Internet Technology Changes Business Relationships

November 10, 2000
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BALTIMORE, MD — Whether it’s an evolution or a revolution, one thing seems certain: the Internet and e-commerce are changing the nature of business relationships. The supply chain in the hvacr trade was well represented by panel members who addressed attendees of The News/ ACCA e-Contracting Summit on the changing business landscape.

Contractors reacted to the question about their relationships with manufacturers and how the Internet has changed the dynamics of customer-to-contractor-to-distributor-to-manufacturer relationships.

In one example, it has opened up a new way to cut costs. “We buy our equipment online from Trane, and they will give discounts for paying within 10 days,” said Advanced A/C’s Tom Lawson. “I asked Trane if they could knock another one-half to one percent off the discount by drafting my account, giving them my money immediately. The bottom line is getting as many discounts as you can.” Contractors voiced their concerns about their customers getting “warm and fuzzy” with manufacturers because of the amount of information exchanged between both over the Internet. Rheem’s Lovick said the situation is a “two-edged sword.” “Customers have a greater brand awareness about us so that when they go to the dealer, they can make an educated choice,” he said. “But it is also up to the dealer to be aware of what we are doing.” “We’d rather deal with an educated customer,” said Ray Isaac, of Isaac Heating & A/C. “It’s a way of taking customer service to another level and differentiating yourself from your competition.” “We have to be very careful about how we partner with manufacturers,” added Quality A/C Service’s Jeff Stewart. “I don’t want a manufacturer to have priority over my customer’s database. I don’t want to depend on an attachment to a manufacturer or a dotcommer.”

Distribution Chain

Another relationship that is undergoing dramatic changes is that between distributors and contractors. According to Russ Broeckelmann of the Northamer-ican Heating, Refrigeration & Airconditioning Wholesalers Association (NHRAW), the future is uncertain for distributors who fear the Internet. “Some distributors would be very happy if they never heard of e-commerce,” he added.

“It’s scary because to some, the only reason they think [of e-commerce] is because their competitor down the street is using it. I know there will always be a place for local distribution and from talking with our members, they don’t want to get into a centralized parts auction.

“Our members still believe in the local, personal relationships. And frankly, I need to know what contractors want so I can take it back to my members.”

“Our biggest asset in the marketplace is the local brick-and-mortar distributors,” said Jennifer Clark of Johnson Controls. “We have been pushing for years for better management in the supply chain. We have no plans to expand contractor-direct sales.”

“Local information derived from the distribution network is one we can never replace,” added Armstrong’s Lee Bergstrom. “Contractors use their judgment as to who we should be doing business with, and we don’t see any changes in that [relationship].”

Contractor’s Websites

One of the foremost things on the minds of hvacr contractors at the summit was developing and maintaining a website.

Panel members and contractors talked about website development and what they hoped to achieve. Isaac had advice for contractors based on his own experience.

“Start simple,” he said, and maintain a consistent message throughout all types of advertising. Isaac said he is getting a half-dozen customers a day from his website with a closing rate of approximately 90% from those visitors. “People will buy from us just because we have a website.”

“The Chamber of Commerce website is a good link for our website and a few national chains have called me because of that,” added Lawson. “Put your website address on your business cards and pass them out as much as possible. You still have to depend on meeting people.”

“The big website issues are ease of use and ease of access to obtaining data,” added AFGO’s Bob Keingstein. “Recognizing our customers’ needs allows us to use the Internet to give them what they want. We went to a dotcom company who built a link from our software to their site which allows us to upload all of our customer data every fifteen minutes. Our customers can see a complete work history on their projects.”

But some functions of a website are not feasible for some contractors — yet.

“We are not at the point where a customer will come to our website, push a button, and buy an a/c system,” said Stewart. “But they can set up service appointments.”

Watch Those Links

Another topic of conversation that generated some interesting answers was the issue of links to other companies’ websites. There is a concern among contractors that if they put a manufacturer’s link on their website, a visitor can bounce out of their website to the manufacturer’s website, and then out to a competitive contractor.

“There’s no reason to send a ‘live’ customer off [a contractor’s] website back to the manufacturer’s dealer locator,” said Lennox’s Ozzie Buckler. “The only advantage for a dealer to have a link back to our website is to gain product information.”

Increasing Profit Margin

“The web is a great enabler of reduction of overall transaction costs,” said Clark. “You can squeeze in extra margin points by reducing labor costs and that is where the Web is most helpful.”

The results of going online and establishing an Internet presence can be dramatic, at least according to Keingstein. “It took our local service company into a national arena overnight,” he said.

Sidebar: Supply Chain Panelists

The panel at The News/ACCA e-Contracting Summit included:
  • Lee Bergstrom of Armstrong;
  • Russ Broeckelmann of NHRAW;
  • Ozzie Buckler of Lennox;
  • Jennifer Clark of Johnson Controls;
  • Ray Issac of Isaac Heating & A/C;
  • Bob Keingstein of AFGO Technical Services, Inc.;
  • Tom Lawson of Advanced A/C;
  • Steve Lovick of Rheem Manufacturing; and
  • Jeff Stewart of Quality A/C Service.
  • Publication date: 11/13/2000

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