The Home Depot and The Trane Co. have launched a pilot program for Home Depot to sell Trane residential heating and cooling products as an installed sale. Customers will be directed to recent Home Depot acquisition and Trane wholesaler Apex Supply (Atlanta), which will send the leads to Trane dealers.

Home Depot has initiated the pilot program in nine stores in Knoxville and Chattanooga, Tenn., as well as Dalton, Ga. The displays and literature feature high-end Trane XL equipment, comprised of two-speed 80%-efficiency furnaces and condensing furnaces and air conditioners from 12 to 18 SEER.

"At $19 billion annually, this is the largest segment of the home-improvement business in which we're not presently involved," said Chuck Berk, Home Depot national product manager, referring to the residential HVAC market. "We feel the time is right for us to explore this potential opportunity and offer another service for our do-it-for-me customers."

The in-store displays include a Trane XL furnace and condensing unit. Salespeople on the floor don't necessarily know much about HVAC, but they must be able to explain the program. Customers are directed to call an 800 number that connects them to Apex. The call center screens the customer and sends the lead to a nearby Trane Comfort Specialist.

The customer pays Home Depot, the same as with other Home Depot installed sales. Financing will be available.

Dave Pannier, Trane vice president and group executive/unitary products, said the program relies on the combination of Trane's brand awareness and Home Depot's strong customer relationships to drive customers to Trane dealers.

"Our dealers are excited about the partnership," Pannier said. "With 20,000 people a week visiting the average Home Depot, it's easy to see how that kind of additional exposure to our products should drive more business to them."

One excited dealer is James Malone, president of Malone Heat and Air in Chattanooga, Tenn.

"At this point we have seen it work very well," Malone said. "We sold the very first job and we've sold a couple since."

Malone said he expects to get more and better leads. Because the customer has already looked at the equipment at a Home Depot store and has been screened by the Apex call center, the leads are high quality, he said.

The dealer has to run the heat gain and loss calculation, make a proposal and close the sale, Malone said. He's been told that dealers with the highest closing ratio will get more leads.

Moreover, many customers go to Home Depot having already decided to buy an installed product such as roofing or kitchen cabinets, so he may be the only bidder, Malone said. These customers are unlikely to call anyone else.

"They know that Home Depot stands behind everything they sell and we do, too," he said. "We do a 32-point checklist at the end of the job and it's signed off by the homeowner and everybody's happy. There's also a follow-up call from the comfort center, which phones in and sends a customer satisfaction card on how the job was completed. This a win-win deal for the customer."

Gregg Turley, vice president/sales and marketing at Gustave A. Larson Co. (Pewaukee, Wis.), said that the program challenges some of the traditional appearances of the distribution channel but seems to be a win-win situation for the dealer.

"We recognize that the value we provide to our dealers and our dealers provide to their customers as indispensable to the industry," he said. "We view this program as a lead-generation service for the Comfort Specialist dealers. It provides qualified leads to the dealers, it provides an element of comfort and security for the consumer and it relieves the dealer from handling the accounts receivable."

Home Depot will decide some time this fall whether the program is right for it, its partners, and its customers and whether it wants to expand the program to a larger geographic area, Berk said.

It appears highly unlikely, however, that Home Depot will be able to roll the program out beyond Apex's territory, which covers Georgia, South Carolina and Tennessee.

Charlie Walters, president of Gensco, a Tacoma, Wash.-based distributor of Trane, does not believe that Home Depot selling Trane products in selected stores will threaten his business.

"This is definitely not a move by The Trane Co.," he said. "We have Trane's assurances that neither Home Depot nor Apex Supply will be able to supply any of the Home Depot stores outside of Apex's distribution territory."

Home Depot may approach other distributors to enter in the program or distributors may go to Home Depot if the project is successful, Walters said, but Trane dealers would also have to be involved in the decision.

Walters added that it is unlikely that his company would enter into such an agreement unless his dealer customers wanted such an alliance.

Trane's Pannier said Walters is correct.

"Do I see a program going beyond Apex's territory? The answer is absolutely not," Pannier said. "There are some pretty specific constraints or specifications with regard to what part of the geography the distributor agreement covers."