An aggressive online strategy is helping to drive up revenue and profits at Watsco Inc., a distributor that operates four e-commerce sites and several mobile apps for selling heating, ventilation and air-conditioning products.
The Miami-based company distributes HVAC equipment and supplies for brands including Carrier, Rheem and Tempstar in the United States and foreign markets. It said sales for the fourth quarter ended Dec. 31 reached a record $914 million, with net income up 9.7% year over year to $39.87 million. Full-year 2016 sales increased 2.6% to $4.22 billion, as net income rose 4.2% to $235.98 million.
Albert H. Nahmad, chairman and CEO, pointed to the company’s investments in digital technologies—covering four e-commerce sites, several mobile apps, a business intelligence system, and an upgraded supply chain and warehouse management systems—as core to Watsco’s growth.
“Watsco’s goals with these technology programs are to further strengthen its leadership position, accelerate sales and profit growth, increase the speed, convenience and efficiency in serving customers, and extend Watsco’s reach into new geographies and sales channels,” Nahmad said in a statement yesterday announcing the company’s financial results. Nahmad added that he expects these digital technology applications to continue priming Watsco’s growth in years to come as “a modern, data-based company.”
In 2016, Watsco notes the following increases in customer activity on its e-commerce sites and mobile apps:
A 220% increase in the number of users of its iOS or Android mobile apps for research products and placing orders
A 127% increase in the number of e-commerce transactions
28% more product lines per order compared with orders placed in physical stores.
In addition, last year Watsco increased the number of SKUs it makes available online to 500,000, up 71% from about 293,000 in 2015. The combination of a larger number of online SKUs and customers’ increased use of apps and e-commerce sites has resulted in more line items per online order, Nahmad said on a conference call with stock analysts yesterday, according to transcript provided by Seeking Alpha.
He also noted on the call that Watsco sales reps that use the company’s business intelligence software—for accessing such information as customers’ purchasing behavior and the availability of new products their customers are likely to buy—are seven times more productive at closing deals than reps who don’t yet use the software.
Watsco sells online through separate websites it operates for four business units: Baker Distributing, at BakerDist.com; East Coast Metal Distributors, at ECMDI.com; Gemaire Group, at Gemaire.com; and Carrier Enterprise Northeast, at CarrierEnterprise.com. Watsco also sells through several mobile apps, including ones designed for Gemaire and for Carrier Enterprise.
Watsco also operates ACDoctor, an online information service for commercial building owners and homeowners. HVAC contractors can register on ACDoctor.com to get leads from prospective customers.
For the fourth quarter ended Dec. 31, Watsco reported:
Total revenue of $913.61 million, up 1% from $903.82 million a year earlier;
Gross profit of $228.07 million, up 2.7% from $222.04 million;
Net income of $39.87 million, up 9.7% from $36.34 million.
For the full year, Watsco reported:
Total revenue of $4.221 billion, up 2.6% from $4.113 billion in 2015;
Gross profit of $1.0346 billion, up 2.7% from $1.0074 billion;
Net income of $235.98 million, up 4.2% from $226.52 million.
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