The big news these days is the acquisition of Hughes Supply by retail behemoth The Home Depot. How will this affect the HVACR independent wholesale distributor?
Granted, a lot of hand-wringing is going on in some quarters, but the HVACR distribution industry has no reason to be projecting doom and gloom. It's true that I'm not in the trenches every day, but since this is my viewpoint, I'll offer my 10,000-foot elevation perspectives.
Hughes Supply has been a member since 1994 and joined through their acquisition of One Stop Supply, a member since 1983. If we ranked our wholesale distributor members on the volume of gross sales, Hughes Supply would certainly represent one of the largest members. But since they are really defined as one of the nation's largest diversified wholesale distributors of construction, public infrastructure and industrial-related products, their HVACR sales place them in the upper three-quarter percentile, by size, compared to other HARDI wholesalers. That is by no means intended to minimize their accomplishments in the sales of HVACR products but to point out that they have a respectable position but do not dominate. Wholesaler Magazine reported their sales breakdown as 44 percent pipe, valves and fittings; 20 percent plumbing and heating (hydronic); 4 percent HVACR; and 32 percent other.
Then there's The Home Depot, classified by United Business Media in their PR Newswire release as the world's largest home improvement specialty retailer and second in the United States with more than 2,012 retail stores. UBM also reports that according to Joe DeAngelo, The Home Depot Supply executive vice president, the acquisition of Hughes Supply more than doubles the size of the Supply Division and speeds up their strategy to attain the same type of market transformation its parent accomplished in the retail market.
There's no question that both The Home Depot and Hughes Supply have a formidable presence and everyone knows its brand, but does the combination forebode drastic changes to the HVACR distribution industry and market transformation? I predict that will not be the case.
We don't have to remember very far back to when the dotcoms were going to disintermediate the wholesale distribution industry, and then Pameco and contractor consolidations were going to turn our world upside down. Granted, some felt the pain of these threats, but in the end, those fears fizzled. I would submit that every HARDI wholesaler today is much stronger and more profitable because circumstances forced them to face and overcome those potential challenges.
In my opinion, this latest change in the industry will have little effect, if any, on the HVACR independent wholesale distributor. What has changed other than ownership? Is it really any different from any other changes in ownership in your market, no matter the size? The entrance of The Home Depot into the wholesale distribution market is nothing new; they have been attempting to do so for years. The power of Market Center Distribution and the relationships and knowledge independent wholesalers possess of their markets are the primary strengths of our industry and position in the channel. Coupling those qualities with the use of technology, a constant focus on cost reduction and maximizing services allows the wholesaler the flexibility to adapt quickly to change. The independent wholesaler distributor out of necessity is the most adaptive business in the world today, and for that reason, these changes will not affect him.
Different players, same game.