footnote 46 to Release No.
  33-8350.

Response

In future
filings, we will insert a line in the Contractual Obligations table labeled
"Estimated interest payments" and will disclose in the table estimated interest
payments due by year. We will provide a description below the contractual
obligation table pertaining to the estimated interest payments. The disclosure
will read as follows:

”We
calculated estimated interest payments for notes payable and long-term debt as
follows: For fixed-rate and term debt, we calculated interest based on the
applicable rates and payment dates; for variable-rate debt and/or non-term debt,
we estimated interest rates and payment dates based on our determination of the
most likely scenarios; we typically expect to settle all such interest payments
with cash flows from operations.”

Statement
of Cash Flows, page F-6

Comment

    3.

      Please
      expand for us supplementally about the nature of your premium payments on
      management liability insurance. In addition, tell us how you determined
      that it was appropriate to classify these payments as a financing
      activity.

Response

As
discussed in Note 10 to our financial statements for the fiscal year ended
December 31, 2000 included in our Annual Report on Form 10-K for that year, Mr.
Waite dissented from the merger of Industrial Distribution Group, Inc., a
Georgia corporation (“IDG-Georgia”) that was one of our predecessor companies.
(Following that merger, IDG-Georgia became one of our wholly owned subsidiaries
and was known as The Distribution Group, Inc.) Following the adjudication of Mr.
Waite’s dissenting shareholder claim, your payment to him represented the
court-appointed independent appraiser’s valuation of Mr. Waite’s ownership
position in IDG-Georgia, at the time of our acquisition of that company. The
amount paid to Mr. Waite represented a delayed acquisition payment, or a payment
made to acquire the equity of IDG-Georgia, and accordingly, was presented in
cash flows from investing activities in accordance with SFAS No. 95.

We
provided a dissenting shareholder accrual of $11.2 million as of December 31,
1999, that was adequate to cover the aforementioned payment made to Mr. Waite.
In April 2000, we entered into a premium finance arrangement with our insurance
carrier to finance the cash payment in the form of long-term borrowings. We
received proceeds of $11.0 million ($10.8 million net of fees) under this
arrangement and used the proceeds to pay Mr. Waite and other obligations
associated

with the
settlement of the dissenting shareholder suit. These net proceeds received were
presented in the statement of cash flows as financing proceeds. Accordingly, the
re-payment of the insurance carrier (premium payments), over a period of
thirty-six months (expiring March 2003), was also included in the statement of
cash flows as a financing activity for the years ended December 31, 2002 and
2003, respectively. We believe the proceeds received and the premium payments
made relating to the dissenting shareholder suit meet the criteria of a
financing activity in accordance with SFAS 95, paragraph 18. The entire
settlement with Mr. Waite was associated with the payment made on an acquisition
and the financing thereof.

Note
1. Basis of Presentation, page F-7

Restatement
of Fiscal Year 2003

Comment

    4.

      Please
      supplementally provide for us a more comprehensive discussion of the
      nature of the error that was identified as well as the corrective action
      you have taken. Tell us when the error was identified, by whom it was
      identified, and when it first began. In addition, tell us what specific
      steps you have taken to remediate the
error.

Response

The cost
of goods sold adjustment was the result of one of our divisions incorrectly
reconciling the “received but not invoiced” payables report to the general
ledger. The division inappropriately discarded a portion of the balance produced
on the report in order for the report to reconcile to the general ledger. We
discovered the existence of an error ourselves in October 2004 through our
internal systems of controls and financial statement close procedures that are
performed monthly. Subsequent analysis of this report and the cause of the error
indicated that as of December 31, 2003, trade accounts payable was understated
by $0.5 million. In addition, at September 30, 2004, due to a continuation of
the errors in calculating the report, cost of sales and trade accounts payable
were understated by $1.2 million, which included the prior year amount. In order
to remediate this error and to prevent the error from occurring in the future,
the accounting department at the division was reorganized, and persons
responsible for financial reporting at the division have been removed from the
company. Also, all accounts are reconciled monthly with the appropriate review
of each reconciliation performed. This reconciliation and review process
includes the “received but not invoiced” payables report.

In 2003,
depreciation expense was overstated by $0.2 million. In 2003, the accounting
department began a project by which all property and equipment of the Company
were compiled and inventoried. This was necessitated due to the various useful
lives and depreciation methods being applied by the merger of 29 businesses from
1997-1999. During 2003, we identified all assets associated with the physical
inventory and reconciled all assets identified to the property and equipment
subledger. During 2004, we analyzed and reconciled all depreciation expense
amounts and methodology for all assets listed in the property and equipment
system to the general ledger. Once completed, we identified approximately $0.4
million in excess depreciation expense that had been recorded. Further analysis
was performed on this account and it was determined that approximately $0.2
million occurred in 2003. This was a positive adjustment to income for that
period. As all fixed assets were reconciled to the general ledger as of December
31, 2004, we have implemented a policy to track and record all property and
equipment additions and disposals to prevent this error from occurring in the
future. This policy also includes the useful life to assign to each asset
addition to ensure consistency in recording depreciation expense for similar
assets.

Note
2. Summary of Significant Accounting Policies, page
F-7

General

Comment

    5.

      We
      note that you have developed software programs that are utilized in your
      service offerings. Please tell us how you are accounting for the costs of
      these programs.

Response

Our
proprietary Flexible Procurement Solutions™ or ‘FPS’ software programs are used
to combine the sale of our MROP products with value added services, including
providing our customers with our expertise in product application. The FPS
Software was acquired through the acquisition of one of our companies in 1997.
The value of the software was recorded as an intangible asset. The unamortized
amount as of December 31, 2004 amounted to approximately $240,000. The Company
incurs development costs of approximately $150,000 per year and are expensed as
salaries. The Company does not charge for this software used at customer
sites.

Inventories,
page F-8

Comment

    6.

      In
      future filings, please disclose the amount of inventory representing
      inventory held by customers on consignment.

Response

This
information will be provided in the Form 10-Q for the first quarter and in
subsequent filings. As of December 31, 2004, consignment inventory was 11.7% of
the total gross inventory balance.

Comment

    7.

      We
      note that inventory reserves include the effect of recoveries in fiscal
      2004 and 2003. Please tell us about the facts and circumstances
      surrounding these amounts and why a reversal of existing reserves was
      necessary.

Response

Each
quarter, we review and analyze the product categories that comprise the obsolete
and excess inventory to determine the net realizable value (NRV) of the product
or product category based upon historical results, which include, among other
factors, returns to vendors and discount selling programs.

The 2003
inventory recoveries totaling $0.1 million were primarily due to success in our
return-to-vendor programs. The 2004 $0.2 million in recoveries were attributable
to the improved management of obsolete and excess inventory levels, in addition
to continuing to utilize the return-to-vendor program as well as discount
selling programs.

Revenue
Recognition, page F-10

Comment

    8.

      Tell
      us supplementally and revise future filings to provide a more
      comprehensive discussion of how you determine when you “earn” revenue.
      Include specific information related to your service revenue. Also address
      for us how you have applied the guidance set forth in EITF 00-21: Revenue
      Arrangements with Multiple
Deliverables.

Response

Product
revenue is recognized when inventory is shipped to a customer as title and risk
of loss are transferred to the customer upon shipment. For consignment inventory
agreements, product revenue is not recognized until the customer requisitions
the items for use in its manufacturing facility. Additionally, on certain
occasions, our suppliers ship items directly to our customers. In these
circumstances, revenue is recognized when title and risk of loss pass to the
customer based upon the supplier’s shipping terms. Where the supplier does not
inform us of the date of shipment, revenue on direct shipments is recorded at
the time that the invoice from the supplier is received, which approximates the
date that the related inventories are received by the customer.

Our
Flexible Procurement Solutions or “FPS” arrangements combine the sale of our
products with value added services, including providing our customers with our
expertise in product application and process improvements. In these
arrangements, the primary revenue source and focus remains on the sale of our
products. Our FPS revenues typically include both a product and service
component, with the product sale accounting for substantially all of the revenue
and costs. The service component is billed separately as services are actually
rendered. These revenues are typically associated with personnel costs with a
small mark-up (i.e. 10%) and are invoiced after the services have been rendered
with no expectation by the customer of continuing services to be performed by
us. Accordingly, we recognize revenue on these arrangements as these personnel
costs are incurred in connection with rendering the related services. We do not
typically charge our customers for our software used in these relationships. We
charge a management fee for our services, which includes usage of this tool.
Accordingly, we recognize revenue on these arrangements as services are
rendered.

In our
FPS arrangements we are able to separately identify service revenue. The service
component, including personnel, site administration and use of software, and is
immaterial to our overall results of operations, representing approximately 3%
of revenues for the 2004 fiscal year. We adopted EITF Issue 00-21, “Revenue
Arrangements with Multiple Deliverables,” in fiscal 2003. In applying this
guidance, we reviewed all arrangements entered into with our customers after
June 15, 2003. In our review, we assessed whether we had any revenue
arrangements with multiple deliverables and, if these arrangements existed,
whether to divide these deliverables into separate units of accounting if the
deliverables met certain criteria. We did not and have not identified any
revenue arrangements with multiple deliverables that would meet the fair value
allocation criteria as defined in EITF 00-21. Therefore, the adoption of this
guidance did not have an effect on our consolidated statements of operations,
financial position or liquidity.  We continue to monitor all arrangements
entered into with our customers.

In future
filings, we will enhance our discussion by adding the following paragraph to
Note 2: “The Company records “service” revenues on its Flexible Procurement
Solutions for the following for its Storeroom Management Services: site
personnel, carrying costs associated with inventory, administrative fees
including the monthly use of its proprietary software. These “service” revenues
amounted to $______ and represents _____ percent of the company’s total revenue.
All revenues are recognized after the services have been
performed.”

Comment

      9.

      We
      note that many of your Flexible Procurement Solutions (FPS) arrangement
      include a guarantee of the customers cost reduction. Please tell us how
      you are accounting for these guarantees. In addition, tell us how you
      account for situations in which customers share their cost savings with
      you.

Response

The
guarantees noted in our literature are primarily service level guarantees. Our
“Documented Cost Savings” associated with our Storeroom Management Solutions
allows for a methodology by which the Company and the Customer will agree at the
beginning of our relationship how “cost savings” will be calculated. Documented
Cost Savings are calculated and agreed to by the customer on a monthly basis, or
quarterly if the contract dictates. All Documented Cost Savings must be agreed
to by the customer for them to count towards our service level guarantee. On
rare occasions, the Company will be required to pay or provide additional
services associated with this guarantee. These costs are expensed as incurred,
and evaluated on a monthly basis as to the existence of a potential liability.
During 2004 the Company did not pay any customer for a failure to meet its
Documented Cost Savings guarantee. There was a liability of $29,000 at December
31, 2004 for estimated future payments.

Approximately
10% of our contracts allows for a sharing between the Company and the Customer
when we exceed our service