Market Continues to Challenge Distributors

It’s a tough crowd of consumers out there these days, and the uncertain economic climate is certainly playing a role in their behavior. According to distributors, consumer behavior is leading to a drop-off in the replacement market, as well as a drop-off in the high-end market. Yet despite these worrisome trends, distributors are still seeing areas of growth and employing smart tactics to keep their businesses in good shape.

Current Challenges

These challenges are not relegated to the residential market. According to Michael Senter, CEO, ABCO Refrigeration Supply + Solutions (Long Island City, N.Y.), “The greatest challenge in the market is larger scale commercial opportunities where bank financing is essential to support growth. Owners and developers are hesitant to commit large amounts of capital because of two primary reasons: one, bank financing is difficult to obtain, therefore creating significant demands on the owner/developer’s own capital and two, owners and developers perceive a great deal of consumer insecurity, so committing a larger proportion of their own capital is fraught with risk. These factors together have created lethargy in large-scale commercial development.”

Bright Spots in the Market

While the large commercial sector and high-end product mix may be down, distributors are seeing strength in other types of applications and equipment. “The most significant strength we perceive in the end-user market is small and mid-sized opportunities involving both residential and commercial air conditioning opportunities as well as commercial refrigeration opportunities,” Senter said.

In the commercial and the large-scale residential unitary air conditioning market, we are participating in a large number of conversions from traditional ducted solutions to Mitsubishi City Multi multiple-evaporator ductless solutions,” Senter said.

In the residential market, however, Senter is seeing growth in ducted systems. “Interestingly, we have experienced growth in the sales of Mitsubishi ductless solutions and Luxaire ducted solutions. Since the recession certainly is here in force, we attribute this growth to an increase in market share based on our ability to provide a wide range of practical, cost-efficient solutions for contractors to offer their end users,” he said. “The use of ducted systems in the single-family house residential replacement market has increased significantly with the availability of dry-charged R-22 residential condensing units, providing creative contractors with multiple ducted solutions for residential homeowners.”

Key Metrics and Tactics

In the midst of all the challenges presented by the economy, distributors are returning to the basics to monitor and ensure the health of their companies.

Senter noted that ABCO is tracking cash flow, accounts receivable, inventory levels, and market share of growth. “These measurements always are important. They are imperative in challenging economic times. And, of course, they all are connected,” he said.

At ABCO, Senter is also focused on strengthening relationships with contractors as well as manufacturers. “We must be the very best we can be whenever our customers need our services and products,” he said. “Our customers are under this same pressure from their end users. Teamwork with our manufacturers and our customers is more important than ever, and it always has been paramount.”

Sidebar: Working Relationships

One key for distributors is maintaining healthy relationships with manufacturers, and both sides need to respect each other for the relationship to succeed.

Michael Senter, CEO, ABCO Refrigeration Supply + Solutions, noted that the basis of a good relationship begins with strong financials. “In other words, we are determined to win and sustain the confidence of our suppliers by consistently paying our bills in a timely manner. Strong manufacturer relations also depend greatly on effective communications,” he said.

Click here to read the full article from the October 17, 2011 issue of the ACHR News.