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Why do HVAC manufacturers need distributors when they can sell direct to dealers or even customers?

I’m reminded of a mattress manufacturer’s advertising, claiming huge savings in going direct to the customer by cutting out the “middleman”, so what makes our industry so different?

The answer: Our industry’s sales and distribution channel needs a local, qualified, professional intermediary with the following attributes to represent and promote a company’s product lines.

-Intimate knowledge and access to the market with qualified sales professionals
-Availability, often at moment’s notice, to assist with troubleshooting, expediting a delivery, etc.
-Inventory of standard stock units, parts and accessories and other complimentary products
-Providing effective promotional programs; advertising, exhibiting in shows, attending seminars and conferences, personal selling with sales engineers, professional memberships in local associations for ASHRAE, ACCA, FRACCA, FEFPA, etc.
-Providing pre-construction and application services to owners, architects and engineers to help select and specify the right equipment while also accounting for various financial, code and performance requirements for the project
-Providing other important services to customers including; credit, delivery, installation help, product training, product service, customer service, start-up training, warranty services, etc.
-Maintaining credit-worthiness, coordinating with the manufacturer on marketing programs, co-ops, providing market analysis, industry trends and having capable management and staff

Together with product quality and design, the success and reputation of the manufacturer’s product will be dependent upon how the product is supported with each of the above listed attributes. Although these services add costs, they are necessary to ensure the product is applied properly and supported throughout the life of the equipment. Without these services, costs may be added and / or costly mistakes may be made due to unforeseen circumstances or unknown application requirements.

The two most common types of sales channels for the HVAC industry are Distributors and Manufacturer’s Representatives. A product may be represented by one or both of these types of sales channels.

Distributors:
Distributors traditionally buy products from manufacturers and resell them to dealers / installing contractors (mechanical, electrical, plumbing), builders and institutional facilities. They carry inventory of equipment, parts and accessories, and they are able to talk the language of their dealers and customers. The role of a distributor is changing today and it is more encompassing than ever before and includes a network for selling goods, providing services and information, Web sites and Apps for member dealers featuring product availability, prices, parts lists, warranty, and document search, etc.

For applied products (aka Plan & Spec) outside sales engineers are often employed due to the complexity of the equipment and application. The sales engineers are of paramount importance in properly applying the product to applications. These sales engineers are often Product Champions specializing in one particular brand offering.

In addition, many distributors employ territory managers who call on dealers to promote all their offerings.

Distributors buy in large annual quantities to reduce cost and shorten lead times for their customers.

Manufacturers’ Representatives (Reps):
A Rep contracts with a manufacturer to represent its products on an exclusive basis in a certain geographical area. The manufacturer’s products are generally represented by the Rep who is typically acting as a regional factory agent. The Rep generally does not take ownership / title to the product but rather receives a commission direct from the manufacturer at a time of sale.

A Rep typically represents a great number of manufacturers and can be an independent person or a firm representing multiple companies with a large staff with dozens of product lines.

A Rep generally will carry very little or no inventory of service parts or equipment. A Rep firm tends to be established in a regional geographical area or several geographical areas with offices in each.

Many Reps in the HVAC industry are engineering-oriented and offer technical support to the industry, thus limiting the involvement of the manufacturer on a day to day basis. Reps also employ sales-engineers, many being degreed engineers because they are calling on Professional Engineers, Architects, Planners, Developers, Facility Engineers and Design Build Contractors. The sales engineers are required to help the professional with his or her project details and assist with applying the product properly. Some of this technical work includes, reviewing plans, drawings, specifications, take-offs, load calculations, equipment sizing, and overall product selection that best fit the requirements of project. These projects are typically commercial with plan & spec bidding, requiring submittals, approvals, installation training, service training and a myriad of other services. In summary the Distributor and Reps (“middlemen”) make a significant difference with the success of the manufacturer’s products, both in sales and application. A Rep and Distribution system is a key external resource to any manufacturer, as the services provided are of great importance for the success of the products and projects.

The writer of this article works for AccuAir an engineering Rep / Distributor firm specializing in plan & spec commercial HVAC products.

For additional information please contact Frank B. Suranyi, MBA, Member ASHRAE, Engineered Products Manager for AccuAir – 407-259-0089 frank@accuaironline.com