HARDI members must prepare for growing economy
Leading economic indicators continue to point up.
Even though 70% of Americans think the country still is suffering through a recession, the U.S. economy is in good shape and will improve in 2015,HARDI’s chief economist Alan Beaulieu told HARDI members Dec. 7 during their 2014 Annual Conference in San Antonio, Texas.
HARDI chief economist Alan Beaulieu gives an optimistic 2015 outlook at the association’s 2014 Annual Conference in San Antonio, Texas. Photo courtesy of HARDI.
“I’m optimistic about 2015; I want you to have confidence going forward,” he said during his keynote address. “The economy will continue to grow. Make sure you’re ready for it. You have to invest in yourself. It’s time to move forward.”
Beaulieu cautioned the rate of growth this year will scale back but that slow growth does not equal a decline. Leading economic indicators continue to point up: Employment is rising; banks are lending and will lend more in 2015; nonresidential construction is improving; retail sales are rising; and the world is relatively calm, despite hot spots in the Mideast and Eastern Europe.
That’s not to say, however, that distributors of HVACR equipment will not face challenges in operating their companies this year.
“We will all face a margin squeeze because we will need to pay good people more to keep them,” Beaulieu said. “The ‘quit rate’ is up, which means people are getting more money someplace else. You will need to put together a package that will attract good people and keep them.”
Ongoing concerns about the economy also may make an impact on business, he said. These include: China’s debt problems; decelerating corporate profits; and the slowdown in some European economies.
ITR Economics, Beaulieu’s firm, identified a particular soft spot in the improving U.S. economy in home improvement construction spending, which suffered its steepest third-quarter decline since 1976 in 2014. His forecast calls for another 1% drop in 2015, and he speculated that consumers are spending money instead on other big-ticket items such as trucks and cars.
On a more positive note, ITR’s forecast shows a growth rate of 9.5% in commercial building construction in 2015 and 10.6% growth in office building construction.
“Where is the economy taking your company?” he asked HARDI members.
A growing economy also figured into the presentation by Michael Marks of Indian River Consulting Group, who discussed findings in his research project, “Distributors’ Role in Demand Creation.” Among the findings, the research shows that demand creation was all about distributors helping customers choose their distributor. Further, customers consistently and strongly chose the distributor before the brand.
Describing the HVACR industry as a poster child for being a channel-led market, Marks said a customer chooses the distributor first based on the bundle of products and services provided, with service being paramount. The research shows that customers buy from a limited number of distributors 89% of the time with only 9% changing due to a failure of the distributor to provide a service or product and only 2% based on another distributor offering a better solution.
“There appears to be a fundamental disconnect between the activities of manufacturers and distributors with respect to how contractor and end user customers choose to buy,” Marks said. “Manufacturers primarily speak with distributors about selling more products to more customers.But distributor behavior is actually about protecting, not selling.”
HARDI will publish a book this year based on the research, which was commissioned in 2013 by the HARDI Foundation.
HARDI’s 2015Annual Conference will take place Dec. 5-8 in Orlando, Fla.