When does a contractor become a distributor?

[sysint]

Scenario - Contractor sells ASC controllers to customer without installation or additional warranty.

Should there be any complaint from the contractor to the manufacturer if an actual distributor sells to this customer if the customer starts shopping?

[nikko]

Tricky situation. But the answer is; it depends.

If the contractor is signed on as "just" a contractor and decides to start selling parts under that umbrella, he's on his own. At that point he's probably in breech of his agreement with the manf. The manf. is likely to look the other way as long as that business is not hurting another contractor/distributor or resulting in tech support calls form the end user.

But if the end customer has issues with the contractor and if the manf. decides the end user is going to mean more revenue for them, they'll step in and support the end user directly.

If the manf. is simply doing an end-run on his contractor, then that manf. is not one I'd want to deal with. But in this situation it's unlikely the contractor has a "legal" complaint as his agreement with the manf. is as a contractor, not as a distributor.

Nikko

[sysint]

I think you have three parties here:
Contractor
Manufacturer
Distributor

If the contractor is setup directly with the manufacturer and decides to pass controllers distributor-style than he shouldn't have a gripe with a distributor or the manufacturer is my thought.

You stated: "If the contractor is signed on as "just" a contractor and decides to start selling parts under that umbrella, he's on his own. At that point he's probably in breech of his agreement with the manf." I can't remember a contract I signed or read where the manufacturer failed to say that engaging in distribution by a contractor was a no-no.

It's interesting you really see this with LON based controllers but it's not really happening with the bacnet world.

[ga-hvac-tech]

At the resi level, Honeywell had things like VisionPro stats and humidifiers in H/D for a while. For the most part, they pulled them.

A few weeks ago we had a dog and pony show here put on by Honeywell to promote their new resi product line. One of the sales reps asked me if there was anything else... I said that I do NOT want to see these products in a big-box store, as the HO needs to buy these products from us... NOT a big box store.

A couple of other contractors chimed in there. The consensus was that if Honeywell does put the new products in H/D, we will go to a different manufacturer.

I personally think there should be a defined line here, just my opinion.

[sysint]

I think it's fine they buy them from you if you install them and warranty your work. I think when you simply pass them through that's a different issue.

[NINAX]

Scenario - Contractor sells ASC controllers to customer without installation or additional warranty.

Should there be any complaint from the contractor to the manufacturer if an actual distributor sells to this customer if the customer starts shopping?

From a service focused / design-build company perspective:

No, the customer interest should aways be first.
If the contractor moves enough product in their normal endevours, the contractor's multiplier should allow them to make up some of the pricing difference.

Customers / owners should buy as they see fit. If it's strictly low dollar, and you're not it, OK.
I find very few that way, and when it happens, it doesn't bother me a bit. Most will ask me to get the material because the time that would be spent on the task is more valuable than a buck or two per piece savings that they might eventually find.

I think when you simply pass them through that's a different issue.

Why and what.

[sysint]

I might be referring to a case where the contractor was charging more than double the distributor for passing parts. In which case, since there is no value added the customer (IMO) can seek out a better price and I don't see where the contractor has a gripe about it.

So, when I say: "I think when you simply pass them through that's a different issue. ", I was more pointed in directing to GAHVACtech by saying if you want a H-well to limit a line of product then you have to support that line. Otherwise you would be no different than a H/D and why shouldn't H-well be allowed to see who does better? It is the same principle. However, when you are provide a service with the parts, that's a different issue.

I think that's why most (if not all) manufacturers have the non-distributor, non-retail clauses in the contracts to contractors.

[crab master]

I've always liked the idea of the customer being able to go back to the manufacturer and pay "retail" price, but no less. As a contractor your rate should be so much less than retail the only reason the customer should not go through you is if your stupid and try to charge more than retail or if the customer really hates the local contractor. I think a contractor becomes a distributor when he tries to sell outside of his/her general 'area' and sells to customers in that other area at a rate less than retail.

But again if you are just passing parts; however the other danger passing parts is getting them to unqualified hands and then getting a bad name for the manufacturer due to improper installation/programming.

[NINAX]

I might be referring to a case where the contractor was charging more than double the distributor for passing parts. In which case, since there is no value added the customer (IMO) can seek out a better price and I don't see where the contractor has a gripe about it.

Agreed.
They've got the hook'em, screw'em, and how business philosophy down, now all they need is the BACcrap line that will support that.

[NINAX]

I've always liked the idea of the customer being able to go back to the manufacturer and pay "retail" price, but no less. As a contractor your rate should be so much less than retail the only reason the customer should not go through you is if your stupid and try to charge more than retail or if the customer really hates the local contractor. I think a contractor becomes a distributor when he tries to sell outside of his/her general 'area' and sells to customers in that other area at a rate less than retail.

I disagree. Full retail? That sounds like list price. And that sounds like BACcrap.

If a owner can buy, and should be able to, at a .50 multiplier directly from a distributor, I know that would be the price I'd have to match when just moving product. With my lower multiplier, say .35, I could up charge the difference and still match the .50 sell price.

The beauty is that it's self-feeding too. The more product I move the better the multiplier gets, which serves me better if and when one of those crunch situations arise.

[crab master]

He asked about a distributor. In my mind a distributor provides no/minimal support to an end customer, just passes parts/goods.

Now we have a company like Engenuity, but they do provide support so I don't have a problem with that. Like I said, the danger comes in with either unqualified installations/programming, or the argument could be made controllers that are too hard to program if the average HVAC guy can't set it up and install it.

[NINAX]

He asked about a distributor. In my mind a distributor provides no/minimal support to an end customer, just passes parts/goods.

So who would they can on to help them? Probably you. I still don't see an issue.

Like I said, the danger comes in with either unqualified installations/programming, or the argument could be made controllers that are too hard to program if the average HVAC guy can't set it up and install it.

Sorry, no offense meant, but those sound like standard lies #8 and #13 from the BACcrap sales training manual.

We, as control systems technician/engineers, should never impede an owner's desire to self-execute work. Again, if the owner struggles, who will they call on? Probably you. I still don't see the issue.

[crab master]

Maybe I should start selling Bacnet!

I do agree with you from one aspect, but I am just stating what I've seen. Unqualified installations give a product line a bad name plain and simple, so the manufacturer has to have some kind of protection in place. I agree let stuff start going free market and let the best prevail, but I think those that start down that path may be eaten alive in the beginning until more start to follow, unless they make their controllers/software some of the easiest on earth to program and operate. There goes my programming job.

I guess the other item a contractor could do is charge a higher rate to a "non contract" customer. Anyway I am not a business owner but I know a lot of my "free" sales time is purchased through the markup rate on the materials purchased. Anyway no offense taken and I am not trying to get into a pi**ing match.

[NINAX]

Maybe I should start selling Bacnet!

Hope not.

There goes my programming job.

I don't believe that one bit.

and I am not trying to get into a pi**ing match.

Nor am I.
We've disagreed strongly on a certain topic before. Here we're just sharing opinions.

[crab master]

Agreed to Disagree.

[ga-hvac-tech]

What happened with Honeywell selling T-stats and humidifiers at HD was that the price at HD was not retail. It was actually not much more than our wholesale price.

The result is that HO's would want to buy it at HD and have us install. If I refuse to do that, I am the bad guy.

If I do it, and there is a problem (sometimes products at HD are seconds), then I am the bad guy unless I make few free call-backs.

So you see, it is better if the products we buy wholesale at the supply houses are not sold at big box stores.

Thankfully when I was in a depot the other day, they no longer have exact duplicate HW products on the shelves.

[NINAX]

What happened with Honeywell selling T-stats and humidifiers at HD was that the price at HD was not retail. It was actually not much more than our wholesale price.

The result is that HO's would want to buy it at HD and have us install. If I refuse to do that, I am the bad guy.

No. But you can't complain if someone else does or your company gets a bad rep from doing so.

If I do it, and there is a problem (sometimes products at HD are seconds), then I am the bad guy unless I make few free call-backs.

Why would you warranty the parts if it was a labor only call to begin with?

So you see, it is better if the products we buy wholesale at the supply houses are not sold at big box stores.

Nope, can't agree with that logic.

sysint started by specifying ASCs, even so, my philosophy would encompass a home thermostat too.

[ctrlguy]

I come at this from a different perspective, having started in this business as a distributor and morphing into a contractor then losing my distributor status (deservedly) while maintaining many of my distribution customers and eventually some of the pricing advantages that came with being a distributor. Anyway, the bottom line from my perspective is the contractor has no beef. If it's advantageous for the customer to buy from the distributor over the contractor when installation and/or programming is not involved, the contractor needs to provide some service beyond what the distributor can provide to justify his getting the business. Failing that, he deserves to lose the business.

[ga-hvac-tech]

No. But you can't complain if someone else does or your company gets a bad rep from doing so.


Why would you warranty the parts if it was a labor only call to begin with?


Nope, can't agree with that logic.

sysint started by specifying ASCs, even so, my philosophy would encompass a home thermostat too.

HO's can be a lot of fun sometimes...

It does not take long to find someone on Ebay or Craig's list that will sell you a home HVAC package (equipment only; furnace, coil, and A/C unit). Then the HO wants someone to install it for wages. You can talk until the sun does not rise, but the HO just does not understand when they 'think' they can get a deal. But let just one thing go wrong and you are the bad guy if it is not fixed (on your dime). And as soon as a few folks do it, everyone thinks it is a good deal. Nevermind that the manufacturers state clearly on their websites that there is NO warranty what-so-ever if the products are not provided and installed by a licensed and qualified dealer. No licensed contractor I know will even talk to someone about this arrangement. This is simply a no-win deal.

Some HO's do not understand that quality has a price.

[sysint]

I think we understand your point well enough and that really isn't what I'm talking about. I'm talking about a contractor who decides to play H/D but then complains to the manufacturer when his set prices are more than double a distributor for no service or installation. The only difference between the contractor and the distributor is price at that point. And the contractor thought he had a closed market so his mark was high.

Plus, I have yet to see a manufacturer contract that allows a contractor to do that...