The 3 S’s Plaguing Your HVAC Customers: Part 1

There’s a ripple effect in HVAC supply chain.

If you are an HVACR distributor, much of your business has had to change because of significant changes in the way your customers run theirs. Understanding their changing needs and being able to adapt your products are key to delivering value to drive your growth strategy.

In this 3-part blog post, you will learn the 3 biggest challenges – “the 3 S’s” -- plaguing your HVAC customers:

• Stiff competition
• Seasonality
• Shortage of Skilled Labor

We'll start with the first "S" today...

Stiff Competition

While the HVAC industry is growing quicker than average:

• The HVAC Control Systems market size is valued at $14.5 billion and will increase to $29.59 billion in 2026, with a CAGR of 9.4%
• The amount of new air conditioners grew by 47% over 2017-2018
• 6% of electric use in the country is for cooling homes and businesses

... Their costs are high and their competition is tight, limiting the cash they have available to order products from you like they used to.

To put this competition into perspective, research by IBISWorld found that no company has a dominant market share in this industry, and the largest company accounts for just 5 percent of the industry’s revenue.

Extend Their Buying Power

So why not be the hero?

Now may a good time to use promotions and incentives like forward buys with your customers to offset the dip in buying power. Related Read: "When Does Forward Buying in Supply Chain Make Sense?"

A word of warning though. Don’t run a promotion or offer without understanding the math behind it. What true value does the promotion bring – or not bring – to you? Distribution-built software for HVACR demand forecasting can quickly analyze the economic trade-offs of those promotions to ensure they make sense.

Check Your Prices

Another by-product of competition is that your customers may not be willing to pay the prices you are charging:

• How much insight do you have into your prices vs. competitors'?
• Are overpriced/underpriced products a threat to your revenue/margins?
• What if you could strategically lower price on some items to deplete inventory surplus, or strategically raise price on higher-demand items to stimulate sales, turns and margins?

News flash. You can.

Innovative price optimization tools will allow you to run valuable analysis on these things to quickly recommend price adjustments based on customer willingness-to-pay. Many distribution businesses don’t realize that just a 1% price change can have over a 22% change in gross profits (for good or for bad!).

Especially with more sales moving online, prices are highly transparent to customers, and can make or break your bottom line. Learn more about Price Optimization here.

Next Up: Seasonality

We continue this series in Part 2 with how to tackle the problem of seasonal demand in HVAC: