E-commerce continues to change the picture in HVACR wholesaling, accelerated by a pandemic-era move toward remote transactions and an ongoing generational shift in the work force.
Distributors are improving and expanding sales platforms and seeing more online transactions, industry watchers say. Some are introducing new systems, such as warehouse robotics, that complement e-commerce.
Watsco Inc., the largest HVACR distributor in the U.S. by sales, increased technology spending during the 12 months that ended March 31, compared to the previous 12 months, by nearly 28%, to $46 million. In the same 2021-2022 period, the company reported, the number of e-commerce customers grew by 19% and e-commerce sales reached more than $2 billion.
“As the digital age influences how HVACR products and services are sold, we believe that Watsco’s customer-focused technologies, scale and leadership position offer significant long-term value,” said A.J. Nahmad, president of Watsco.
A 2021 study commissioned by HMI Performance Incentives found that more than 29% of HVACR contractors use distributors’ websites to place orders.
General manager of business administration
Century A/C & Air Management Supply
‘Here to stay’
“Many HVAC distributors appear to understand that digitization and e-commerce trends are here to stay,” said Gabe Pinchev, the CEO of FieldPulse, which develops business management software for service businesses.
Andrew Larson, the CEO of Gustave A. Larson Co., said Millennial and Gen X customers are more likely than baby boomers to favor e-commerce. The company is working to accommodate them, he said.
“Things are going to be moving pretty quickly in the future, and we’ve got to be prepared,” he said. Larson introduced its first digital sales platform in 2001. “I think we were pretty early on the curve,” Larson said.
Over the past year, Larson added, digital sales accounted for about 15% of the company’s sales. “The latest trends have gone up closer to 20%” and even 30% in some markets, he said.
The pandemic changed the picture, too.
“Absolutely, during COVID it went up,” Larson said.
The increase in e-commerce, Larson added, has helped ease a shortage of trained employees at Larson, as salespeople have been freed up for other tasks.
“It’s certainly helping. It’s certainly a pressure-release valve,” he said.
Larson said e-commerce can strengthen relationships with customers, and that the Larson customers who use it the most “are the ones we have a better relationship with.”
But Larson and other wholesalers don’t see customer visits to distributors going away any time soon; the personal relationships, and the technical expertise that’s better shared in person, they say, remain important.
“Buying from people you like is still hugely important, said Renata Morgan, general manager of business administration at Century A/C & Air Management Supply.
Morgan, however, is concerned that bad actors with websites can undercut legitimate HVACR distributors on pricing, possibly selling equipment to unqualified installers and do-it-yourselfers, with the result being poorly installed or dangerously installed equipment.
“With the advent of the internet, there is a lot more opportunity to avoid distributors entirely,” she said.
When equipment fails or performs badly because of a bad installation, some distributors said, the reputation of the industry can suffer.
“Then the manufacturer gets a bad reputation because that’s what’s installed at that person’s house,” Morgan said. “It creates friction, really, from all angles.”
“The biggest danger I see is our industry getting a black eye because somebody’s installed it improperly. And then the consumer is unhappy,” said Richard Cook, president and COO of Johnson Supply. “You know, there’s a lot of social media, there’re a lot of ways for consumers to make their voices heard,” he added.
Morgan noted, though, that HVACR installations by untrained people will likely void equipment warranties. A “majority of them do have some language about it,” she said.
Talbot Gee, CEO of HARDI, said rogue online sellers are “not dramatically altering our industry” and don’t account for a lot of sales. “Our members have been pretty smart about keeping an arm’s length from them,” he said.
Manufacturers and distributors, Gee said, are careful about keeping product from those who might sell it on the side to unqualified installers, for fear of harming the industry’s reputation.
“The stakes are high enough that it does police itself,” he said, adding, “Both sides have a vested interest in being good partners with one another.”
Pinchev, at FieldPulse, said that increased e-commerce in HVACR has created opportunities for companies like his, as larger suppliers are integrating their product catalogs into field service management (FSM) software. FieldPulse, he said, has a “channel partnership program” that strengthens relationships between distributors and the contractors who buy their products.
“Those distributors that keep making it easier to do business with them by marrying e-commerce tools, business consulting services, and good ol’-fashioned customer service and support will win big in the near future,” Pinchev said.