Does The Internet Change Distribution?

March 19, 2003
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Why would a dealer scrap the traditional distribution/retail channel of buying from an HVACR distributor? That is the question that still lingers in the minds of business owners who try to find a way to make an Internet presence compatible with the traditional brick-and-mortar business model.

In the book, The Wholesale Distribution Customer Speaks, author Mark Dancer commented, “Customers often told us that they preferred to buy from their local supplier. They had heard about the dot-coms and were aware that online buying was — at least at one time in recent history — supposed to be all the rage, but said that the distributor down the street had always been there for them.

“Moreover, these distributors understood the customer’s business. The customer knew the distributor’s sales people, counter people and, in many cases, all its officers. They knew who to go to for advice and who to go to when a problem needed to be solved. Why would they consider changing?”

Why indeed.

The benchmark of traditional distribution businesses has always been the personal service — the personal, familiar service. How can an impersonal Web site take the place of this service? The truth is, e-commerce is not designed to replace personal service, it is designed to improve customer service. A computer screen will unlikely ever duplicate the personality of a business owner or his or her employees.

At least one distributor feels that his “traditional” customers will not likely take to e-commerce as quickly as others. “We all have customers that do not factor value-added into the equation,” said Frank Meier Jr. of Meier Supply Company, Johnson City, N.Y. “The difference is that these same customers that shopped price via the phone can now use the Internet. That’s not typically the type of customer that we partner with.”

The Business Plan

Putting the lack of the personal touch aside, there are a number of other ways that companies can strengthen their customer base without actually being in the same room with them. It starts with a solid business plan.

Skip Schembari represents HVAC Performance Products Inc., Pasadena, Calif. His company is both a distributor and manufacturer. He told The News how the Internet fits into his company’s business plan.

“Our business model has placed the Internet as an valuable and essential tool in our overall marketing program,” Schembari said. “We encourage our contractor dealers to visit our Web site and use e-mail.

“As part of our business model, the Internet is just one part. As far as reaching new customers and providing existing customers with information 24/7, it’s unbeatable. There is still a lot to be gained as the Internet community grows; the best is yet to come. That said, nothing beats hands-on, face-to-face communication with the customer. The Internet is just another way to bring the customer closer, if done right.”

A role of distributors is to be a mouthpiece for the equipment manufacturer that it represents. And manufacturers are looking to improve the information flow between distributors and their dealers.

“We are always looking for ways to use the technology to make it easier for our customers to do business with us,” added Joe Niemann, vice president — Emerson Climate Technologies Marketing and eBusiness, Sidney, Ohio. “Putting order status information online for our OEM and wholesaler customers ultimately benefits the contractor by making the info readily available to their suppliers.”

Doug Young, president of the Behler-Young Co., Grand Rapids, Mich., works with the Carrier Corp. to market its products, but he said that his company puts in extra effort to work with its dealers.

“We are a Bryant distributor and work somewhat with them,” Young added, “but Carrier has an extensive Web presence, and it is not integrated with how we and our dealers interact.”

Young said that he still prefers the traditional business model of meeting face-to-face with his customers, adding that having a Web presence is “a minor part of our business method.”

Part of the traditional interaction between dealers and distributors is parts ordering and transacting business. Whereas the typical brick-and-mortar scenario often involves signing an invoice or paying cash (or credit), the Internet changes the methods of shopping.

Schembari said that the shopping “experience” has to improve in the future, too.

“Although our Web site is not a shopping cart, it does have a password-protected area with online pricing,” he added. “I do, however, see a complete shopping-style site in the near future.

“I don’t think the industry as a whole is quite there yet. The reason I say that is, I have found Internet access is, for the most part, only on the boss’s desk. Those people who make parts and equipment orders do not have Internet access on their desks. That’s not to say there are not a lot of companies who do provide access, but it is very few and for a very good reason: Surfing eats valuable productive time.”

News’ contractor consultant Larry Taylor of AirRite Air Conditioning Company Inc., Fort Worth, Texas, said that although we haven’t seen the Internet “shake out” all of the bugs yet, using a Web strategy will be a vital part of any business plan.

“I believe the Internet in its next form will provide better information and resources in providing a business model that will work.”

Connecting With The Customer

Convenience is a big reason for driving customers to a Web site. One distributor keeps that thought in mind when reaching out to his customer base.

“Our goal is to make our Web site valuable to our customer,” stated Meier. “We want the customer to go to our Web site for anything and everything that has to do with HVACR. We have recently hired a marketing person who as part of her responsibility will focus on that.”

Distributors prefer to connect with both contractors and customers via a two-pronged marketing approach.

“We find not only contractors visit our various sites daily, but so do homeowners who are on the hunt for various products and information,” said Schembari. “Our goal is twofold. First, find out what the end user/homeowner needs, then steer them to a contractor/dealer, then follow up with both. And second, make our company, its products, and information available to the contractor with as little hassle as possible. We return Internet inquiries in hours. This goes for both the homeowner and the contractor/dealer.”

In his book, Dancer remarked, “The customer’s needs are paramount and need to be factored in. Can the same service levels be delivered without local assets and people? Can the customer’s view of ‘not local’ as ‘risky’ be overcome?”

Getting customers involved with a Web presence may not be the No. 1 priority right now, according to News’ contractor consultant Scott Getzschman of Getzschman Heating & Sheet Metal, Fremont, Neb., but its time is coming. “I believe we could live without [a Web site] today, but within two to five years it will be used to streamline a lot of processes of many distributors,” he said.

Other Pluses

“Buying online is often about convenience — a benefit that can mean time savings,” Dancer pointed out. “Time-starved owners should reap rewards if they can save time procuring products. They can get the job done quicker with higher quality and few reworks.”

Schembari said, “The Internet has made information and the speed at which business can be transformed unbelievable — to quote Bill Gates, ‘business at the speed of thought.’ It is amazing to me, relatively speaking, how many HVAC contractors are not linked to the Internet in their work place.”

But there is also the minuses that go with conducting business online. Young pointed that out. “Customers find it easier just to call and have our staff do the work for them,” he said. “It may make it easier for the customer to ‘shop’ our prices, but we can take the privilege away if it is abused.”

Yet Young knows the value of an Internet presence, so he intends to move forward. “[The Internet] provides quick answers for customers and ties the customer to us. We want to do more with it.”

Publication date: 03/24/2003

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