“They’ve been forced into trying out new buying behaviors, and then they’re keeping the ones they like.”
Lisa Anderson is founder and president of LMA Consulting Group, which specializes in manufacturing strategy and end-to-end supply chain transformation.
In recent years for HVAC distributors, the phrase “e-commerce” has represented a competitive challenge as brick-and-mortar distributors fend off online-only vendors. But as Anderson pointed out, COVID-19 work-related fallout has instigated an unexpected wave of instability and re-evaluation when it comes to purchasing habits.
This is certainly true for consumers, and as the “Amazon effect” has demonstrated, what becomes the new normal for consumers migrates into the expectations of those same people when they are on the job interacting with other companies.
The result of shaking up the customer’s mindset a little more? Added potential to expand a supplier’s business or customer base — but also a landscape where distributors can fall further behind due to complacency or inattention to their own e-commerce presence.
Overhauls and Promo
David McIlwaine, president of HVAC Distributors in Lancaster, Pennsylvania, reported that he has “not seen a big change here, just that most distributors are offering improved online offerings, and so contractors are more familiar [with them] and more apt to utilize” them.
That may not sound like a sea change, but it’s a key change, according to Anderson.
“Folks who had already gotten into e-commerce along the line saw a sharp increase,” she said while discussing post-COVID activity. “Even if they didn’t have many sales, generally speaking, they gained customers.”
The companies that were able to enhance their presence were in position to reap the rewards. In the case of First Supply in Madison, Wisconsin, the company benefited from a proactive strategy and some coincidental timing.
“We completely overhauled our online presence at the end of 2019,” said Tim Winter, First Supply’s director of eCommerce. “We went live with a new platform, new PIM [product information management system], and drastically improved product content to create a totally new online shopping experience.
The positive feedback started immediately regarding the upgrades, which included enhanced search and navigation, real-time inventory counts, and the ability to not only create but to share lists.
First Supply determined that its customers “like to be self-sufficient,” Winter said. As a result, admin privileges, order history access, and customer-specific pricing have been valued adjustments.
In Lancaster, McIlwaine notes that his company began its online offering more than 15 years ago. That established presence has meant that “our biggest change has been trying to promote it more effectively,” he said. McIlwaine observed that his company’s web side “has been pretty consistent at approximately 20 percent of sales.”
One larger move HVAC Distributors made about six years ago was the launch of its mobile feature, and McIlwaine said that it “has definitely helped grow utilization.”
First Supply’s mobile option was part of last year’s overhaul, so they have no benchmark for comparison but Winter has observed ongoing usage increases month over month. In addition, the new app users have shown interest in QR scanning capabilities related to the company’s First inStock program.
Additional evidence that a good traditional website isn’t enough anymore: McIlwaine added that between desktop and mobile, HVAC Distributors’ growth is faster on the mobile side.
In-House or Outsourced?
Opinions differ on how to manage an e-commerce presence. For both First Supply and HVAC Distributors, some hybrid of an in-house approach seems to have worked pretty well.
D.I.Y. WEB WORK: Distributors willing to invest the resources can make an in-house e-commerce management team work, as First Supply and HVAC Distributors have shown. However, owners should weigh that strategy against the efficiencies of drawing on existing solutions that can be tailored and easily updated.
McIlwaine said his company handles this task itself and that it is part of their ERP’s system.
“We used an outside vendor for the mobile program,” he added, and that pulls in the data that his team is managing for the desktop version.
First Supply has built a dedicated team, including e-commerce manager, web designer/developer, SEO specialist, and content/data strategist and specialist.
Winter explained that “the team manages platform and PIM operations through third-party implementation partners and also oversees UI/UX enhancements, version updates and testing. Between PIM capabilities and cross-functional support,” he said, “the team can react to and resolve site maintenance and updates in a very timely manner.”
Anderson acknowledged that it is possible to execute well in-house and some of her clients choose that path, but she cautioned distributors not to overlook the efficiencies or built-in benefits of enlisting outside expertise in this area.
One upside of proven e-commerce platforms, she said, is ease of software updates and taking advantage of [platform] marketplace changes on a more efficient basis. Addressing a likely concern for many distributors, she added that “any of the e-commerce platforms can be tailored to look like your business.”
At the end of the day, distributors need to weight the pros, cons, and ongoing expenses before, as Anderson put it, “trying to recreate the wheel of something that people [in the platform sector] have poured millions of dollars into creating.”
Some may go a step further and enlist a company like DCKAP, which automates ERP, e-commerce platforms (Shopify, Magento, et al.), and CRM solutions to integrate a number of functions. Looking outside HVAC, a recent DCKAP webinar featured one such client, Quality Farm Supply (QFS).
Beyond competing with Amazon, QFS has opted to participate within it.
“We like doing business on Amazon because it brings us sales,” said Blant Hurt, QFS chief marketing officer and co-owner. Hurt said that QFS has been surprised at the volume, but that it has been worth it despite the drawbacks of Amazon Marketplace.
Those drawbacks include a lack of access to first-party data, Hurt continued. That prevents a company from going back to remarket to those customers and build relationships.
As for QFS’ other e-commerce efforts, Hurt made the argument that in the COVID era, B2B is more similar to the B2C arena and can offer its own advantages.
“You know what your audience cares about, you know they’re in a similar business, and you have reasons to reach out,” he asserted.
Hurt encouraged B2B companies to “automate outreach and campaigns to build up relationships at a time when trade shows are off the table. Dig in, understand what your brand means and what your market looks like.”
Familiar Locals & Faraway Eyes
Building the web customer base may be an obvious goal, but where do (or where should) those new customers come from? Is it worth working to draw existing non-web customers over to online and mobile features?
HVAC Distributors and First Supply have both shown that while the growth of online competition may have put distributors in a defensive stance initially, there is room to go on the offensive and the upside can extend beyond the usual zip codes.
HVAC Distributors’ e-commerce side is private, McIlwaine said, so customers have to be invited or request access. However, “our general website gets lots of activity on forms and training information from outside our service area.”
Winter reported that First Supply has invested resources into encouraging existing customers to adopt its website, given its recent renovation and rollout. As one example, a gift card sweepstakes program rewarded entries for each $100 order placed after the launch, and that worked so well that First Supply extended the promotion.
The company has deployed Pro Top emails and web learning Zoom meetings to help customers get acclimated and make the most of the new website’s features. A video library addresses more involved questions.
At present, Winter said, he attributes most of the company’s online customer growth to social media strategies and sales staff outreach.
“The question of how to handle customers outside our service area came to light soon after we launched our online chat feature, and we began receiving the account sign-up and ordering inquiries,” Winter recalled.
First Supply is evaluating those on a case-by-case basis for now. Winter expects the company to extend its overall strategy to target this demographic in the future.
While pandemic conditions have steered clientele toward HVAC Distributors’ online and mobile platforms, McIlwaine also cited the value of the counter staff’s and sales team’s habit of promoting web capabilities to customers.
According to LMA’s Anderson, companies who are not touting something like an overhauled website might not pursue a dedicated campaign to bring over traditional customers. For one thing, web orders may cost distributors a little more in terms of shipping management and possibly even in warehouse operations.
“It’s not really great financially,” Anderson said, “but providing the options so they maintain their business and they keep happy customers” makes it a good trade.
Not to get too gloomy about the web orders — according to McIlwaine, “Most online orders have more lines per order than an order provided across the counter.”
Anderson observed that in web orders, “the volume might be smaller of each item, but there are typically more items.”
She went on to say that the ease of web ordering can lead to more frequent shipments, a dynamic familiar to any Amazon Prime customer. However, Anderson has seen clients use incentives or discounts to motivate customers toward fewer and higher-volume orders.
Anderson added that distributors may also increase the average online order’s total by using “related item” or “have you considered …” sorts of features. These can be based on where the customer is already showing interest, encouraging them to buy items that they might need anyway.
Even the owner of a relatively new website advises distributors to approach that question with “optimistic caution.”
“What I mean,” Winter said, “is that it’s easy to get caught up in the quickly changing technology and to build your roadmap around what’s cool but not necessarily relevant to your customers.”
First Supply aims to be nimble enough to adjust to new opportunities or to course correct as needed. Winter does see voice and image search as features his team is more likely to implement.
At HVAC Distributors, McIlwaine is looking at continually improved content and “at some point an upgrade of the technology.”
Anderson’s parting recommendation was for companies who may feel it is too late to get into a significant web presence. Yes, she said, they did miss out on a real uptick in the wake of COVID-related buying habits.
Nevertheless, “they should definitely jump on that bandwagon … you can still easily double year over year,” she said, depending on where a business starts and the web-related percentage of its overall sales.
Anderson cautioned that even a distributor that enjoys strong traditional sales and foregoes a thoughtful web presence will eventually see those sales start to slip away to companies who are working harder to keep up with the ever-evolving customer perceptions surrounding convenience and what constitutes standard business practice.
“Generally speaking,” Anderson concluded, “e-commerce as a category is going to continue to grow, and it will cannibalize other avenues.”