Watsco Inc., a distributor of heating, ventilation and air-conditioning products with $4.2 billion in sales last year, has its eye on competitors like Amazon.com Inc.
But it’s not afraid of e-commerce or digital technology. Instead, it’s investing about $23 million a year in e-commerce, mobile apps and upgraded warehousing and fulfillment systems to help differentiate Watsco from its online as well as offline competition, executives said on a first-quarter earnings call yesterday with stock analysts.
After Watsco’s executives noted that the company produced “record sales and net income” for the first quarter ended March 31, followed by accelerated sales in April, they fielded a question about how Watsco was geared up to compete amid the “eruption of e-commerce” affecting HVAC companies as well as other industries.
Albert H. Nahmad, chairman and CEO, noted that Watsco is spending “approximately $23 million” annually on “innovative technologies to transform our business.”
That investment, he said, was going into three primary technology platforms: e-commerce and mobile apps tied to rich product data; business intelligence software designed to help Watsco better plan production and meet customers’ needs; and improving the speed and efficiency of its warehousing and supply chain operations.
Nahmad and other executives said that Watsco is using that technology in several ways to differentiate from Amazon and other competitors, according to a transcript of the earnings conference call provided by Seeking Alpha. Not only does Watsco handle delivery of extremely large equipment like five-ton air condensing units—which are “not easily delivered by drone” Watsco president Aaron Nahmad said, in a playful jab at Amazon—it is also upgrading its warehouses with software designed to help workers pick, pack and ship orders in eight minutes.
Aaron Nahmad added that Watsco further differentiates itself from competitors by using its business intelligence data on product sales and customer activity to help its customers with engineering and technical advice. “We do business with 90,000 customers and contractors, and many of them, if not all of them, require our input on design and engineering and technical advice,” he said. Such expertise, he added, “is valued in a big way by our customer base, and I don’t think that’s going away anytime either.”
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 first quarter ended March 31, Watsco reported:
- Revenue of $872.095 million, up 2.4% from $851.424 million;
- Gross profit of $218.556 million, up 2.9% from $212.447 million;
- Net income of $33.768 million, down 1.2% from $34.174 million.
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