Will Uber Model Threaten HVAC?
On-demand Labor Sites Offer Cheap, Quick Work but are Often Ill-equipped
According to Uber’s founder, Travis Kalanick, the inspiration for the on-demand car service came in 2008 when he tried unsuccessfully to find a cab in Paris. As a result, he developed an app that directly connects riders to drivers, thus bypassing the long waits — and higher costs — that are sometimes encountered with traditional taxi or car-hire services.
This on-demand model has spread quickly into others markets, as well, and apps are now available that connect consumers with local freelance labor that can provide everything from same-day grocery delivery to dog walking to handyman services. It’s this last category that may be of concern to the HVAC industry as numerous on-demand labor sites such as Pro, Porch, and Amazon Home Services give homeowners the opportunity to instantly purchase and/or schedule just about any home services-related task, including HVAC maintenance, repair, and installation.
How They Work
There are a variety of on-demand labor sites, and each one works a little differently. According to Amazon, its Home Services department allows customers to “purchase and schedule hundreds of professional services from wall mounting a new TV to installing a new garbage disposal to house cleaning, directly on Amazon.com.” Consumers should feel comfortable ordering these services, states Amazon, because the program handpicks pros who are background-checked and required to maintain insurance. In addition, Amazon offers a happiness guarantee that “ensures the job gets done right.”
Amazon Home Services also offers upfront pricing, which means service professionals compete for a customer’s business based on price, quality, and availability. If customers find a lower price, Amazon will match it. And, with just a few clicks, customers can add pre-packaged services (such as a furnace or air conditioner tuneup) to their cart and then pay for them upon completion of service.
Porch operates in a similar fashion in that it states it can connect homeowners and renters with local home-service professionals, but it is more of a referral service, and its recommendations are based on “whom neighbors have used, project and cost history, and friends’ and neighbors’ endorsements.” According to Porch, one of the most popular search terms on its website is “HVAC contractor,” and the company states it “offers licensing verification services to all of our HVAC technicians around the country to ensure the best level of craftsmanship and customer satisfaction.”
Pro’s goal is to provide a “seamless experience to homeowners who are looking for a better way to accomplish their home improvement projects.” Through this app, it’s possible for consumers to get instant price estimates, find professionals, and schedule appointments online for anything from fixing a plumbing leak to installing a furnace. The company matches customers to service professionals through an algorithm that is based on expertise, ratings, and proximity to the customer. According to the company, “certified pros are deeply qualified home-services professionals who meet Pro.com’s high bar for quality and service. We interview every certified pro and verify their licenses, bonding, and insurance according to local laws. We also scrutinize public records and online reviews.”
These are just a few of the many on-demand labor sites now available, and, although they are still in their infancy, there are already concerns as to how they could affect the HVAC industry.
Friend or Foe?
Most contractors do not expect these on-demand labor sites to become serious competition for their companies — yet.
“Professional HVACR contractors who rely on loyal customers and referrals for the majority of their business are customer-focused, bonded in a personal relationship, and are not an immediate threat,” said Jerry Grendahl, CEO, Grendahl Mechanical Inc., Edina, Minnesota. “However, believing in the old adage, ‘if it’s not broken, don’t fix it,’ will not carry the day against highly motivated and capitalized players wanting to claim our flag. One can anticipate that, someday, on-demand service companies will be a threat to the traditional professional contractor, to some degree.”
Matt Bergstrom, president, Thornton & Grooms, Farmington Hills, Michigan, also believes it would be a mistake to think these sites could not have a significant impact on the industry. “Look at what Uber has done in a short period of time to taxi and metro car businesses. Having the Internet in the palm of our hands all the time changes the way we look at things. With the younger generations — especially Generation Z (those born after the millennials) — this is all they’ve known. It’s definitely something we, as contractors, need to pay close attention to and figure out how to harness the benefits.”
Benefits may be difficult to discern right now as most contractors are concerned with the threats these sites may pose to their companies.
“What this does is make our service more of a commodity,” said Travis Smith, owner, Sky Heating & Air Conditioning, Portland, Oregon. “As soon as heating and cooling equipment becomes an appliance and not a professional installation, every contractor will hurt because of lower prices. Sites like these will allow customers to bid on the cheapest person and not the best service.”
Grendahl added the proliferation of on-demand labor sites will also encourage individuals to start up one-man operations as they will be able to use these sites in order to jump start their businesses and get the phone ringing. “This fact alone will encourage some to buy a truck and tools and start a non-official business. In time, a non-official one-man business could evolve into an official business. With more one-man HVAC companies in a neighborhood, there will be more competition, and service will become even more commoditized.”
These one-man operations will need to buy their parts and equipment from somewhere, resulting in distributors feeling the effects of on-demand sites, as well. “Like many distributors, we adhere to the code of not selling to anyone who is not a licensed HVAC contractor and/or OEM customer,” said Russ Geary, regional vice president, Geary Pacific Supply, Orange, California. “We are proud to maintain a level of professionalism in the industry by only selling to licensed contractors, and our customers respect that.”
This could lead some one-man companies to order their parts and equipment online, but Geary is not too concerned about that, either. “Our customer base needs support, including tech support, design assistance, the ability to return products, etc., and that does not happen with online suppliers. Online folks may claim they can do all that, but I say, let’s see them credit back an entire pickup load of ductwork. That’s why I think brick and mortar distributors will always have their place.”
While these online sites may encourage some customers to choose contractors based on the lowest price, Doug Young, president, Behler-Young, Grand Rapids, Michigan, believes if traditional contractors continue to offer quality products and services, they’ll still win out in the end. “As a distributor, we pride ourselves on standing behind our products and training our contractors on installation and service techniques. Contractors who are interested in educating their employees, having the right tools, and getting certifications from NATE [North American Technician Excellence] or NCI [National Comfort Institute] will always be successful, and homeowners will look for them. It’s difficult to have a long-term success strategy if your method of selling is based only on price and not the value of your services.”
Frank Besednjak, president and CEO, Training Source Inc., agrees, noting contractors who know how to target their marketing by focusing on customers, offering great warranties, being on time, and hiring and training employees who know how to be professional will not be affected by these online sites.
“Most customers would rather do business from a great referral from a friend or neighbor or maybe a series of great reviews before they rely on a new app or unproven online service. Today’s clients ignore the terms used in ads, like ‘great service, quality, integrity, and certified.’ Those words don’t mean anything; they’ve been overused and abused. Most consumers base buying decisions on referrals, reviews, and your unique selling proposition — what you do and commit to. That’s what makes you better than everyone else.”
Publication date: 6/1/2015