Meet the new year, same as the old year.
Wholesalers and manufacturers are preparing for another moderate year in 2012, but that doesn’t mean the chess game is over. With new housing starts expected to remain low, businesses are working harder to retain valued customers while trying to make strides to bring in new ones.
“It is back to basic blocking and tackling,” Coburn Supply Vice President of Sales and Marketing Jim Fuller says. “Customer retention and development is not simple, but it is the same as it has been for years. Keep treating the customers as prospects, not customers. Make sure you continually add value with improved service capabilities. It is not a strategy or plan. It only happens one-on-one and face-to-face.”
Green is the wordFuller believes - as do others in the industry - that the retrofit and remodeling markets will continue to be the strongest areas for wholesalers. Sustainable solutions also will continue to attract interest. In terms of green products, Fuller predicts high-efficiency water heaters will be a strong product line for 2012.
Government tax credits were a big reason why many people committed to retrofitting and remodeling their homes with energy-efficient products such as a water heater or boiler. But the amount the government is willing to credit has shrunk recently. Coming off the books Jan. 1 were the tax credit for construction of new energy-efficient homes (maximum credit of $2,000) and the credit for energy-efficient appliances (maximum credit of $300). Fuller thinks these developments won’t be much of a deterrent to people in 2012. “We still think that the last two years have raised the awareness of high-efficiency products,” he says.
Stirling Boston, Lochinvar’s director of marketing, sees similar projections for 2012 with energy efficiency still the driving factor for sales in the industry. “The industry as a whole has seen a decreased market share of standard efficiency products being installed and growth in high-efficiency products,” he says.
Lochinvar expects condensing boiler and water heater technologies to be strong in 2012 because the products can easily be incorporated into older homes and buildings. Lochinvar gave its Knight Boiler - now named the Knight Boiler II - a reworking with a second-generation controls system that provides the user more control and makes it more energy efficient. “These units save energy and are easily integrated into existing installations where the equipment is outdated and underperforming,” Boston says. “Payback on condensing products is typically very short. Facility owners are looking for ways to reduce their operating costs, the largest of which can be fuel- and energy-related comfort for occupants of the building.”
Taco President John White Jr. says the focus and push for green technologies will continue, but there might be a shift in how those products are marketed to customers. “While you may see a diminishment with the word ‘green,’ you won’t see any decline,” White adds. “We just consume so much energy.”
Commercial gainsMichael Sfura, national sales manager with Florida-based Clearwater-Enviro, which manufactures environmentally friendly products for solving hard-water issues, believes the commercial market is ready to take off. One of Clearwater-Enviro’s business plans over the last few years includes an increased working relationship with wholesalers.
As a result, the company has enjoyed a 20% growth in sales through wholesalers and expects to maintain those numbers in 2012. “That’s been a big key,” Sfura says. “We’ve been able to get in with national wholesalers. With the growth of our product, we’ve become a known name.”
Franklin Electric Vice President DeLancey Davis says manufacturers and wholesalers must continue to communicate well with each other - something that has improved since the economic downturn. Wholesale is Franklin Electric’s core channel with the HVAC and plumbing segments. “We focus on supporting wholesalers by providing training and tools for construction,” he states. “The economy certainly heightened the level of communication and planning between manufacturers and wholesalers.”
While new commerical product rollouts aren’t expected to be high for Clearwater-Enviro, rebranding its existing line is another way to stay at the forefront in 2012. “It’s still the same principles and same technology,” Sfura says. “We just have to introduce it to the market in a new way.”
White isn’t getting too excited about 2012 just yet. He expects Taco’s business - which typically was a 50/50 split between residential and commercial - to rise to a 60/40 breakdown in favor of commerical. “We’re forecasting growth, but we’re being conservative,” he states.
The environment and how to best utilize its resources is on White’s mind, as well. Domestic water recirculation is a major topic Taco sees coming to the forefront in the near future. “It’s important to do what you can to protect the environment,” White says. “Minimizing waste of clean, fresh water is critical. There is only a finite amount of it.”
A government in fluxThe upcoming 2012 election is clouding the vision of industry forecasters. “The uncertainty between now and November makes it difficult to foresee a lot of change in job growth,” says Michael Pinkus, president of Mr. Steam, a manufacturer of steam showers.
Dan Hilton, ASA’s director of government affairs, has worked on Capitol Hill for 11 years. Getting helpful legislation passed will be a struggle in 2012, since it’s an election year. “Members are looking for overall tax reform. We suggest we go big,” he says. “But first we have to get tax reform on the table.”
Getting a tax reform proposal on the table seems unlikely as legislators look toward a critical presidential election on Nov. 6. Hilton thinks that there might be some opportunities for legislation after the election with a lame-duck Congress. “We see a lot of activity in lame-duck sessions,” he notes.
With low odds of success for meaningful legislation in 2012, Hilton stresses that wholesalers and industry leaders speak with their federal representation while Washington prepares for a possible restructuring from the top on down.
“The best way to take advantage is to remind folks about our industry,” Hilton says. “Go make that connection with your district director. While it’s gridlock, it’s a good time to broaden and put a face on the industry. It also gives the members of Congress some anecdotes for the floor. They learn from people.”
Getting the house in orderPositioning chess pieces on the board for future moves is something that may be beneficial for companies to do in 2012. Coburn Supply sure thinks so. In the last two years, it opened six new branches between Houston, Mississippi and Tennessee. “Markets are opening up,” Fuller says. “These were a positioning exercise.”
Companies also will continue to be budget conscious in 2012 and will likely streamline expenses on travel, giveaways to customers and trade shows. “We’re looking for the best bang for our bucks,” Uponor Senior Manager of Brand Management Ingrid Mattsson says.
As the recovery from the economic downturn moves forward, companies are finding out what works and what is expendable in order to achieve success. For Taco, that means a coninued investment in its workforce.
“We’ve grown from $30 million to $200 million with the same 500 people,” White says. “It’s all about continual improvement, and part of that is people.”