A wise man recently said that within five years the HVAC products we sell will become commodities and that the only thing contractors will have to sell is service and repair. He said that thanks to the big box stores like Home Depot and Lowes, anyone can shop for heating and cooling equipment and cut out the middlemen - both contractors and distributors.

Being classified as a commodity isn't necessarily a bad thing. After all, Webster's New World College Dictionary defines commodity as "any useful thing." But it also defines commodity as "basic items or staple products."

I can see the logic in calling our products commodities. Some people assume a box is a box is a box. What difference does it make if a homeowner buys the box from you or Home Depot? Your profits are based on a good labor markup, right? Why should you be concerned with the lower margins that the mass retailers are so interested in? They deal in quantity and you deal in quality.

Fair enough. But is your good service going to be enough to carry you through when all of the boxes are sold by someone else?

Cyber Feedback

I threw that hypothesis out to some of my friends in cyberspace, visitors to our News'HVACR Forum (on our Extra Edition page) and The Wall (www.heatinghelp.com). Here are some of the responses.

"I tend to agree with the wise man," commented HVACR Forum poster Brad Swanson. "It is already happening, and, in my mind, it is not going to get any better. We are a plumbing, heating, and air conditioning shop, and we have seen what this has already done to the plumbing side. Things we used to sell, like water heaters, faucets, toilets, sinks, tubs/showers, etc., we hardly ever sell anymore. Most all of this has happened in just the last ten years. People are buying these items at the big box stores and wanting us to install them. Profits we made on those items helped to pay for the overhead; now it has to be made up in higher labor rates, which in turn has people complaining more about how much we charge."

Over on The Wall, Tom Meyer noted, "I was at a trade show some time ago and saw a booth with HVAC books, tapes, etc. Always on the hunt for new information, I went up and asked if they had anything on hydronics. I was told ‘Absolutely! We have everything you want to know about it.' I was handed a VHS tape, which was 43 minutes long.

"I thought, ‘15 years in the business, and all the schools, conferences, workshops, networking, etc., I've done can be condensed down to a 43-minute tape? Have I wasted all that time?' I don't think so.

"I teach eight-hour classes on radiant heat, and we are pressed to get through all the information. Should I just throw in the 43-minute tape and let the people watch that instead of the eight-hour class? I think you see my point.

"The big boxes, Internet, whoever sells directly to the DIYer [do-it-yourselfer] can only sell the materials. They cannot possibly give them an instruction book covering all the engineering and design principles we learn as we go along. ‘Real men don't need instructions.' Can you imagine if they tried to include an instruction book? It would be several hundred pages long in fine print. Most would go unread - just like the two-page instructions for setting a VCR clock.

"What's wrong with people doing it themselves? The potential effects of not being trained and experienced send a chill down my back - improper venting, carbon monoxide leaks, inefficient combustion, improper pipe sizing, layout, etc. Imagine what would happen if people didn't understand heat loss, surface temperature, mixing valves, injection stations, delta T, point of no pressure change, boiler protection, heat exchangers, threats of Legionella, pressure reducing valves, pressure/expansion tanks, constant circulation, etc. Our future may go from design and install to correcting errors.

"Unless you understand the complexities of the system, you may get it to run. Is it going to be the best system working the way you want it to at the cheapest operating cost with the longest life expectancy? You have to decide. Is it time to admit you need a professional? Many people make that decision about their cars. That's why there are oil change shops and mechanics.

"One other story may bring the point to focus: A young man crashed a small private plane at a local airport. When they pulled him out, they found he had stolen the plane and wasn't a licensed pilot. When asked what made him think he could fly the plane, he answered, ‘I read a book about it.'"

Much Ado About Nothing?

At the forum, one person said that all this hypothesizing is much ado about nothing.

"Most products we install and service can be purchased by anyone. That's not a revelation," stated Harry Baldini. "It's also known that Joe Homeowner will make a mess of most attempts to perform work on an HVAC system in which he is absolutely clueless.

"Products and service are one in the same thing in this business. As long as we progress with the high-tech aspects of our trade and stay on top of everything, it will remain that way."

At The Wall, "Heatboy" had a different point of view. "I agree that the industry will go through some changes over the next decade," he commented. "I just don't think those of us that don't perceive ourselves as a commodity will become one. We will have to adapt to change, but we have been doing that all along. That's why we are still here.

"The only thing I see happening because of the retailing of hydronics is my service revenues skyrocketing over the next decade if retailing does happen. I will still get the work I do now. People that hire us can certainly afford to purchase the equipment themselves with a little legwork. The people that hire us see the value in doing so. This type of client will never disappear. They will become more knowledgeable, which is the best thing that could happen to us. Knowledgeable clients make selling them on the ideas I have a lot easier.

"Commodity? Never."

The voice of the DIYer was also heard at The Wall. "I'm a DIYer, but probably not a typical one," stated "prm." "After buying several books, some from here [HeatingHelp.com], I think I'm getting a pretty good handle on things. Your point is well taken, though; I've read well over 1,000 pages of various books and manuals. The heat loss calculation can be done by hand and by software (the results are within 5 percent of each other) and the pipe and circulator sizing are done with the method described by [industry expert/instructor] John Siegenthaler.

"Now, that said, I'm hiring a pro to install the gas piping and get the boiler running and tuned."

Does it matter if customers buy elsewhere and ask you to install and/or service their equipment? I'd like to know what you think. E-mail me or join in the discussion at our HVACR Forum.

John Hall is business management editor. He can be reached at 248-244-1294, 248-362-0317 (fax), or johnhall@achrnews.com.

Publication date: 03/29/2004