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“I think it’s somewhat important to have a recognizable branding on aftermarket products,” said Andy Dodds of Indiana Supply, Indianapolis. “It helps relieve buyers’ anxiety over no-name or unbranded products that we all typically tend to shy away from.
“I would say that the majority of the contractors simply want the reassurance they’re buying good-quality products and that we’ll stand behind them if there is a problem,” he said. “With Source 1 we have a nationally recognized label, and the warranties on some of their aftermarket products are actually better than the OEM component warranties.”
Dodds said he believes that his customers have responded very favorably to the Source 1 products because many of the items they’re purchasing are manufactured by the same nationally recognized companies they have been accustomed to buying from (i.e., companies like Hydro Balance coil cleaners and JMF line sets).
He said, “As a distributor, it is our goal to provide our contractors with real value by offering them top-quality products at competitive prices. I feel that we have accomplished this and we can see the result is increased sales in those offerings.”
If all other things are equal, brand name might be the deciding factor, said Charles Humphreys of ESD, Inc., Memphis, Tenn. “Certain products such as hand tools and meters are purchased based upon their reputation and the brand name is important,” he said. “Other parts will be given a chance by the customer if we the distributor will recommend it and provide the warranty to back it up.
“Of course, if there is no advantage pricewise and the availability is the same, the brand name will prevail.”
BRAND AS A FOOTHOLDFor distributors like Kevin Morris of cfm Distributors, Kansas City, Kan., having a full line of branded HVACR parts, supplies, and equipment allows his business the opportunity to “penetrate a larger purchasing group, i.e., the total market potential. We have found that our refrigeration contractors usually end up purchasing our commercial equipment from us, the parts and service people usually end up being converted to our equipment dealer base as well as being exposed to the refrigeration side of the trade,” he said. “Each department receives the opportunity to grow each customer in every aspect of the product we offer. In other words, we feed each other.”
Morris noted that having something for everyone helps with the price-sensitive side of wholesale-distribution. “Commodity items have to be in line and perceived as very competitive,” he said. “These items are notoriously low-gross-margin producers, but put them in the mix of a complete project and/or invoice-counter ticket and you can easily see the positive impact on the bottom line.”
The bottom line - the results of healthy margins - is what makes the aftermarket so important to Source 1 distributors like Humphreys. “I have been told that the overall market size of the aftermarket sales is equal to the equipment sales,” he said. “This is a real opportunity for an equipment distributor to improve its bottom line in a very competitive market. Margin pressure is generally not as great as it is on the equipment side.”
BEYOND BRANDINGHaving an established name brand also has other benefits, such as increased buying power. This has a spider web effect on other ways of saving money. “I have seen many instances where Source 1’s buying power has resulted in savings to us over other vendors,” said Dodds.
“We also have the advantage of combining a variety of items from various manufacturers on one purchase order to meet freight minimums, which again flows right to the bottom line. Ordering in smaller quantities and still meeting freight allowances also improves our product turns and stock rotations to minimize old and obsolete inventory.”
Dodds said it all goes back to being the one-stop shop for customers. “We constantly strive to have most if not all of the items a contractor needs to fill their purchase orders in one stop. I think this increases our market share and definitely increases our market penetration into specific accounts as we change customers’ buying habits.”
Having a recognizable brand is reinforced by signage and product labeling, two things that Humphreys attributes to the marketing success of Source 1. “Marketing aftermarket products has proven to be very similar to what occurs in the retail market. Appearance is a very important part of the formula,” he said.
Morris said he is very happy with the Source 1 brand name and what it has meant for his business. “It has been 12 years since I started with cfm Distributors, which at the time was a York distributor and the only thing we stocked was York and York replacement parts,” he said. “We are still York and have added the Coleman line of HVAC equipment and have expanded our product offering to become a full-line aftermarket HVACR wholesaler.
“It has drastically improved our sales, our margins, enlarged our customer base, and prevented us from having flat times.”
Sidebar: Beyond ProductsBesides offering brand name aftermarket products, Source 1 distributors provide a lot of business training for their customers. Here are some examples from the distributors interviewed for this article.
“We believe education is a must, not only for profitability, but for survival,” said Morris. “It is imperative that our customers are educated not only on the technical side, but on the business side as well, and we offer monthly classes on all aspects of the contractors’ needs.
“We offer full support from the HVAC and refrigeration side, how to wire a relay, install the newest technology, and how to collect receivables faster and reduce risks,” he said. “We strive to be not only a one-stop shopping spot, but also a one-stop customer service spot. We attempt to build a culture to empower our customers and employees to engage in an effort to continuously improve our products, our services.”
“One additional thing Source 1 does,” said Humphreys, “is to continually search for new opportunities in new product offerings and marketing programs to improve our collective businesses. If we see a product that could be a benefit to this goal, Source 1 has been very accommodating in adding that offering to their line.”
“Our culture has always been to provide training and education to our customers by continually offering a host of product, service, and business related training opportunities,” said Dodds.
“We are fully committed to providing up-to-date training to our contractors, so they can be better prepared to meet the demands of an ever-changing market. We also offer programs throughout the year that contractors can take advantage of to help them market certain products or product lines within their existing business structure, to increase their per ticket gross margin and grow their business.
“Lastly, in these tough economic times and even with the cost of fuel, we still offer free daily delivery to our customers,” he said. “This single resource can be extremely valuable to contractors, not so much in terms of growth, but more in terms of cost avoidance that flows right to their bottom line.”
Publication date: 08/18/2008