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    The Retail Market: Succeed in Your Own Backyard

    April 1, 2007
    By Thomas J. Winstel We are a nation of consumers. In 2006, the retail industry in the United States generated $3.8 trillion in retail sales. In short,

    By Thomas J. Winstel

    We are a nation of consumers. In 2006, the retail industry in the United States generated $3.8 trillion in retail sales. In short, everyone shops.

    Where do people shop? At stores, of course. While an increasing number of people shop via the Internet, most shopping is still done in person. Think of the overwhelming "flavors" of retail: apparel, restaurants, convenience stores, grocery stores, department stores, drug stores, electronics stores, home improvement outlets, athletic, bridal, and shoe stores . . . the list goes on and on. And these stores are a source of opportunity: It's estimated that in 2006, retailers made more than $200 billion in capital expenditures to maintain new stores and remodel older ones.

    Yet, many contractors still ignore — or outright avoid — the retail market. Why? Because of some retail "hassle factor" stereotypes. Do any of these sound familiar?
    • Retail is only rooftops
    • Retailers require too much paperwork and make unrealistic demands
    • Margins are too low with retail customers
    • Retailers are difficult to sell to
    • Retailers require too much reporting.

    As contractors, we often either try retail, get frustrated by it, and bail out; or steer around it altogether. So why are we at Engineering Excellence proponents of serving the retail market? Because it's an excellent, steady profit center for us. All it takes is to approach it with the proper mind-set. Your mind-set determines your operations.

    Think Like a Retailer
    The first step in succeeding in retail is to think like a retailer. The average retailer has many issues on his or her mind: sales goals, personnel and staffing, ordering and stocking, and security, just to name a few. One thing most of them don't spend too much time thinking about is their HVAC. In fact, they don't want to spend time thinking about it. This means they're looking for three things in their HVAC contractor: trust, accuracy, and timeliness.

    Accuracy and timeliness will help build trust. Providing a fast response time, an accurate diagnosis, a fast resolution time, and a quality repair with no repeat repairs, can be the differentiator for you in your market. Failure to provide any of these items can be the eliminator.

    Be aware that there's something even more important to retailers than repairing their HVAC systems: information. Especially when it comes to preventive maintenance services, keep your customer apprised of what you're doing, when you're doing it, and when you've done it. Remember, a job is only accepted by the customer when you have communicated and documented it.

    Part of the retail mind-set is being prepared to accept certain reasonable expectations from your customers. These may include:
    • Pre-approved spending limits
    • A guarantee not to exceed quotes
    • Pre-defined parts mark-ups
    • Competitive labor rates and charges. Meanwhile, be prepared to offer them these core competencies:
    • A regional footprint
    • A quality program that meets performance standards 100% of the time (see Table 1)
    • Accurate field quoting.

    Self-performers and National Management Firms
    There are two basic types of retailers: those who self-perform their HVAC maintenance and service work, and those who have their HVAC work handled through a national management firm.

    For self-performing retailers in your local area, you can sell your company's services directly to the store manager or facility manager. The first steps here are understanding the retailer's needs, challenges, and frustrations, and identifying which prospects fit well with your company (see the sidebar, "Run Away From the Delusion Buyer").

    After that, it's no different than selling service and maintenance to any other type of client: learn and understand their goals and budgets, design a preventive maintenance package to meet those goals, and write an agreement. Then, do what you said you would do, and conduct regular customer retention reviews. Ask how you're doing and what you could do better, and share the customer's insights with your operations team.

    Partnering with a national management firm offers some benefits not found among the self-performers: a low cost of sales and marketing, and the opportunity to team with an educated partner. However, you still want to make sure the company is a good fit for you. You want to work with a national management firm that:
    • Has a good reputation with retailers that balances contractor realities
    • Understands the business of HVAC

    Has a broad portfolio of accounts
    • Places a high value on relationships based on mutual respect and trust
    • Offers and opportunity to make a fair profit
    • Pays on time.

    Putting It All Together
    Ultimately, the retail market represents a huge opportunity for many HVAC contractors. It's true that the market is rooftop-unit dominated, and performing preventive maintenance on dozens of rooftop units may not be glamorous. However, it's steady work, and it affords you the opportunity to identify and address problems "below the roof," such as improper ductwork installations, improperly wired or outof-date controls systems, and so on.

    Put yourself in the retailer's shoes to develop a retail mentality, and you might be pleasantly surprised by how needed and appreciated your company quickly becomes in a market that you had previously shunned.

    Although we feel the retail market is attractive and profitable, you certainly don't want every retail buyer. Watch out for clients who exhibit these tendencies, which are symptoms of something we call "Delusional Buyer Syndrome":
    • Unrealistic maintenance tasking or frequency versus the time allotted
    • Unrealistic travel or set-up time t Repair allowances/claims to third-party insurers that impose unreasonable time restrictions based on accessibility of equipment or drive time
    • Slow pay — you should expect 45 days or less
    • Internet auctions — don't overpromise or bid unrealistic time frames for your technicians
    • The "forced agreement"— read the terms of an agreement (the fine print) carefully to ensure you enter into the agreement with your eyes wide open
    • Customers who try to tempt you into biting off more than you can chew ("Can you also take care of our store in the next county?")

    You don't need these types of customers. Take realistic steps with reasonable clients, and the business will build.

    Thomas J. Winstel is president and chief operating officer of Engineering Excellence, Inc., Cincinnati, OH. The company is Contracting Business' 2005 Commercial Contractor of the Year. Engineering Excellence partners with HVAC service contractors across the U.S. and Canada to provide services to retailers. Winstel can be reached at 513/761-6000, e-mail at tjwinstel@ engineeringexcellence.com