Big Box Enters Supply Chain

Changes in the supply chain began in 2006 as The Home Depot acquired Hughes Supply and entered the HVAC market as a significant player. Its $3.51 billion-entrance fee climbed as the company continued to purchase other strategic supply houses. Officially HD Supply, the new division of the big box store, sparked controversy as local contractors’ service trucks began frequenting its parking lots more often.

The Home Depot’s marketing strategy is set to attract all types of contractors, according to a spokesperson for the company. Although the big box does not operate on a referral system, it’s vendors provide customer relationships.

This raised concerns about a competitive market between big box stores and traditional HVAC distributors. A spokesperson for Home Depot said, “The Home Depot Home Services HVAC program does not compete with distributors; we actively partner with Trane distributors to assist in managing the program and driving installation sales.”

In a survey conducted by The NEWS, results indicated that HVAC contractors were buying from the big box stores even though they view them as a competitive threat to the traditional HVAC distribution and retail markets in their areas. Marc Primus of Primus Heating and Air, Greenville, S.C., said smaller distributors only need to keep up with the changing trends of the HVAC trade to keep his business. “As long as the mom and pops stay competitive and provide technical savvy to us in the HVAC trade, we will continue to frequent them,” he said.

But, Scott Leveranz, HVACPlanet.com, offered a word of caution. “If the small wholesaler/distributor can’t find themselves a niche in the market, or step up to provide the extra customer service to dealers, then they will fail just like any other business (ours included),” he said. “We have to meet the ever-changing demands of our customers, too.”

“We must utilize initiative, agility, and intensity to compete with the sheer magnitude of a Lowe’s or a Home Depot,” said Michael Senter of ABCO Refrigeration Supply Corp. “This means we must understand our customers more intimately and meet their needs more specifically, from providing high levels of technical customer service to maintaining specific inventories to meet their needs at any time of day or night.

Publication date: 2/25/2006