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“Search is the biggest challenge for us.”

Todd Sisson, e-commerce manager for Dakota Supply Group (DSG), put his finger on a challenge for HVAC distributors who are continuing to develop and refine their e-commerce presence.

DSG attributes this to the complexity of integrating the wealth of product data it has into its search engine. It’s an ongoing process, but Sisson and team have made headway.

“One of the ways we have made procurement better is by bringing their most used and most viewed products to the front of any search result,” he reported. “We have also evangelized lists of products for any and all imagined uses and made them accessible through hover and one click to an order.”

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FINDING DATA: Both Locke Supply and Dakota Supply Group have found success in reinforcing ease of use in the digital “last mile” as online customers look for solutions. (Image courtesy Start Up Graphic Design / The Noun Project (CC))

Meanwhile, Locke Supply launched a new website and e-commerce platform in April. Asked for the most valuable decision in his effort to make the new experience more user-friendly, Locke’s vice president for operations, Kyle Cline, also turned to search.

“We invested in a third-party search engine that allows our customers to find products more effectively,” Locke recalled. “Our biggest complaint from customers was that the search function didn’t work well, so we invested heavily to improve it.”


Push and Pull

Customer feedback about search functionality reflects one side of the push-and-pull dynamic that HVAC distributors face in this area. Dealers can pull distributors toward offering certain features, and in other cases, distributors may or may not work to draw customers into new habits.

Locke Supply is serious about offering a robust e-commerce window but stays open to whatever technology meets the customer’s comfort level.

“We haven’t pushed our customers to move to e-commerce and away from traditional purchasing habits,” Cline said. “If that means placing orders in person, via text, phone, e-commerce, or even by fax machine, we are more than willing to accommodate.”

At New York-based Sid Harvey’s, which also launched a new website along with a new app this year, one COVID-era carryover is proving its worth. The SidChat texting platform seems like it will stick.

Harvey explained that the platform allowed customers to “ask questions, place orders, check inventory, and send pictures to our local inside sales team.”

Making remote customer service feel more personal, the software also lets the user see who is working on their query. The company promotes the service prominently at the top of its homepage; Harvey believes contractor reliance on technology in daily work is only increasing.

DSG’s Sisson agrees and is ready to make a more assertive case for all involved — noting, for one thing, that distributors are pressed by workforce challenges just like everybody else.

“A digitally engaged customer not only does more business with us, but it’s more efficient for both sides,” Sisson said. He sees an incentive for DSG and dealers alike to become stronger digital partners.

Sisson relays that “around 35% of our customers have digitized themselves.” Like Cline, he recognizes that there’s room for growth but also a ceiling for the current customer base.

“Yes, we still get facsimiles at our branches,” he said. “Some of those are just not going to change.”


Effects on Operations

Both Cline and Sisson understand that their new e-commerce initiatives might have ramifications for their physical operations. Industry analysts have predicted changes in ordering mixes and habits as a result — and Cline mentioned that he could envision an uptick in jobsite deliveries as more contractors embrace e-commerce — but neither company has reached that point yet.

ActVantage, a firm that consults for distributors and presented about pricing and inventory at a HARDI event last year, does see key components of traditional distributor value as changing as e-commerce develops. Pradip Krishnadevarajan, Ph.D., and R. Senthil Gunasekaran, Ph.D., are managing directors and two of three cofounders at ActVantage.

The nature of website orders may force changes in operation strategy.

“One HVAC distributor has all their e-commerce sales through their regional distributor center to protect walk-in customers and local inventory at smaller branches,” they said. “The channels' cost-to-serve (such as level of technical support, order size, frequency of delivery, and transportation requirements) are different.”

ActVantage advised distributors to incorporate cost-to-serve into pricing and to be consistent for customers within each channel.

At the same time, they caution that “customers may purchase hundreds of items across the channels and expect the same level of customer service.”

Harking back to the SidChat effort to strengthen this connection, ActVantage says that “inside sales teams have a more prominent role to play in both sales and sales support. They have become the face of customer service for e-commerce customers.”

These changes, some more obvious or faster to manifest than others, reinforce the need to know your base better than ever. Specifically, distributors should understand customer stratification; having a grip on specific buying power, alignment, cost-to-serve, and profitability “is critical for distributors to succeed,” in ActVantage’s estimation.

Krishnadevaraja and Gunasekaran summed up that “Core customers need both the product and service, while the express or e-commerce customers might value the ease of purchasing at a reasonable price.

As a result, “Segmenting your customers will help sales, pricing, and operations teams make field-level decisions confidently while educating the customers about service elements and the resulting customer experience.”


Wherever You Are, Keep Going

With HVAC distributors all over the curve in terms of progress in this area, the key remains continued work on understanding the target and creating a strategy that is right for a given distributor and market.

In Locke Supply’s case, not only did Locke build its current e-commerce presence in-house, but Cline wishes they had chosen that approach much sooner.

“It allowed us to build a completely custom e-commerce platform that worked best for our customer base,” he said. As a bonus, that team has helped the company digitize what had been some paper-based internal processes.

“The investment in a strong web development team is one of the best investments we’ve made,” Cline said.

At DSG, Sisson emphasizes that distributors have to look for new ways to shape the traditional distribution model to work better. However, established distributors may also have a leg up in some ways over more recent e-competitors. Don’t overlook strengths that might tend to go underappreciated in an era of redesigns and platform launches.

“With our network of physical locations, we have the ability to deliver into mid-size and small markets the same day as the order, and we can handle oversized products with ease.”

Sisson added one other layer of assets that even the largest fleet of deliver trucks can’t overcome.

“We also have customer-focused staff ready and available to assist either in person or over the phone.”


Think F-A-S-T in the E-commerce Era

Pradip Krishnadevarajan, Ph.D., and R. Senthil Gunasekaran, Ph.D., two of the three managing directors and cofounders at ActVantage, offered an acronym’s worth of advice for HVAC distributors navigating these waters.

“There are some blind spots and points to consider,” they said. “Focus, alignment, scorecarding, and transparency — also known as FAST.”

In their words, here is the quick overview on the components (and in one case, unexpected benefits) of FAST success.


Focus: A distributor should think about the primary objectives of their e-commerce platform upfront. An HVAC distributor focused on assisting existing customers to procure effectively online as part of their e-commerce rollout. The acquisition of new customers was not their primary objective in their first phase of implementation.

The focus on existing customers helped them prioritize resources accordingly. If the distributor's primary focus is acquiring new customers, the details of the value proposition would be much different.


Alignment: Like technology projects (ERP, analytics, CRM, etc.), distributors traditionally associate e-commerce implementation with their IT team, causing misaligned expectations. One needs to remember that business requirements precede technology decisions.

Distributors should recognize that e-commerce is an additional channel with a different set of customer expectations.

It's not just digitizing price lists and product descriptions. Customers expect lower prices like the B2C industry, due to reduced cost-to-serve.

Alignment requires careful planning and decision-making by a cross-functional team before seeking technology solutions such as the platform, etc. The e-commerce project should be owned and driven by both business and IT teams with the right cadence.


Scorecarding: Most distributors provide feedback to suppliers only when things go wrong – too many backorders, incorrect products, long lead times, etc. Tracking and reporting supplier performance objectively goes a long way in managing customer service.

A distributor tracked lead time and their deviation from the agreed-upon lead time. Due to the suppliers' inconsistent lead time performance, the distributor had to carry additional safety stock. The manufacturers were impressed by the distributor's attention to such matters and were willing to improve with the distributor. Several suppliers added five extra days to payment terms, a few improved lead times, and inventory for these suppliers dropped by 20%, which enhanced turns and fill rates.


Transparency: At present, product availability is scarce due to supply chain challenges. Several HVAC distributors are planning for orders through next year.

These distributors had the difficult challenge of letting their customers know about the lack of inbound shipments from suppliers. They made customers aware of the actual inventory status and an estimated order fulfillment time. If the distributors are not transparent about the market's actual demand, it leads to inflated forecasts, putting supplier capabilities under further duress.

Transparency and communication (distributor-to-customer, distributor-to-supplier, and supplier-to-distributor) are vital to surviving the current lead time crises. In trying times like now, both the suppliers and distributors must be transparent about product needs to protect customer service