Peirce: Peirce-Phelps was founded by my grandfather WG Peirce Jr., his brother Trevor Peirce, and his MIT roommate Charlie Phelps. As MIT graduates, they wanted to start a business that was technologically innovative, so in 1926 they formed Peirce-Phelps to distribute Majestic radios in the Mid-Atlantic market. The business was an instant success, and the company continued to expand its product lines in a variety of different fields, including white goods, brown goods, manufactured housing, automobiles, and HVAC equipment. Peirce-Phelps partnered with the Carrier Corp. in 1944 to represent their products in the Philadelphia market. That relationship has grown tremendously, as they remain our primary partner today. We have also been involved in the commercial applications of all the products we’ve represented, including commercial laundry products, professional audio/video systems, teleconferencing, and commercial HVAC.

When did you personally first get involved in HVAC distribution?

Peirce: I first got worked with Peirce-Phelps during the summers in high school and college. At that time, we had nine different divisions. I worked in audio-video installation most years but also worked in our HVAC parts division and accounting department. We have a strict rule that family members cannot work full time in the business until they’ve spent at least two years working for another company. It’s a great rule that helped develop and diversify the management talent of the family. I first started full time at the company in 1985 after working for Bristol-Myers in sales, finishing my MBA at the University of Chicago, and working in product management with Ralston Purina in St. Louis. I came in to run our parts department, which consisted of Carrier, Zenith, and Amana parts. Our primary mission was to expand our network of branch operations. From there, I became vice president of operations and was elected president by the board after my father’s death from cancer in 1992.

As president, what was the first big decision you made, and did it work out in your favor?

Peirce: The early 1990s was the beginning of the big box houses. Their model to provide low-cost electronics and white goods significantly damaged our base of TV and appliance dealers, and most of them went out of business. We lost close to 50 percent of our sales volume in a three-year period. We looked at our portfolio of businesses to determine where we could add the most value and maintain a long-term sustainable business. We decided on HVAC due to the complexity of the products, the need for customer education, the need for system design and product bundling, and the diversity and sophistication of HVAC markets. We sold our audio-video and teleconferencing business and invested the money in expanding our HVAC network. That bet was a solid one, as our HVAC business is now significantly larger than all nine of our divisions were at their peak in 1989.

Today, Peirce-Phelps operates 23 locations throughout five states. Can you share exactly how that business plan came together?

Peirce: We’ve grown through diversification and acquisitions. Twenty of our 23 stores are parts stores that are dedicated to HVAC parts, supplies, and equipment. Two of them are dedicated to our solid service countertop business, and one serves as our headquarters. We initially expanded our branch operations back in the early 1980s because there was a great need for better local availability for service parts. We only had two locations at that time, one in Camp Hill and one in Philly. It was really inconvenient for our dealers to get the parts they needed quickly. Our intial strategy was to expand with a few smaller, 3,000- to 5,000-square-foot stores that sold strictly parts and accessories. While that was successful, we determined it wasn’t really what our dealers wanted. They wanted the ability to pick up an entire job at our locations, so we continued to expand, and our locations continued to get bigger and bigger, from 10,000 to 15,000 to 30,000 square feet. We now have three locations with well over 100,000 square feet. In total, we run about 500,000 square feet of warehouse space and all 20 of our HVAC stores are within a 105-mile radius of where I’m sitting right now. Today, our dealers can pick up whatever they need, whenever they need it. 

In 1996, you acquired Bryant of PA, the oldest Bryant distributor in the country. That’s quite a purchase.

Peirce: Bryant of PA was a great acquisition for us. We were lucky and delighted that the ownership decided to make that transaction and that we were able to acquire such a longstanding and reputable company. It’s been a real growth engine for us since we acquired it back in the 1990s.

What type of ERP do you operate? When was it installed? Can you mention some of the benefits of that system?

Peirce: We’ve been through several systems in our career, but today, we operate Epicor P21. We went live with that in December 2013, and the system automates many of our backroom operations. It’s really sped up our order processing time and accuracy in the marketplace. The great thing about P21 is it works with a number of other vendors’ plug-in tools and services.

On your website, it’s noted that Peirce-Phelps offers best-in-class industry-specific programs and resources. Can you list a few of these and share the impact they’re having on your customers?

Peirce: We live by the words “succeeding by helping our customers succeed,” as our success is integrally and totally dependent on the success of those we serve. We offer a full menu of programs, promotional and marketing tools, financing options, training classes, and e-commerce solutions and services to help our dealers and contractors grow their businesses profitably in today’s extremely competitive market. Our team of talented territory managers and sales engineers help our customers pick from this menu to customize our offering to the individual needs of each customer.

Where is Peirce-Phelps at regarding e-commerce?

Peirce: We have been processing orders electronically since the late 1980s. We started with dumb terminals, modems, and a handful of customers. Things have come a long way since then. Our dealers have 24-hour access to product availability, invoice data, technical information, product specifications, and a business intelligence system where they can review their buying histories and trends. They can place an order for pick up or delivery at any one of our locations. We have worked closely with both Carrier and AD to utilize their e-commerce services to assist us in developing attributed data we can market over the web. We currently only sell to existing customers within our defined market segment but have the capability to expand as needed.

What’s Peirce-Phelps’ biggest challenge today?

Peirce: To make sure our past success does not lead to static thinking and our eventual decline. The market is continuing to change at an accelerated pace, and we need to continue to innovate to meet the changing needs of the market and to constantly develop and communicate our value to our manufacturers and customers.

The industry, as a whole, is struggling to locate qualified workers. Are you experiencing this problem as well?

Peirce: We’ve seen longer recruitment times in specific positions, most notably in delivery drivers and e-commerce specialists; however, we anticipate the labor market will continue to tighten, especially in the Mid-Atlantic and Northeast as slower population growth rates, low unemployment, and restrictive immigration policies work against our need to find additional people to fuel growth in the future. I expect there to be a shortage of labor through the mid 2020s.

What recruiting tool has produced the best results when it comes to finding qualified workers?

Peirce: We’ve used all the online tools, but employee referrals have been our greatest source. Good people telling other good people about the opportunities we offer has always been our most successful recruiting tool.

You were recently named HARDI chairman. What does that honor mean to you, and what goals do you hope to accomplish as chairman in 2019?

Peirce: HARDI is a wonderful organization that has grown and expanded its services tremendously over the past 10 years, and I’m honored to be a small part of it. My goals are to expand and strengthen many of the key initiatives that are already in progress at HARDI. Specifically, I want to ensure the success of HARDI’s transition to its new governance structure, help the HVAC industry recruit and retain more new talent through education and HR marketing efforts, and expand participation with the great industry benchmarking data that HARDI collects and help turn it into actionable information that can be used to make better decisions at our individual distributorships.

Outside of HARDI, what goals does Peirce-Phelps have in 2019?

Peirce: By almost any measure, 2018 was a fantastic, record-breaking year for our company. So, were going to start the year with a celebration for our associates. We’re going to throw a big party. Then we’re going to get back to the hard work of reaching our next goal, which is to increase revenue by 50 percent by the time we hit 100 years in 2026.

What’s one piece of advice you’d like to offer the industry?

Peirce: As an industry, we need to realize that we are way behind many other industries in our e-commerce capabilities. This hasn’t hurt us yet because the unique selling and logistic needs of the HVAC industry make it difficult to emulate online; however, it will eventually come, and not being strong leaves us open for disruption from either inside or outside the industry. One of the first steps the industry can take to accelerate e-commerce marketing is to develop a standardized format for attributed product data. Too much time, money, and effort are currently being wasted trying to translate each manufacturer’s format to be compatible with each distributor and customer’s system. Similar to what occurred with barcoding standards, a single data format would dramatically simplify and speed up the development and adoption of online selling and marketing systems at the distributor and dealer level.

If you could travel back in time to 1992, when you became president of Peirce-Phelps, what piece of advice would you share with yourself?

Peirce: In retrospect, the early 1990s was probably one of the two or three most difficult times for our company because we were transforming from our core business of consumer products to a core of HVAC products. It was a tough time for the team. My advice to myself would be to make sure that I paint a clear and honest picture of the situation for our people and to trust in the power of a common goal and the abilities of the excellent people in the company. I’d tell myself to worry a whole lot less and enjoy the ride a lot more. DT

Publication date: 3/4/2019

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