Weighing in on Direct Selling via Internet

October 22, 2007
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Since its inception, the World Wide Web has managed to become an integral part of everyday business and everyone’s personal life - well almost everyone who has a computer and Internet connection. The Web has made it easy for people to conduct business and buy merchandise in the privacy of their own homes.

While the Web has revolutionized how consumers buy retail products, it has also brought dismay and distrust from traditional brick and mortar businesses, like HVAC contractors and distributors.

These businesses have enjoyed selling and servicing equipment in an environment where the customer buys equipment or parts from them, who in turn arrange for installation of the equipment and parts with the hope of future service work and eventual replacement/retrofit work. In a perfect world (and one which used to exist), this is how successful HVAC contractors and distributors set up their business model.

Not anymore. The Web has changed this formerly traditional model forever. But is that a bad thing? Maybe or maybe not, depending on which side of the transaction one is viewing, or profiting from. The NEWS took a look at one particular Website, www.acdirect.com, and asked the site president about the company’s policies of selling directly to end users while bypassing the traditional contractor-distributor chain.

HVAC contractors and distributors contacted for this article also commented on this new trend of online buying versus brick and mortar buying.

WARRANTY VOIDED?

Perhaps the biggest question that HVAC businesses have is whether any of the equipment sold via the Web comes with its original manufacturer’s warranty - something that has been at the very heart of the issue of direct selling to consumers. In the past, HVAC contractors have balked at installing equipment that is not backed by a manufacturer’s warranty. If something happens to the equipment, the contractors might be paying out of their own pockets to fix it, or stand the chance of losing the customer.

NEWS contractor consultant Aaron York Sr. of Aaron York’s Quality Air Conditioning, Indianapolis, said that Web sellers want contractors to be labor-only suppliers without the benefit of markup on the equipment. “The manufacturers tried this back in the late 60s and early 70s and found that selling to every person who wanted to slam in the systems ran their warranty costs through the roof,” he said.

However, according to AC Direct’s President Michael Haines, warranty fulfillment is basically a nonissue.

“Warranty fulfillment is almost always up to independent distributors and dealers and, as such, any given warranty (traditional channel purchases included) will normally be fulfilled without question, although, in rare instances complications can arise either way,” he said.

“AC Direct offers warranty fulfillment through over 400 major independent distribution centers throughout the United States and, as such, has never had a warranty claim denied for any of our customers, nor do we expect to.

“We are currently working in conjunction with several major manufacturers on a national program that will ultimately end the concerns of both manufacturers and consumers when it comes to certified installation and warranty fulfillment. This program will provide manufacturer-certified and -approved installers to all consumers who purchase through the AC Direct network of dealers.”

But getting any manufacturer onboard with a warranty fulfillment program could be a challenge, especially if that manufacturer does not condone the sale of its products at acdirect.com.

Mitsubishi Electric, whose Mr. Slim ductless systems are advertised for sale at acdirect.com, issued the following statement to The NEWS regarding unauthorized sale of their products directly to end users. “We do not authorize online retail sales of our Mr. Slim air conditioning and heat pump products,” said Lorie Quillin-Bell, director of marketing for Mitsubishi Electric.

“Mitsubishi Electric HVAC has selected qualified HVAC distributors in the industry to carry Mr. Slim split-ductless systems and, in working with them, we have assembled knowledgeable HVAC dealers (our Diamond Dealers) to provide excellent sales, installation, and service support to end users. We have spent millions of dollars putting this team in place, and we recommend that consumers call upon this network for Mitsubishi Electric’s high-quality and reliable Mr. Slim split-ductless products.”

Peter McCandless of Griffin & Co. Inc., the marketing company of Mitsubishi Electric, said that he is uncertain from where ACDirect is buying Mr. Slim products. Haines would not confirm his source.

NEWS distributor consultant Michael Senter, president of ABCO Refrigeration Supply Corp., Long Island City, N.Y., said that buying direct from an online retailer presents several problems. “Online retailers have been terribly disruptive,” he said, “avoiding state sales tax to the disadvantage of in-state contractors and often running into installation issues (at least, as we have heard) by not having a reliable network of qualified installers. I am unsure that direct sales that exclude qualified, well-trained contractors will benefit consumers, even if the upfront cost appears to be less expensive.”



LET THE BUYER BEWARE?

Bell said her company does have concerns about Web purchases of Mr. Slim. “First of all, consumers may base their decision on limited information and may purchase incorrect products and accessories for the needs of their space,” she said.

“Secondly, installing contractors perform many important services involved with the selection and usage of our products, and those services cannot be provided over the Internet. Consumers therefore may not receive the same level of customized and professional installation and after-the-sale service support unless the product is purchased from an authorized local dealer.

“Lastly, improper sizing can lead to improper operation. A trained and experienced HVAC dealer must size our product to meet the consumer’s specific comfort requirements based on an onsite inspection.

“Our warranty covers manufacturing defects in the Mr. Slim product itself. But our warranty does not cover problems arising from the installation work. Proper installation of our products requires the skill of trained and experienced HVAC contractors who are independent businesses over whom we have no control.”

One contractor, Joel Boucher of Boucher Energy Systems Inc., Mendon, Mass., doesn’t have as much of an issue with who is qualified to install Mitsubishi equipment as much as how the labor to install it is being priced.

“Having certified AC Direct installers would probably be fine if they would stop quoting such crazy install rates,” he said.

“A year ago or so, they were telling people you could buy a Mitsubishi from them and have it installed for $200. Yeah, right. It cost me $300-$500 just to have the electrical guy wire it.”

AC Direct’s Haines believes consumers are entitled to shop the Web for products that are affordable and provide improved comfort for their families.

But he added, “It is our hope that manufacturers will stop discriminating against consumers who simply split their purchase between the licensed dealers of their choice to improve pricing and efficiency.”

Matt Prazenka of American Weathermakers Inc., Northbrook, Ill., summed up direct selling via the Web by saying it is a nonissue.

He added, “The manufacturers will sell direct to builders that have large numbers and repeatable sales. But they will be picking their own pockets by going into the direct selling business and providing ‘certified installers’ (is there really such a thing) and warranty fulfillment. They make good money off the replacement market, more than the residential new construction market. The manufacturers would be killing their golden goose.

“AC Direct’s Website is going to tell consumers what they want to hear; they [consumers] need to choose the reality.”

Publication Date: 10/22/2007

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