It is wonderful that there are places to seek out more refined definitions for the novice and the veteran alike. It wasn’t until recently, when perusing a reader’s comment about an article in The NEWS, that I discovered that some of the seemingly simplest terms are not well understood in our business. The reader complimented a contractor/author for spelling out the difference between a maintenance agreement and a service agreement. “For the first time, I know the difference between the two,” wrote the reader.
Finally, I can come out of the closet! After reading the contractor’s original article, I realized that I, too, had been confused. Therefore, I feel justified that in my perfect-world HVAC glossary, I would add the following simple definitions so that confusion might be lessened.
A NEW GLOSSARYHVAC CONTRACTOR: sells to end user; usually refers to the company or the owner.
HVAC DEALER: sells to end user; used to refer to brand-specific representation; manufacturers and distributors refer to contractors as “our dealers.”
HVAC DISTRIBUTOR: middleman in three-step distribution process; sells to contractor; sells parts, accessories, and equipment; used to refer to brand-specific representation; manufacturers refer to distributors as “our distributors.”
HVAC WHOLESALER: middleman in three-step distribution process; sells to contractor; sells parts and accessories, may sell equipment.
My definitions may not be 100 percent on the money, but arguably so.
DON'T SCREW WITH MY GLOSSARYOf course, there are those who will make me out to be a liar. For example, there is probably one lone distributor or wholesaler location that will sell product to an end user. It might be a box today or an air filter tomorrow, but they have just ruined my glossary of terms. Still, most middlemen would never sell directly to an end user.
There might even be a manufacturer that has exclusive relationships with “our distributors,” that also is selling product on the Internet. Still, most manufacturers would never bypass the middleman.
Another way my glossary could go awry is if a distributor or manufacturer sold not only to its exclusive dealers, but also to contractors. In other words, let’s just say (for grins) that someone pulls up in a pickup truck with a license to handle refrigerant (or not) and wants to purchase an air conditioning unit. A nice warehouse person might sell the product to the contractor, even though the person was not an exclusive dealer. Still, this doesn’t happen very often.
Just like the maintenance agreement-service agreement thing, I am still a little confused. Although these are very rare instances, it appears that the further up the chain one goes, the more options exist for selling directly to a variety of buyers. Contractors, who reside nearer the bottom of the chain, only have one buyer. Contractors don’t sell product back to wholesalers, distributors, or manufacturers. They only sell one step down the chain - to the end user.
Dealers once expressed much more of a fierce loyalty for a specific brand. Today, studies suggest that even smaller residential HVAC companies are likely to carry two to four brands of equipment. In the heavy commercial arena, you wouldn’t think to refer to a mechanical contractor as a dealer. The word dealer almost infers a single-brand loyalty, and commercial contractors almost never align themselves so closely.
In recent years, there has been a grassroots movement among contractors to proudly proclaim that “I am the brand.” Although I personally believe there should be a strong branding allegiance throughout the chain, upon the realization that the allegiance must be multidirectional and that dealers cannot simply be one of the options for channel distribution, it becomes more apparent why dealers are becoming contractors.
Publication Date: 01/14/2008