Should Contractors Install Consumer-purchased Equipment?
HVAC owners discuss the pros and cons of consumer-direct contracting
For better or worse, several HVACR contractors across the country are now installing products for homeowners who have purchased their own HVACR equipment — even if they don’t sell that product line.
This type of practice may sound taboo or even blasphemous to some, but with the rise of HVAC products on big-box store shelves and consumers willing to take shortcuts where possible, the trend is rising.
Contractors who aren’t partaking in this practice — but aren’t adamantly against it — have a number of questions for their peers, including, “Will you be held accountable for the system’s performance?” “Is it the right size?” “Is it the proper piece of equipment for the space where it is being installed?” and “Will manufacturers stand behind their warranties?”
Some contractors, such as Christopher Roth, president, Climate Control Experts, Phoenix, have taken a hard-line stance against the practice.
“While we get asked on occasion, we have decided not to install owner-provided equipment for one simple reason: warranty responsibility,” said Roth. “It’s a blurry line, and we don’t want to be in the middle.”
However, across the country, contractors remain torn when it comes to dealing with this rising trend.
“No, we do not install customer-provided equipment,” said Kim Madden, vice president, Custom Climate Heating & Air in Mt. Pleasant, South Carolina. “Despite what customers might tell you initially, if you are the installer, they will hold you accountable for the quality and performance of that system regardless of who provided the equipment. We want to know where our equipment comes from and be assured that our distributor will stand behind it in case of failure. If we don’t provide the equipment, we have no idea of its history — was it used? Was it dropped in shipping? Is it the right equipment for the application? Is it a quality brand of equipment? Also, we want to discourage a marketplace that sells directly to unlicensed, non-EPA [U.S. Environmental Protection Agency]-certified individuals. HVAC is not a ‘do-it-yourself’ kind of project. Existing regulations were put into place to protect homeowners from harm as well as uphold the integrity of our industry.”
David Borowski, director of technical training, Direct Energy/Success Academy in Houston, pointed out that poor consumer results could impair a contractor’s reputation, product warranties will be a nightmare, and the unintended consequences of the wrong product being installed could prove troublesome.
“You’ll need a new sales contract that either omits warranty service or posts a fee for optional warranty coverage,” he said. “Municipal inspections could be traumatic if outdated or non-AHRI [Air-Conditioning, Heating, and Refrigeration Institute]-rated products are employed. Most OEM [original equipment manufacturer] warranties default to a five-year parts warranty when products are sold online, and poor or improper equipment selection could bring unintended grief with physical demands or compromised future service access.”
Madden added that homeowners sometimes have a misguided impression that if they buy something online, they are getting a deal.
This assumption seems to hold true for customers across all markets. According to research by InvisibleHand, an online shopping tool, 53 percent of consumers believe they will always get a better deal online, and nearly 70 percent of shoppers admit they do so without shopping around first.
“From what I have observed, the retail prices consumers are paying online are more than what we as dealers pay for the equipment,” said Madden. “Homeowners don’t have a good understanding of what quality installation costs. In addition, most manufacturers will not honor warranties if equipment is not purchased through the regular distributor-to-dealer channel. One failed part replacement cost, which would have been covered under the manufacturer warranty if purchased and installed by a licensed contractor, could negate any savings the homeowner received from buying directly from an online source.”
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Even with all of these issues and potential pitfalls lurking in the installation-only waters, Borowski believes contractors need to face the current realities of the business landscape. He pointed out several reasons that installing products you don’t sell as a contractor can be a good idea.
“You are not going to influence or change the course of this business,” he said. “You have a responsibility to your employees and their families to do all in your power to be successful. If we could calmly address this ... is it different than what our brothers in plumbing went through when big-box stores loaded their shelves with plumbing fixtures? The landscape has changed, let’s look at the posture of attorneys; what they sell is what they know.”
According to Brian D. Feenie, home comfort consultant, Clyde S. Walton Inc., Lansdale, Pennsylvania, smart contractors are going to make up any lost profits in the consumer-direct equation by increasing the cost of labor for the installation.
“At that point, there is no downside for contractors,” he said. “The homeowner is at risk due to most manufacturers explicitly stating that online equipment sales do not come with a warranty and that the manufacturer warranty is void. This will lead to costly repairs for the consumer within what would normally be a 10-year registered components warranty. Again, smart contractors will prevail and charge for their services along with parts markup.”
Feenie echoed the sentiments of Madden, adding that based on what he has seen online, the price consumers pay is not that great of a deal when you factor in the labor to install and the performance guarantee for the first year.
“The perception is that customers are saving, but I think as more smart contractors participate in this, the total price will be right where it would have been had they would have gone through the normal channels,” he said. “The downside to the direct scenario is now the consumer has a brand new product that is out of warranty, and they more than likely would pay the same money in the end.”
Borowski also highlighted several other potential positives for contractors.
“You gain customers at no additional cost and have maximized your marketing spend,” he said. “At the end of the day, every call you don’t capture still costs you in marketing spend. [These calls are an] opportunity to sell unanticipated accessories to these homeowners or require upgrades for code compliance at full margin. It keeps your install teams busy and is an opportunity to sell maintenance agreements and parts and labor extended warranties as well as introduce smart home controls packages.”
As online retailers continue to grow and big-box chains further enhance their presence in the HVAC arena, contractors will continue to be faced with a decision in this sector of the marketplace for the foreseeable future.
Publication date: 9/4/2017