Flexibility Helps Wholesalers Increase Profits
The Northamerican Heating, Refrigeration, and Air-Conditioning Wholesalers Association (NHRAW) announced the results of the association’s annual survey of member sales for 1999 following the association’s Summer Member Business Conference at Myrtle Beach.
Profits Impressive, But Below ExpectationsAccording to NHRAW, this billion-dollar growth represents a 7.6% increase over 1998, and, while impressive, the figure is actually more conservative than results compiled by the association’s monthly “Sales Trends Report” (up 9.1%) and the annual “Profit Planning Study” (up 8.5%).
Donald Frendberg, executive vice president and chief operating officer of NHRAW, stated that “variations among the respective association studies may be explained by differences in the number of respondents and their respective regions in Canada and the United States. From these reports, it is apparent that the NHRAW wholesale distribution companies remain a noteworthy force in the North American hvacr industry.”
According to NHRAW reports, industry estimates set 1999 installed value of unitary equipment and central heating at approximately $26.6 billion. “For the same period, NHRAW wholesale industry sales were just over $14 billion,” said Frendberg, “with about 50% representing equipment and the remainder in the accessories — ductwork, registers, controls, etc. — and supplies.”
Wholesaling has always been of utmost importance to the hvacr industry, as well as to surrounding industries. According to Frend-berg, the strength of wholesale sales in an era of consolidation is a testament to how stable the wholesaling industry remains. Even e-commerce, a revolution striking at industries far and wide, has not hurt the profitability of wholesaling.
“The increasing value that wholesale distribution brings to the market is evident by its continued strong growth,” said Frendberg, “in spite of increasing pressure brought about by consolidations and new e-commerce ventures. Notwithstanding these and other efforts to reduce the cost of distribution, no one to date has been able to accomplish greater efficiency.”
Understanding Is Key to SuccessBy placing themselves in the shoes of their customers, wholesalers have managed to understand the market they serve in a way that many industries only dream about. For the wholesaler, however, this way of looking at the market has become a way of life, because it leads directly to their success, according to James McNeil, NHRAW president and owner of Emco Limited Distribution.
“Quite simply, the wholesaler understands local markets,” said Frendberg. “He [the wholesaler] is an integral part of the local business community and a true business partner with his customers. And, most important, 90% of what the customer needs comes right from the wholesaler’s instantly available inventory.”
Distribution ProcessPrompted in part by e-commerce ventures, McNeil initiated a careful review of the two step distribution process by the association.
“We have now drafted what I believe to be a more realistic view for the evolving distribution process through a concept we call Market Center Distribution (MCD),” said McNeil. “As new e-commerce initiatives attempt to unsuccessfully devise alternatives to distribution, it is becoming increasingly obvious that an alliance or marriage of the participants would provide the greatest advantage for the future of the industry.”
James Truesdell, of Brauer Supply Company in St. Louis, MO, vice president of NHRAW and author of the MCD ideal, asserted that the MCD process will incorporate new levels of communication, cost reduction, and efficiency to maintain the value and critical position of distribution to the hvac/r industry.
“MCD is a concept which marries e-commerce technology to the knowledge of local customers, convenient warehousing, information access, and rapid/accurate delivery as provided by the independent distributor,” said Truesdell. “MCD calls for manufacturers, distributors, and retailer/contractors to identify their core competencies, strengthen strategic alliances, eliminate redundant costs, and utilize the power e-commerce technology brings to the channel.”
For more information about NHRAW and its programs, visit www.nhraw.org (website); or contact the office in Columbus, OH , at 614-488-1835.
Publication date: 12/04/2000