Q+A: HARDI CEO Talbot Gee
Industry leader talks about developments in distribution
Where have distributors in general made the most progress in the last year or two with regard to how they run their businesses and their profitability?
Gee: We have seen more commitment by distributor members to attracting, retaining, and developing talent the last few years than ever, which we hope we influenced because it’s certainly been a major emphasis for HARDI in our program and content development.
For example, we tried to launch a Human Resources Council about 10 years ago, but there weren’t enough HR professionals to make it work. Today, our HR Council is one of our fastest-growing; they’ve had their own conferences, and they had an entire track dedicated to them at September’s Focus Conference.
We also have more distributors than ever engaged in our market intelligence programs, which would align with my observation that distributors have been much more disciplined and strategic throughout this growth cycle than most were leading up to the Great Recession. That is exactly why we developed those market intelligence resources, and we have plans to invest significantly more into new, more powerful resources.
HARDI’s annual gathering is coming up in December. What were a couple of top priorities for the association in planning this year’s event?
Gee: This December is the official launch of HARDI’s latest strategic plan, which is focused on our mission: making wholesale distribution the channel of choice for HVACR manufacturers and contractors.
Our mission has not changed, but this plan is predicated on identifying what drives wholesale distribution’s value in the eyes of their contractor customers and manufacturer suppliers, and then deploying HARDI’s resources towards those things. It doesn’t stop there, though, because we will now also be measuring our effectiveness at growing wholesale distribution’s share of the products that flow through our channel.
It is our vision that our annual conference becomes wholesale distribution’s annual “report card” at which all the content is driven by keys to improving wholesale distribution’s performance the following year. This year’s attendees will see previews of this as we unveil the findings of our planning research throughout the conference.
Any significant changes in format or new opportunities to offer for members who have attended a couple or even several in the past?
Gee: There are always plenty of new wrinkles each year because our conference themes, which we take very seriously, change every year.
This year’s theme, “Pulse,” is focused on enabling each attendee to feel the pulse of our industry and know the latest trends that are driving or threatening their success. That is the clearest expression of our new strategic plan, and we’re excited to engage the rest of the membership in it.
The launch of our unified, five-track Focus Conference in September this year enabled us to make our annual conference the most strategic of content events in HVACR distribution. While our Focus Conference dives deep into specific job functions such as supply chain/logistics, marketing, sales, human resources, and business analytics, the annual conference is now able to focus on strategy, leadership, and management development.
This year, our conference will have a wide variety of session styles, including what I can best describe as lightning round sessions. 2019 will likely be our fastest-paced annual conference, enabling management and leadership teams to engage in and consume more content in less time. And, of course, we always have a few surprises that you simply have to be there to see.
A study this year sampled 251 distributors in 2019, and it reported that 30 percent of those in the HVAC industry offer e-commerce, up from 25 percent in 2018. What are the keys or tipping points for distributors to get into e-commerce for themselves? (The details of the survey are in this link.)
Gee: E-commerce in the HVACR industry is a unique animal. We’re one of the few channels left with a significant portion of exclusive or semi-exclusive product brands, so it’s flawed to compare us to retail e-commerce or other wholesale channels with more commoditized products.
The growth in distributors offering online ordering is not a surprise as contractor customers grow their interest in online ordering. However, the relatively low total percentage of distributors offering e-commerce is also unsurprising, because this is not an investment that instantly grows your customer base and sales.
On the other hand, 30 percent is still a pretty small number. What are the major hurdles for those who might do well with e-commerce, and what will change that equation for them?
Gee: Our industry continues to struggle with the consistent availability of high-quality product content, making it difficult for distributors — especially small and mid-sized — to get online quickly and affordably.
That being said, service is at the heart of HVACR wholesale distribution, and it will always be hard to replace the ability to talk on the phone or over a counter to an expert who can help you solve problems and develop solutions. E-commerce can’t do that, and it can’t introduce new products like “traditional wholesale” can to a customer base that is wary of change and the unproven.
Our channel is not best measured by the percentage of purchases made online, but rather by the service and satisfaction rates of the contractor customers and the growth of their businesses. The potential for e-commerce to reduce service costs and increase contractor efficiency remains appealing but is not yet so definitive that it’s driving a majority of sales to be done online.
How do you see the role of robotics evolving for HVAC distributors in coming years?
Gee: Excellent question! We’ve been studying this with our Supply Chain Council for a while now, and it is coming. We already see growth in the use of conveyors and automation in some of the higher-volume warehouses, and we recently toured an Amazon fulfillment center to see how they use robotics and automation.
As these systems and technologies commercialize and prices come down, they may be best-suited for limiting/eliminating product damage within warehouses by making it easier to move equipment, as well as making warehousing more efficient within smaller footprints.
Until such commercialization occurs, however, adoption will be very slow in our channel because there are only a few months out of the year for most distributors with enough volume to justify an investment in robotics, and those systems are too expensive to only be used seasonally.
What other technology or software advances do you see on the horizon to help the average distributor?
Gee: We led a session with industry leadership earlier this year about augmented reality and how it could help contractors address the acute labor shortage by on-boarding untrained technicians faster while also reducing no-fault warranty claims and improving end-customer satisfaction. While our industry has traditionally not been effective at working together to get ahead of such technologies, we remain optimistic and highly interested in this technology.
Artificial (or Augmented) Intelligence (AI) is also a perfect application for such a transaction- and data-rich channel to help manufacturers and distributors predict demand, thereby creating a more efficient channel. More immediately, distributors of all sizes are already starting to use marketing automation and web analytics tools to better reach, serve, and understand their customers.
The industry has been waiting for quite some time now in hopes that a federal HFC phasedown plan would emerge. Meanwhile, a number of states are moving ahead with their own actions. What has this prolonged situation meant for HVAC distributors in running their businesses, and what are they most worried about looking ahead?
Gee: Well, there is little distributors can do right now regarding the products they sell today or next year, but they are most certainly evaluating their suppliers’ readiness and potential positioning in any post-HFC market. Unlike previous transitions, however, the industry is collaborating much better this time around.
This is the time for distributors to be building the infrastructure necessary to be a best-in-class training organization. The greatest need, once this transition begins in earnest, will be product and application training to the entire contractor base, and distributors should be the leading providers of this training.
What do you think the chances are that a federal solution will become law before November 2020, and what are one or two keys you’d like to see included in one?
Gee: A bill can get passed next year if everyone (within and outside the industry) agrees no one will get everything they want. Legislation faces an uphill battle — especially in an election year — but my bigger concern is getting the building and safety codes updated and locally adopted in time to actually use the next generation of refrigerants.
We are very proud of a provision we worked with ACCA and PHCC to get included in the [draft] federal legislation, which would require a more stringent technician certification to handle A2L refrigerants. We firmly believe everyone from the manufacturer to the end-user benefits from this being a part of any enacted law.
Challenges continue for building and retaining a qualified workforce throughout the HVAC industry. How is this trend within distributors themselves affecting their operations and growth, and how does the workforce challenge on the contractor side effect distributors?
Gee: The single greatest barrier to distributor growth is the difficulty contractors have scaling their businesses, largely due to the challenges finding and retaining quality talent. This need is only going to get worse, and many of our distributors have taken major steps to help their customers get ahead of this through the development of schools and labs, human resource solutions, and recruiting initiatives, to name a few.
Our documentary and series of shorts will be released later this year; that will get our industry in front of an entire generation of talent that currently knows nothing about HVACR. It will be up to our members and their customers to use these resources to become talent recruiting machines, and we’ll be here to help every step of the way.
What tactic or two do you think should be given more attention to resolve the workforce situation? What is HARDI doing as an association in this area?
Gee: See above, and I’ll add that we began an emphasis in earnest several years ago to provide total human resource solutions and tools to members, with the goal of our members being the employers of choice in their respective markets.
Simply looking at the consistent influx of new, talented individuals engaging in the association in our Emerging Leaders program, councils, and certification programs, it seems distributors are making significant progress addressing their own labor shortages.
I’ve been impressed each time I hear about the educational opportunities that some distributors offer for their dealers’/customers’ benefit. In the name of spreading good ideas, could you share two or three such offerings that you think are particularly interesting or effective?
Gee: This dovetails nicely with the previous question about workforce challenges. We are frequently asked to present, or help members present, the keys and best practices to being an employer of choice to their contractor customers. No talent recruitment initiative can be successful if the talent attracted doesn’t want to work for the industry, so the more HVACR businesses of all sizes can understand and adopt what increases your ability to retain, grow, and effectively manage talent, the less acute the talent shortage becomes.
Second, running and growing any business is difficult especially because most of us never received any formal training on how to do it. This is especially true among the contractor community. However, I don’t believe most contractor owners know how much more money they could make with fewer hours worked if they sought out and embraced business and leadership training.
Many distributors offer this already, but it’s not unusual to hear from members that these are often the least-attended sessions. Not only is this a missed opportunity for many contractors, but it’s further constricting the growth of the industry as a whole.
Finally, most people are in sales whether they acknowledge it or not, but very few have ever received any actual sales training. Distributors are exceptionally equipped to offer this kind of training, and we would hope contractors would enthusiastically embrace sending any employees who interact with customers.
What do you hear from members as the one or two things that contractors could change or adjust to improve the contractor/distributor relationship?
Gee: Allow me to rephrase this question to ways distributors and contactors could help one another grow faster, make more money, and better serve their customers. This is at the heart of our new strategic plan: identify what drives or hinders growth, and focus like a hawk on those things.
For example, with as much as distributors have grown their value proposition into an array of services, inventory availability remains a primary value, so HARDI is investing heavily in forecasting tools and resources to help ensure members have the right product in the right quantities in the right places at the right times. Contractors can help themselves and their distributors by being transparent and proactive in purchasing patterns and needs, at least with the one or two distributors from which they buy and rely on the most.
Much like distributors must do with their suppliers, contractors must consider the total cost of a product when making purchasing decisions. Chasing the lowest unit price doesn’t always make you more money. If there are services you know you don’t want, be transparent about them in advance in exchange for a lower price, but understand the services you do want can’t be free, or they won’t be offered for very long.
Finally, distributors and their contractor customers would both benefit from working together to speed up new product adoption from their major manufacturers, and from providing new product and product refinement feedback to those manufacturers to identify opportunities and threats more rapidly.
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