When the U.S. Supreme Court handed down its ruling in Wayfair v. South Dakota this summer, the Court’s ruling that out-of-state online vendors could no longer rely on the allure of no state sales tax answered a big question and opened the door to several others.
How do HVAC distributors use the internet to pursue business outside their own geographical areas? After all, the internet has done nothing if not enabled a fledgling bookselling outfit to become a massive commerce giant. Would the Wayfair decision have an impact?
And on the other side of the online equation, have distributors seen online competition eat into their existing business with local contractors?
DANCE WITH WHO BRUNG YOU
“We currently use our e-commerce platforms primarily to sell [to] and support only local licensed contractors,” said Cameron Perkins, vice president, vendor management and marketing for Johnstone Supply – The Ware Group. His team has concentrated on creating an efficient ordering process and streamlining their supply chain.
At the same time, he said, “we realize that there is a growing trend of online sales to contractors and to the DIY [do-it-yourself] market outside of a distributor’s primary market. We are following this trend to determine if our strategy needs to change.”
Meier Supply, based in Conklin, New York, is a major distributor that considers the internet as a way to dig deeper into existing relationships as opposed to hunting for new business abroad. Dale Norton, the company’s sales director, offers one reason.
“The bulk of the products we sell are proprietary in nature, either requiring some level of engineering or having limited distribution,” he said.
Meier Supply has approached its online presence chiefly as a way to accommodate customers who prefer to place orders online or perhaps have to make orders after hours.
And along the same lines as others interviewed in this issue, distributors are seeing big-picture value in creating what Norton describes as a hub for product information, available 24/7, and a way to deepen the connection with a customer base.
Meanwhile, Nick Emmons, regional sales manager with Plumbers Supply Co. in Louisville, Kentucky, does acknowledge the macro sort of success enjoyed by Amazon in the online commerce world at large and of an organization like Ferguson Enterprises in the construction sector. However, that sort of approach isn’t on his radar.
“We’ll never be on that side of things,” he said.
While he explained that Plumbers Supply doesn’t really use the web that way, it’s not like he dismisses the web altogether.
“Older stuff, sometimes we’ll throw on eBay,” he added.
If Emmons sounds dismissive of using the internet to pursue long-distance customers, he is more enthusiastic about www.mytrustedcontractor.com.
Although the site doesn’t feature the Plumbers Supply name on its homepage, it represents the company’s effort to point interested consumers toward a group of contractors that Plumbers Supply has approved based on its own working relationships.
That Supreme Court decision earlier this year was only a 5-4 decision — and a rare case of finding justices Samuel Alito and Ruth Ginsburg on the same side of an opinion. One justice’s flipped vote would have changed the course of any conversation about online business for distributors and contractors alike. But with the court essentially endorsing a “level playing field” as far as tax collection goes, Wayfair wound up being more a case of what might have been than one with significant everyday fallout.
Per the larger question of web strategy, both Norton and Perkins confirmed the decision meant very little in the way of adjustment.
As Norton put it, “We do not expect an influx of new customer sales using our current online strategy.”
He added that the company’s energy resource management (ERM) software was already well-equipped to charge any applicable tax regardless of a web visitor’s location.
Emmons hasn’t seen a change either way as a result of Wayfair, and Plumbers Supply is used to some odd tax and accounting circumstances as a part of doing business. Louisville’s place along the banks of the Ohio River means that even a highly local focus means doing business regularly in both Kentucky and Ohio.
Murphy’s Law of Accounting dictates that Kentucky (6 percent) and Indiana (7 percent) would of course have different state tax rates, but that’s not all. Louisville sits not only on a state border but on the line between South and North regions in the eyes of regional efficiency standards. In the case of something like a split air conditioner, that means the company can sell 13-SEER units all day in Indiana but cannot offer them in Kentucky.
Having established that none of these distributors has any grand plans at present to conquer the supply house world via website, one question remains: Do any of them sense that out-of-town businesses are using the internet to erode any of their valued home-turf contractor base?
Perhaps not coincidentally, the distributor that sounds open to possibly setting sites on expanding via internet is also the distributor who has seen an impact in this area.
“We have felt pressure from online sales attracting business away from The Ware Group,” said Perkins. “That competitor can be an online version of one of our brick-and-mortar competitors, an online-only wholesaler, or the Amazons of the world.”
It serves as motivation to redouble the effort to create an appealing web experience, but Perkins sees this involving “a short- and long-term strategy.” This is an area where whatever familiarity and loyalty have been built with a customer over the years can pay off again in the face of a new opportunity for them to work with you or look elsewhere.
Norton identifies another area of concern.
“This is a serious issue for products and equipment that require any continued warranty support,” he said, looking not toward contractors’ choices but upstream toward manufacturers.
Meier Supply works with them to emphasize the need for a concrete policy for online sales, minimum advertised pricing (MAP), and a published “no warranty” policy for online sales.
Back along the Ohio, Emmons sees some limited impact — “some of the low-hanging fruit, maybe … or some specialty thing they can get within two days” — and he sees incorporating some artificial intelligence into a distributor’s website as more or less essential these days.
Yet, as he assessed the overall situation, he is not concerned with the DIY element that Perkins mentioned; he puts the real weight on local customer service.
“Contractors aren’t doing business with someone just because they have a good web platform,” he said. “Our inside sales people have value. There are times that contractors want to click a button, and there’s times they need something more. They want to know they’re taken care of.”
MEANWHILE, ON THE HORIZON …
When Emmons said the HVAC trade is slow to change, it carried an unmistakable ring of truth. However, when Norton described online sales as a continued threat and said distributors “are forced to evolve or eventually become obsolete,” that fits with plenty of business evidence and conventional wisdom.
A press release recently hit The NEWS’ inbox from Morsco, an HVAC distributor based in Fort Worth, Texas. The company launched its own new “robust e-commerce experience that’s much more than just a website and shopping cart.”
Citing an existing presence in 18 states and more than 40,000 customers, the company touted technical documents “organized into customer-specific catalogs” and “integration with a customer’s purchasing system and job management tools.”
The industry may change slowly, but every industry has early adopters and those with expansion on the agenda. Even without a handy sales tax advantage, that kind of competition can show up anytime, doing business a more comfortable 300 miles down the road or perhaps just a click away.
Publication date: 12/3/2018