Quietside Makes Minisplits into Big Business

April 1, 2009
Quietside became the exclusive importer and distributor of Samsung minisplit systems.

When Samsung Electronics was looking to establish its minisplit air conditioning line in North America, the South Korean manufacturer knew it would have to rely on the expertise of those who knew the market and the products. Samsung got both with Quietside Corp., a company formed in 1998 by Sang Woo Lee, who was then the owner of a Johnstone Supply store in Los Angeles, and Jack Ernest, who had extensive experience in HVACR distribution and minisplit systems.

Quietside became the exclusive importer and distributor of Samsung minisplit systems. In that role, Quietside provides the sales, marketing, distribution and product support for this line. Although it is a separate corporation, Quietside looks, acts and performs like the manufacturer, providing the level of support and confidence that distributors expect in the North American market.

Eleven years later, Quietside markets the fully featured, fully-benefited Samsung line of minisplit systems as well as a standard, competitively priced line with the Quietside brand. Ernest calls this “the best of both.” Quietside also has a line of wall-hung, on-demand tankless condensing water heaters under the Quietside brand name.

All of this is done through a national network of independent manufacturer sales representatives who work with distributors around the country, a technical support staff to provide services and answer questions, and two warehouses on each side of the country — with a third in Texas on the way — to quickly get the products in the hands of distributors and to their customers.

Ernest recalls his first meeting with Lee, who had just acquired the rights to the Samsung line. He was looking for the right person to put together a national program to promote and sell the line. At the time, Ernest was with Mitsubishi Heavy Industries and was preparing to launch that company's minisplit line in North America. He was meeting with Lee as a competitor — preparing to learn more about what Samsung wanted to achieve.

He didn't come seeking an opportunity, but Lee presented him with one. Ernest says Mitsubishi was preparing to back away from the minisplit line in North America, so the timing for him was perfect. He and Lee talked about what a national distribution and marketing program for Samsung would look like. When they met again, each had developed outlines of a business plan that were remarkably similar, he recalls. From that, Quietside was born.

Starting a new line of products still not totally accepted in the North American market would be a challenge for Quietside, but Ernest had faith in the abilities of Lee and himself. He also relied on a quote from Proverbs 3:16: “Roll your works upon the Lord, commit and trust them wholly to Him; He will cause your thoughts to become agreeable to His will, and so shall your plans be established and succeed.” That, he says, is a foundational truth that he has counted on throughout his life.

Even after 30 years of growth in the North American market, minisplits remain a niche market in the world of HVACR. Ducted systems remain the norm, and the cost factor of minisplits often puts the systems off the radar screens of contractors and distributors. As a result, the end-users have had little knowledge of the convenience and reliability of minisplits.

Ernest calls his time with Goodman Manufacturing invaluable. “When I first started there, the rest of the industry was saying, ‘They'll never make it, there's no room for another manufacturer.’ Yet today, Goodman Manufacturing is an industry leader, and they've probably put air conditioning in more homes because they made it more affordable for people,” Ernest says. “We owe a lot to Harold Goodman for that.”

Ernest applied those lessons from Goodman to the Samsung products. After all, when end-users and contractors saw the products and technology behind them, they were thrilled. But the price compared to standard unitary systems was much higher — indeed, price was the barrier. So Quietside lowered that barrier by bringing down the price. “Our focus was to drive that cost down to where the contractor would feel like this is something that is affordable,” Ernest says. “So it would not only meet the needs of that person but fit within a budget that the individual could afford.”

Ernest said lowering the price — thus reducing the profit margins — was the only way to introduce the product to the market and then grow it from there. “With minisplits, we said we needed to trim the cost, and Samsung agreed to price the product at a point where nobody was losing money, but the margins were very thin,” Ernest says.

The strategy has paid off for both Quietside and the minisplit industry. From one manufacturer selling 5,000 minisplit systems annually, there are now multiple manufacturers now selling upwards of 50,000 systems per year, Ernest says. Reflecting the growth of this market is the increase in the number of manufacturers who now sell these systems.

Ernest is passionate about the HVACR industry and minisplit systems in particular. He believes in the products that he sells and the benefits that HVACR has delivered for people in the United States and around the world. “I take a lot of pride in the work that we do as an industry and that our minisplit technology and the tankless, on-demand products represent a new wave and can make a difference in the comfort level and the economy of our country,” he says. “We're offering products that make a difference.”

While Quietside came to the market with pricing that was competitive with the unitary systems, it also established customer service as a cornerstone of its operations. Recognizing that the HVACR distribution model in the North American market works very well, Quietside had to establish itself as part of that system. “We had to look like, talk, act and walk like a U.S. manufacturer as opposed to being an importer,” Ernest says.

With the combined experience of Lee and Ernest in distribution, they made certain that the support system was in place as they built its distribution network. That included quick and easy access to technical support as well as sufficient inventory, including parts, on hand. “We did it as quickly as we could, and history has proven that we did a reasonably good job,” Ernest says. Today, Quietside has a staff of eight technical support persons led by John Miles.

Quietside began with a 20,000-square-foot warehouse in Whittier, CA. Within a year, it moved its operations to a larger facility, which includes a technical training center, to keep up with the growth. In 2003, Quietside opened a new facility in Carlisle, PA, to serve the eastern United States and Canada. This includes a 60,000-square-foot warehouse and a technical training center. Quietside works with distributors to bring contractors to the training center and better familiarize them with the technology of the systems. Ernest is now in the process of opening a Midwest office, warehouse and technical training center in the Dallas-Fort Worth area.

Ernest is quick to credit the work of the independent sales representatives in growing Quietside's business. Some of the salespeople worked with Ernest at Mitsubishi Heavy Industries and came to Quietside with a base of knowledge about minisplits.

A large and diverse product line has been a draw for distributors. When 13 SEER became the standard, most Asian HVACR manufacturers turned to inverter technology to meet and surpass that standard while staying true to providing low-cost products. To do that, Quietside worked with a manufacturer in China to provide a standard fixed-rotary compressor, 13 SEER minisplit system at a lower price than its old 10 SEER products. “From the state-of-the-art Samsung DC Inverter Compressors to the passive Silver Nano and the aggressive MPI air filtration features, Samsung offers a system equal to or better than the competition, providing our distributors with a recognized name with profitable features and benefits to sell,” Ernest says.

Quietside's tankless water heaters have also been good for the distributors' businesses. Two models — its On Demand Water Heater, available in four capacities, and its DPW, or Dual-Purpose Water Heater — offer exceptional performance and efficiency.

To assist its distributors with marketing Quietside products, Quietside has a market development fund that is similar to a co-op program. Unlike a co-op program, a percentage of sales accrued by distributors is put into this fund by Quietside. The distributor can use this money as they see fit to promote the Quietside products. In addition to the market development fund, Quietside provides both distributors and their contractor customers with literature and technical training.

“The focus is still on product training,” Ernest says. Sales and engineering go hand in hand, he adds, noting that its new vice president, John Miles, brings together those two functions. “The better a sales guy understands engineering and vice versa, you wind up with the best of both worlds,” he says. Miles writes the training materials and works directly with the sales staff, distributors and contractors. “He understands the contractors' needs and puts together programs based on that.”

In addition to training at its centers in California and Pennsylvania, Quietside also offers instruction in the field — whether it's at a wholesale distributor's branch or at a location of the contractor's choosing — to bring the technology and the learning to those who are directly involved in selling and installing the products. Quietside also offers NATE-certified classes.

From their experience in the industry, both Lee and Ernest understand the needs of the HVACR distributor. That has meant giving them the inventory they need when they need it. “Turns of inventory are vitally important to distributors for them to maintain positive cash flow,” he says. Quietside has developed a relationship with the distributors so that they have ready access to parts and supplies when they need them. “That's really helped us be better partners for the distributors,” Ernest says, “giving them a good level of confidence in Quietside and a value that they appreciate.”

Ernest says Quietside is committed to the wholesale distribution system, and it credits HARDI with being an important organization to link them to all of the parts within the distribution chain. “So being part of HARDI adds credibility and allows Quietside the honor of being part of this great support organization,” Ernest says. In particular, Quietside has developed strong relationships with the Blue Hawk buying group, to serve distributors throughout the United States, and Master Group Ltd. in Quebec, Canada. There are still markets where they are looking to increase their reach, he says.

Quietside also sells through major unitary manufacturers' parts centers. “It allows them the opportunity to have a line of minisplits they can sell through their parts centers as profit centers without having the burden of inventory or putting together their own technical support staff or a national program of their own,” Ernest says.

While Quietside may only have 11 years under its belt as an organization, it has seen great changes in the technology and the industry as a whole. For Ernest, who has 30 years of experience in HVACR, change is constant, but the way that he and Quietside do business remains steadfast. “It's still a person-to-person relationship based on the value of our integrity,” he says. “Our goal has always been and will continue to be a standard of excellence.”

Michael Maynard is a business writer based in Providence, RI. He writes frequently on HVACR, construction and architecture issues. Contact him at [email protected].

Quietside at a GlancePresident & CEO: Mr. Sang Woo Lee Senior VP GM: Jack L. Ernest Vice President Sales & Engineering: John Miles Headquarters: 8750 Pioneer Blvd., Santa Fe Springs, CA 90670 Operations: Offices & Warehouses in Santa Fe Springs, CA; Carlisle, PA; Fort Worth, TX Employees: 25 Annual Sales: $35 million Major Product Lines: Samsung Minisplit Air Conditioning, Quietside Minisplit Air Conditioning, Quietside On Demand Wall-Hung Tankless Water Heaters, Quietside On Demand Wall-Hung Tankless Dual-Purpose Water Heaters Website: Year Founded: 1998

Best Practice

Significance: Quietside offers a wide range of niche products that meet or exceed the growing demands for energy- efficient air-conditioning and water-heating products. As the United States and Canada focus on “green” and becoming more efficient, we find the rest of the world has already answered the call.

Benefits: Quietside holds inventories of product and parts along with product training facilities on the West and East Coasts, and will open a new facility in Fort Worth, TX, to serve the Midwest. It works with wholesale distributors to supply product and training to their installing service contractors.

Procedure: Quietside represents a number of Asian manufacturers working with independent sales representatives selling through wholesale distributors to installation service contractors.

People involved:

Accounting: Helen Jang, Karen YI

Tech Staff: Nelson “Stu” Taylor, Denis Dumm, Mike Steinke, Chris Dolin, Colby Shade, Kevin Park

Operations: Michelle Morris, Bobbi Little, Elsa Roldan, Yong Kwan

IT Dept.: Kwan Nam, Kyung Nam

Mktg. & Ads: Sean Kim

Sales Staff: Lee Gilpatrick, Golden Stephenson

Timing: Company started in 1998; Support hours from 6:30 AM (EST) to 5:30 PM (PST)

Contact: Jack L. Ernest Sr., VP GM, [email protected], 562/587-7829 Cell