Online HVAC Sales Are a Small but Growing Market
Contractors devise strategies to handle online purchases
There is no question that most contractors are not fans of websites that sell HVAC equipment directly to consumers. And they have a right to that opinion. For years, contractors have made a profit on the equipment they sold, so those sales moving online could take a chunk out of their bottom lines. Then there’s the issue of ensuring the size and quality of the equipment, not to mention figuring out who handles the warranties. That’s why for some contractors, it’s just not worth the hassle of taking on these labor-only jobs.
But some would argue that taking this stance means missing out on profitable work. That’s because a growing number of consumers are purchasing HVAC equipment online, and they need qualified professionals to install it. In addition, once contractors are in the home for the installation, they can offer other goods and services, such as maintenance agreements, Wi-Fi thermostats, and upgraded filters. Furthermore, they can slap their sticker on the unit, so if the homeowner needs service in the future, they know who to call.
If customers buy their equipment online and contact Schaafsma Heating & Cooling in Grand Rapids, Michigan, to install it, they usually will, said company president, Kevin Walsh. He said that so far, these requests have been few and far between and have only involved ductless mini split systems.
“We have created different quality tiers for the installation,” said Walsh. “The basic tier is a minimum code installation, which includes a warranty on our workmanship but nothing else. From there, we start adding items to make it a quality installation. So depending on what the customer chooses, we may provide a comfort guarantee. But that assumes the customer has purchased equipment that matches the correct load for the house and allows for any necessary duct modifications and proper commissioning.”
While Walsh has not seen a surge in online sales, he cautioned contractors to be careful about calculating their costs for labor-only installations.
“The difficult part in the beginning will be contractors not pricing their work correctly,” said Walsh. “Right now, contractors make money on the markup of the equipment and their labor, and if the customer buys online, the profit from the equipment will be lost. Many contractors won’t consider this and will not adjust their labor rates accordingly. The labor is what drives overhead and that won’t change, so contractors will need to raise their labor rate to survive.”
Mercurio’s Heating & Air Conditioning in Tacoma, Washington, does not get many requests to install equipment that customers purchase online, but when it does, it turns them down, said director of human resources and customer service, Angie White. The reason for that decision is that these online transactions take the company out of the system design process, so customers may choose equipment that is not right for their homes. In addition, the company would be unable to provide any warranty on it.
“I don’t see this as a growing trend for the moment,” she said. “Installing new HVAC equipment is beyond the realm of familiarity for most homeowners, and they would rather trust professionals to take care of everything from start to finish. But I have seen some e-commerce sites that have the potential to change the way our industry sells equipment. Once more sites get to the point where contractors are involved in the equipment-buying process right from the beginning, we will see a shift in how we sell to homeowners.”
Empire Heating and Air Conditioning in Atlanta also turns down requests to install equipment that was purchased online; however, that decision came after saying yes a few times. Unfortunately, those transactions did not work out very well, said owner Martin Hoover.
“I do think in the future we may need to embrace [online sales] as the plumbing industry has, but at this point, the warranty issues are not worth the hassle,” he said. “In addition, online customers are typically motivated by the lowest price, so they usually purchase the lowest-end equipment. Value is not a consideration in that equation.”
That said, Hoover believes the online sales trend is growing, although he only considers it to be a minor threat at the moment.
“Currently, many manufacturers have warranty disclaimers for equipment purchased online, and I hope that will remain,” he said. “Hopefully, we can do a good job as an industry educating consumers that it’s best to do business with the company providing the equipment.”
OEMs WEIGH IN
Randy Roberts, vice president of sales and marketing, air conditioning division, Rheem Mfg., agreed that in-person sales by contractors is the preferred way to provide a satisfactory experience to the homeowner.
“E-commerce, though, continues to grow, which is why we have analyzed how our websites, portals, and apps can be appropriate stewards in the online sales process,” he said.
While Rheem does not sell HVAC products directly through e-commerce sites, its goal is to leverage the company’s online assets to enable contractors to adapt e-commerce practices that make sense for their businesses, said Roberts.
“Our flagship websites, Rheem.com and Ruud.com, are carefully designed to foster relationships between homeowners and contractors,” he said. “Both sites prominently feature sections to ‘Find a Pro,’ so homeowners can search by product type and geography to quickly locate a qualified licensed contractor in their area. With our Pro Partners — which are our top-performing Rheem and Ruud contractors nationwide — homeowners are able to book appointments online with their selected professional.”
Goodman Mfg. Co. also does not sell its products via any channels resulting in a direct manufacturer-to-consumer relationship; however, the company does use an expansive network of independent and company-operated distribution locations across North America for the distribution of its products.
“We are constantly reviewing evolving HVAC market trends, with the goal of maintaining the integrity of both distributors and HVAC dealers throughout the purchasing process for HVAC equipment and systems,” said Laurence Scharff, director of e-commerce, Goodman Mfg. Co. LP “As with a multitude of consumer products, we understand that the use of the internet will affect the HVAC purchasing process. Our view of the future includes the existence and expertise of HVAC distributors and independent contractors.”
It is this technical expertise, combined with their installation experience, that will give contractors a golden opportunity to dominate this market segment, said Scharff. That’s because residential HVAC systems are not designed for do-it-yourselfers, and most OEMs will not honor equipment warranties unless their products are installed by qualified contractors.
“It’s been a long-standing policy that any HVAC equipment manufactured by Goodman does not have a limited warranty when someone other than a qualified contractor installs it,” said Scharff. “Our guidelines are very clear. The limited warranty coverage does not apply to units that are ordered over the internet, by telephone, or by other electronic means unless the unit is installed by a dealer adhering to all applicable federal, state, and local codes, policies, and licensing requirements.”
While some may be reluctant to face the reality of online HVAC sales, this trend is not going away. Indeed, it will likely only become more pervasive as millennials start purchasing homes over the next few years. This generation is very comfortable buying products and services online, and this will probably include HVAC equipment as well. So contractors may want to consider devising an internet strategy that will capitalize on these online purchases.
“Many HVAC contractors are currently altering their existing business practices to engage with potential customers who have purchased HVAC equipment from online resources,” said Scharff. “Currently, the segment is not large, but it is growing and should be considered a long-term, permanent change in the HVAC industry. When properly positioned for internet equipment sales, contractors can experience a substantial sales lift.”
Publication date: 3/25/2019