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Understanding E-commerce In The HVAC Industry With Nick Fleetwood

SBM 616 | HVAC eCommerce

 

Online shopping had become very common nowadays. You have to recognize that there a massive opportunity here. Think outside the box if you want to be a successful entrepreneur. Join hosts Tersh Blissett and Josh Crouch as they engage in a powerful conversation about eCommerce in the HVAC industry with Nick Fleetwood of Fleetwood’s Mechanical Services, Inc. Fleetwood’s carries products to cover all HVAC needs, from a full ductwork line to complete heating and cooling systems. Join in and learn more on how to sell online successfully!

Listen to the podcast here:

Understanding E-commerce In The HVAC Industry With Nick Fleetwood

Everybody out there in the podcast world, we have a different show and a little different guest. It’s going to help you think outside the box a little bit as they have done with their business. This is going to bring about some good discussion as far as online shopping and what it means for our industry. A lot of times, this is one of those topics that contractors have very strong opinions about. Honestly, these guys have been doing things differently for a long time. This is going to bring around some good discussion and some questions. With that being said, Tersh, do you have anything you want to add before we bring Nick on?

I’m excited to talk to Nick. I have lots of questions for myself inquisitively. eCommerce is very foreign to a lot of HVAC business owners. I know there are a lot of people that are reading this that are going to have a lot of questions as well. I’m excited to see how they have gotten over some hurdles because I can think of hurdles in my mind so I’m excited to learn more about it.

Nick, why don’t you start by telling us a little bit about yourself? I know part of that story involves your family and the start of the business. Why don’t you let us know your background? We will start jumping into some questions after that.

SBM 616 | HVAC eCommerce
HVAC eCommerce: If you’re just a contractor installing and you want to add some revenue, you should probably add the filters.

 

My grandfather started the company in approximately 1976. It was originally opened to the public, sold direct-to-consumer, direct to contractors, and that’s how I started the company. In the ‘90s, my uncle started doing the installs and service. He started the mechanical division and that started to grow as well. I had come into the picture probably about 2008, 2009. I have been here full-time since then. I was a warehouse guy, and then we had a bunch of overstock inventory that needed to be moved out.

My father, at the time, was also running day-to-day operations. He liked to buy surplus equipment from manufacturers. Back in 2008, 2009, it was a very good time to buy surplus equipment because we had all these companies with their warehouses, they are filled, and had 500 furnaces they wanted to get rid of. They need to get them off the book. People weren’t buying them and weren’t installing them, and they needed to move them.

We are buying them up left and right, trying to sell them up the door, and trying to install them. We could only install so many per week and we could only sell so many out the door for a week. I had a great idea, “Why don’t we try selling them online?” We put a few on Refocus.com, which is a local auction online, those sold great. We put them on eBay and they sold left and right. We were selling 1 or 2 a week. We thought that was good, then it was five a week, then it was ten a week, and then eventually it was coming up to 50, for instance, a week. They were shipping all over our dock. It just grew from there.

We started our own eCommerce website and struggled to get that going. It wasn’t getting traffic like eBay. We also bought it out a few years ago ShurailHVAC.com. They are another direct-to-consumer and they sold online. We bought some of their inventory and their name. The website wasn’t getting as much traffic as well, so we went back to the roots. We went back to eBay. That’s where all the traffic is and that’s where we did the best. We have been selling full-time moving equipment there.

As far as I know, when I look, do you still have an eBay store up?

We did our own eCommerce website. As I said, we couldn’t get the same amount of traffic to go through that as the traffic that hit eBay. eBay spends a ton of money on getting traffic to its website. They do a great job of getting the search engines to pick up our items. We live with eBay, they charge a fee but that’s where we sell most of all our equipment. We sell furnaces, ACs, heat pumps, geothermal mini-splits and ductwork.

I just shipped out 120 boxes of flex to a customer that couldn’t find flex anywhere, and we have probably 700 boxes of flex in stock. It’s crazy. I have a customer in Miami. He’s another contractor. He buys equipment from us all the time. I will ship him 20 to 30 ACs at a time. It depends on the market. He might not be able to get the ACs he needs in Miami. We might have them here in stock or it might be something that has been sitting in the warehouse for a couple of years. We will give them a discount and ship them down to him.

You ship all over the country, then.

We ship all across the country. The crazy thing is most of our business is in California. I hate shipping that far because the cost is high. For some reason, a lot of our stuff goes to California.

How do you end up with equipment? Are you buying directly from the manufacturers? At what point do you become a supply house yourself?

At this point, we basically are. We have a full line of ductwork and anything HVAC-related. If you walked into Johnstone Supply, we are probably going to have the same stuff right here in stock.

Is that something that you want to do? Some people reading, they are going to be like, “That’s more of a headache than I really want to get into. I just want to be able to dropship some air filters or something.”

If you are a contractor installing and you want to add some revenue, I would say probably add the filters. In my opinion, make a couple of bucks a filter. I don’t think it’s worth my time when we are shipping out 50 a week. We are making a lot higher revenue per furnace. The other spin of things is we have a regular walk-in store, 8,000 square feet. Customers can walk in. We’ve got furnaces on the floor they can look at and ask questions about. We’ve got 2 or 3 experienced sales taxes here.

We’ve got our other company mechanical, which does install and service. They are licensed, insured and a different entity. They rent office space from us and they have approximately six employees that run that. A lot of times, we have customers call or they walk in because they have heard of us and get a price on the front. They decide, “I’m going to have you install. Can you come out and give me a quote?”

It’s like rocket fuel almost to our mechanical division. Half the people that walk in the door thinking, “I’m a handyman. I’m going to put it in myself.” They might have a brother-in-law that’s going to help them, so they buy it first, take it home, and the brother-in-law might not be informed or they might not. They say, “Why don’t you come out and give me a quote on,” and then they are installed and we will take over from there.

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That’s the way a lot of things go. Everyone has a grand idea like, “I’m going to do this. I’m going to have all this time. I’m going to do this project.” They get to it and they start realizing all the other things like the electrical stuff that has to be hooked up the refrigerant, and all this other stuff and they are like, “Maybe I will just hire a contractor to do this. Can you help me out?” As you said, it’s a very interesting way to push leads to yourself, in a way, without even trying. I don’t know if that was really your intent or by happenstance. It’s like, “We have a mechanical company and we have a supply company. Let’s put them together and help each other out.”

If you would think about it, we are like a Johnstone Supply with an in-house mechanical company. We have contractors coming in, they buy parts and furnaces all the time. We also have consumers that come in and buy stuff. As I said, that fuels our mechanical division because half the time that people decide they are not going to do it themselves and they want us to do it. Going back to the question about the supply house, a lot of people will say, “That’s a lot of overhead. That’s a lot to manage,” but we have so much volume going through. We get such good discounts on buying equipment, flex stock, steel ductwork and stuff like that.

That helps out the mechanical division because we are selling that stuff to them at a better cost. They can keep their prices lower. If mechanical has a job come up, we don’t have to order anything. It’s in-house. We can have that order pulled in twenty minutes. The crew can load it up. There’s no waiting for a Johnstone. There’s no waiting for, “If that furnace is backward, flex is backward.” We had some products like that but we honestly haven’t run out of anything since 2020.

We might have been getting low on some stock but as far as all these contractors saying, “We are out of flex.” A competitor of ours came in earlier. They bought twelve boxes of flex because they couldn’t find a Johnstone Supply. A lot of other contractors and competitors will do that but then they would go around and talk bad about us. They are like, “You are selling directly to the consumer.” They can go in there and buy their own furnace or they can see what our cost is. The downside of it is our competitors don’t like the model because anyone can come in and they can get a furnace, a box of filters, capacitors or anything they need.

That was going to be my question. Whenever you have that situation where a client comes in and purchases the equipment, and then, later on, wants you to install it. How do you have that conversation? A lot of times, we have to build some margin into the materials to go through all the warranty processes and everything like that. What do you do in that situation?

If they already bought the furnace or want to buy a furnace and have our mechanical division install it, then our mechanical division would send an estimator out there. He would pull the normal markup of any job. Whatever the markup is on the product plus the labor, that’s going to be the same markup for this job. He’s not going to cut them a deal because they bought the furnace in-house. If you came in and we bid this job at $7,000 from mechanical, came in and bought the furnace, and then decided to have us install. It’s going to be around the same $7,000. We still get the same markup.

Do you ever get any kickback from people from that? I don’t really find it with clients like people but what I find it with is home warranty companies because they are who they are. They are like, “Why is labor so much?” I’m like, “Add that price to the materials.” They are like, “Why is the material so much?” I’m like, “Add it to the labor. I don’t care how you split it up. It’s my price.”

We do get a lot of kickback but that’s in any industry. You’ve got your customers that will complain if we charge $10 an hour or charge $200 an hour. You are always going to have someone that complains about the price. We tell them, “That’s the price. This is what we charge per hour to have two guys out there. If you don’t like it, you can check around because we are pretty competitive in our market.”

This is the conversation we had with the guys over at Contractor Commerce. Usually, you can look up a menu for a restaurant or a retail store. You know what the price of everything is before you ever stepped foot in that location. With contractors, customers have no idea what it costs to run our type of business. When they see a price tag of $7,000, $10,000, $15,000 or $20,000 for a system with all the accessories, they are like, “I can go online and the equipment is only this much. Why is it so much?”

I feel like there’s no place online telling them that this is the install price around the country. Otherwise, you get people like HomeAdvisor who are telling people that they don’t care what the contractor makes because they are trying to sell the leads to as many people as possible. You have your retail pricing on your eBay store. Do you put your install pricing on your mechanical website?

We don’t advertise our installed price because we don’t have a flat rate on all jobs. We let our estimator go out there that way, you can quote it when he’s there. We have a lot of customers that call and they want, “It’s a standard 39-square foot ranch. Can’t you give us the price?” We don’t ever like to bid anything like that. We would like to send them out there. That way, he knows what needs to be done and he can sell the job.

There’s still some traditional contracting involved with your mechanical division. I see both sides. You want to put some base pricing out there, potentially, on your website like a soft warm-up to the customer. When it comes to it, you don’t want to have a firm price because a firm price means you can’t move. If that furnace is facing a door and you have 6 inches to disconnect it and stuff like that or it’s in some crazy crawlspace or attic, it gets super difficult to guarantee any pricing. Tersh, I don’t know if you want to talk a little bit about what your thoughts on that while we are waiting for him.

SBM 616 | HVAC eCommerce
HVAC eCommerce: With retail stores, you know what the price of everything is before you ever stepped foot in that location. With contractors, customers have no idea what it costs to this type of business.

 

I agree with that because when I spoke to Paul and Will about this, one of the things that they said they did to solve that is the fact that it says as you are completing the checkout and everything that we still have to come to a site visit. The price is not final. It’s an estimate. I believe they add some photos or something to that effect.

Those same competitors that are talking bad about you, do you find them coming in your retail store to buy stuff?

They come in. If they don’t want to drive 45 minutes to Supply House and they need a part, they would come and get it. If they can’t find flex stock at Johnstone, they come in and get it. As I said earlier, we had a competitor of ours that talked bad about us but he comes in and buys stuff. Normally, when you see them is when they are close by or they can’t find something somewhere else, they buy from us because there’s nowhere else to get it.

I have a question about that. Since you are not a legit “supply house,” how do you handle warranty issues if you are selling to another competitor or a mechanical contractor in your area?

If we sell at Goodman, for instance, it’s still warranted to Goodman. We have a contact at Goodman that handles all the warranty. It’s the same thing with Nordyne, Trane and stuff. Some of our connections for the warranty are more local. Some of them are corporate level.

That’s how I figured you would handle it. What about with the parts? Is it pretty much the same?

For warranties and parts, it worked the same way. Some of our suppliers are local. They can swap them out and handle the warranty. For some of the more corporate levels, we have to ship them to them.

Normally, a supply house has territory reps and stuff like that. Do you do anything like that to try to grow accounts that buy more from you or do you just let people buy when they want to buy?

None at this time. We just have an inside sales. People walk in, they can call in or place the order. We don’t have anything outside at this point. We have a bigger market that we are missing. The biggest thing we have struggled with over the last few years is staffing. People come and go. It’s hard to get guys in here because there are so many opportunities out there. A lot of our techs, installers, and salespeople don’t know if they quite want to come on board.

They have heard good things about us. They see what we are doing but then their boss or someone else in the background, whispering in their ear saying, “They sell to the public. They are missing our market.” There’s a controversy going back and forth. We think we have a huge market we are working on. The regular contractor does a service and installs, and they can see us as the market. It goes back and forth. It takes a while for someone to understand our scope of work and how we operate here.

It’s a very unique setup you have. Getting products can be a challenge. You have heard rumblings of furnaces being difficult to get for certain contractors, especially smaller guys that don’t have that buying power. If they want to contact you to see what you have in stock and stuff like that, is there a good site or something they can go to?

They can go right on our website FleetwoodsHeating.com and click on our eBay store. We don’t have 100% of our inventory on there. We switched over to Fishbowl Inventory, so we are still updating that. They can reach me directly by phone or email. I’m the main sales guy here.

I’m assuming that contact information is listed on your website?

They can call at (269) 521-3382. My direct extension is 3102.

It’s super interesting because it’s one of those things. SupplyHouse.com used to be our backup. If we couldn’t find something, I would go and search there because I was like, “Somebody has got to have this.” I didn’t even realize that there are people like you out there, Nick. You would have been a good resource for some of that stuff when we were running out of stuff.

In the summer of 2020, we actually had to bring on the second line of equipment because we were short on certain ACs. This distributor had ACs, so we had to get a second line of equipment out of necessity and having a backup option where you could get equipment and get it. What’s your regular lead time? Let’s say you are shipping from Michigan to California. About as far away as you can go, what’s your regular lead time to get there?

We shipped a furnace to California. They ordered it today, we would ship it tomorrow, and they would probably have it in the week. If it’s going to the East Coast, usually there’s only a couple of days turnaround.

For any of you reading that is having some issues finding product equipment, I would definitely check out their website to see what they have. It’s never a bad thing to have a backup option if your local supplier or your local distribution network does not have the product.

If you don’t see it on our website, shoot me an email or give me a call because we have a ton of inventory that’s not on eBay. We are still working on getting our new system up and going full tilt.

Have you ever considered a Shopify or WooCommerce type of site for your stuff?

We had a BigCommerce website. As I said, we ran up for probably about five years, and then we dropped it off because the traffic was not the same as eBay, so we went back to eBay. That’s where all the traffic is. We spent a ton of time and money trying to get our BigCommerce to pick up the same traffic as eBay. Whatever eBay does, they drive a ton of traffic to their website and we seem to do so much better there. Our long-term goal would be to build a more advanced website like SupplyHouse.com and get all of our inventory online.

I’m thinking about it from a supply point where you could also have it based on ZIP code. If somebody buys a part, you can also ask them before they check out if they would like a professional to come and install it for them, service or add a maintenance agreement. There are so many things rolling through my head as far as if something like that were set up but I get it. You do have to get traffic too because people in California are not going to find your website.

They are going to find AC wholesalers or these bigger online distributors first. If you are reading this, even if you found a way to get some wholesale equipment and you want to resell it, check out their eBay store and see how it’s set up. It’s a very interesting concept and I thought it would bring some value to our readers. Tersh, I don’t know if you have anything you want to close with.

Think outside the box before your competitors do. Click To Tweet

No, you did great. You asked all the questions that I had. I was curious about the competitors, which you answered for me. I appreciate all the information you brought to us and I know our readers will appreciate it as well because there are a lot of people that are wondering what it would be like to pull that trigger. I’m sure that, either you answered a lot of questions or now they have a lot more questions.

They probably have a lot more. If you have questions, you can reach out to Nick. We can facilitate you touching base with him. Hopefully, they could think outside the box a little bit that these things are out there, whether you put your head in the sand and try to ignore them or not, they are out there. Somebody is doing it and business is changing. You have to keep your eyes open and start thinking outside the box before your competitors do it.

I appreciate you coming on the show, Nick.

Thank you for having me.

Thank you all for reading. Again, if you have questions about online stores or anything from this episode, feel free to reach out to us.

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