Watsco Inc. is gaining ground on several fronts as it focuses on building out an already-dominant position as an online distributor of heating, ventilation, air-conditioning and refrigeration products.
For the third quarter ended Sept. 30, Watsco said ecommerce sales rose about 15% and accounted for about a third, or $702.9 million, of total sales of $2.1 billion. It also noted that ongoing improvements to its digital commerce technology and practices have resulted in a 19% expansion over the past 12 months to 54,00 customer with active ecommerce accounts.
“Our mobile platforms and ecommerce channels have increased customer engagement, reduced attrition, created market share gains, and supported our margin expansion,” chairman and CEO Albert Nahmad said on the company’s recent earnings call with investment analysts for the third quarter ended Sept. 30.
He said that Watsco has added over 400,000 new SKUs to its digital product library since the start of 2023 and noted that “approximately 60% of the HVAC systems we are now selling represent new products.”
Digital strategy supports margin strategy
Nahmad said the company’s digital technology strategy is supporting its long-term goals for improving gross profit margin to 30% (up from 26.7% in Q3) while also upgrading how it engages contractors and end customers.
Aaron (“A.J.”) Nahmad, president, said Watsco’s overall digital strategy enables the company “to do analytics on opportunities, enhance our capabilities, and measure and track our successes in all parts of our business — things like prospecting and winning new customers and changing and improving how customers engage with us with things like ecommerce in our apps, which eventually reduce our cost to serve those customers.”
Albert Nahmad asserted that, as Watsco’s financial position continues to improve, it “provides us the flexibility to invest in virtually any opportunity” in the $50 billion North American [HVAC] market.
He added that merger-and-acquisition activity “remains an important contributor” to Watsco’s growth and noted that, in Q3, the company acquired South Carolina-based Gateway Supply Co., a regional HVAC and plumbing supplies distributor, “giving us the ability to partner with great leadership to grow beyond their $180 million sales.” Gateway operates an ecommerce store for HVAC and plumbing supplies and offers contractors online Pro accounts.
Since 1989, Watsco has acquired 68 businesses.
Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.
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