Examining HVACR Distribution’s Amazon Problem
Three ways to become a valued asset so that your dealers choose you over Amazon
Amazon’s fast-growing presence in the online marketplace is no secret. The company is marked by its aggressive expansion into any and all areas it deems ripe for the taking. The once strictly online store has gone brick and mortar for the first time since its founding.
Thanks to Amazon, finding the product you want is easy. The company is even innovating easier ways to get that package to your door. That’s all well and good for Amazon customers.
But what about its competitors? Specifically, Amazon’s competitors in the HVACR industry.
Here are three issues you may be encountering when it comes to Amazon.
Gobbling Up Commodities
The HVAC industry works with the sale and installment of commodities. Unfortunately for the distributors and the manufacturers of these commodities, Amazon has started to get its hands on them and offer them up at low prices.
A quick glance at Amazon’s HVAC section shows thousands of products, from thermostats to venting. Now, these parts are available to everyone, but many of your end users might not know what to do with them if they simply ordered from Amazon. It’s not these end-users you need to worry about: it’s your dealers, the contractors who buy these commodities.
The problem lies in your dealers or distributors being able to purchase the products you offer more easily from Amazon than from you. Amazon can provide a quick turnaround, and it may be able to provide the product at a lower cost than you can buy it from the manufacturer or make it yourself. This is happening to a lot of businesses, no matter the industry.
The ‘Hire an HVAC Specialist’ Problem
Here’s the scenario. My a/c just conked out, and I don’t have the ability to fix it myself. However, I just found this really useful page on Amazon’s website called “Hire an HVAC Specialist.” On this Page, I can hire a contractor to fix it. Great! I’ll read some reviews of a couple of companies and go with the one I feel is best. Unfortunately, your dealers didn’t even show up on the list of recommended specialists.
As Amazon increases its standing in every industry it can, it becomes a one-stop shop for consumers. Offering recommendations for services can be very helpful for both customers and the companies that are part of the recommendations.
The trouble comes when your dealers aren’t part of these aforementioned programs. In the scenario above, your dealers missed out on your business and will miss out on all the business afterward by not being a part of that service solution program. This lack of business is trickling up to you because your dealers aren’t utilizing all their opportunities to sell the products you sell to them.
While Amazon Prime is great for customers, it’s not so great for Amazon’s competitors. With lower rates from Prime, dealers can get even lower prices, along with the free shipping, which probably costs a bit less than what you mark up for your products.
Even without Prime, Amazon still provides some of the lowest prices on products on a daily basis. Amazon’s pricing strategy has it underselling even the big retailers, including Walmart, Target, and Best Buy.
So, how do you combat these undercuts? The retailers that have to compete head-on have turned to price matching. But, being such giants, Amazon can afford that kind of margin. The question is: How can you sustain your margin while still holding on to your market share? It mostly boils down to adding value.
WAYS TO ADD VALUE
Becoming a valued asset is the best way to compete with Amazon. There just happens to be several areas of value that you uniquely possess, and Amazon simply can’t get its hands on these talents. Here they are.
Expertise Breeds Relationships
One thing you have over Amazon is depth. It may be infiltrating every industry it can find, but that means it’s spreading itself out. The giant may be gobbling up commodities, but it doesn’t have the expertise that you do, it just has the products. You have depth, whereas, it has breadth, and only a fraction of its business involves yours. Depth beats breadth in the HVACR arena every time. Use your expertise to create meaningful relationships with those who buy your products. One thing that Amazon certainly won’t do is go out to your contractor’s headquarters and run a meeting to educate the techs on how your new product works or invite manufacturers to a conference to discuss strategy. If your dealers were to purchase a cheaper version on Amazon, they’d be on their own to try to sell it. Hopefully they don’t have to take the thing apart to know how it works.
Fill in that value gap and seal your relationships while you do. Loyal partners will always be more willing to give you more share of their wallets than unfaithful Amazon customers. Loyalty is key, and you’re more than capable of inspiring it.
Stay Ahead with Associations
Amazon is unable to join industry associations. If you’re working within the HVAC industry, you’re most likely a part of an organization, such as Heating, Air-conditioning & Refrigeration Distributors International (HARDI).
Associations are areas of expertise where leaders in the industry contribute to knowledge that can keep you ahead of the curve when it comes to trends and topics that could be useful to you when adding value for your dealers. Many of these associations have perks for their members that can help educate you and your employees.
Membership into these associations often comes with resources and benefits, such as education, networking, and professional development tools. All of these are invaluable weapons in your battle against the e-commerce giant.
What do the two areas of value above have in common? They can be combined into an incentive strategy. The two things your dealers get from purchasing items on Amazon are ease and, most likely, pricing (Amazon has actually been found to skimp on this).
You, on the other hand, can provide so much more. By establishing an incentive strategy, you can actually provide the expertise mentioned above and reward your dealers for taking part in the learning. Quick and easy e-learning modules can be set up to teach them the ins and outs of products and services so that they can be more efficient at selling the products you want to push.
You can also push certain products through dynamic promotional strategies. If you’re not hitting your goal in one aspect of your business, incentivize it to make it more attractive and rewarding to buy and sell. For example, maybe a product didn’t launch as successfully as you’d hoped. The problem may lie in how it’s being sold. A product push with an e-learning module can help to hit that launch goal.
Most associations have partnerships with companies that provide incentive services like this. Make sure you’re looking into the ones that best match your needs. Chances are these companies are also members of your associations.
YOU CAN COMPETE WITH AMAZON
But you can’t compete with Amazon head on. The logistical machine is too much for even the biggest distributors. Amazon is riding a tide, which may never break upon the shore. Through changing market environments and the insertion of technology, it has ridden this wave by amplifying its logistics.
Because of this, Amazon is taking your business. It’s gathering up fleeting loyalty and undercutting pricing. You probably don’t have the same resource surplus, though, so what can you do to compete?
You need to add value — not only to your business but for your customers as well. You have the ability to improve your business by improving the business that your resellers, dealers, and customers do. Become a valued partner to them, and you will inspire loyalty that will beat out Amazon every time.
For more information, visit www.hmiaward.com.
Publication date: 02/06/18