Director of Operations
Customer Service Director
Insite Software and Absolunet recently had the opportunity to sit down with Bill Fiore, Director of Operations at Distributor Corporation of New England (DCNE) to learn about the company’s digital journey.
In the interview, we hear about how DCNE earned the name, “The Amazon of HVAC” by investing in new technology to expand their market reach and better serve their current customers. Just one year into their digital transformation, DCNE more than doubled digital revenue, and that’s just the beginning.
Insite and Absolunet: Can you share some background on Distributor Corporation of New England and the role you play there?
Bill Fiore: Yes absolutely. My name is Bill Fiore. I’m the Director of Operations at Distributor Corporation of New England or DCNE for short. I’m going on my 18th year with DCNE, I’ve been with the company since 2002. I’ve held many different roles. I was actually in engineering for quite some time. I lead the sales department for a couple years. About seven or eight years ago, I moved over to my role in operations. I’ve dabbled in a bit of everything from handling purchasing, application development, eCommerce, business intelligence, logistics and warehousing.
To provide a little background on DCNE, we are a 2nd generation family-owned business. We’re focused on the HVAC industry specifically. We’ve been in business since 1963 servicing Maine, New Hampshire, Rhode Island and Eastern Massachusetts. We’re B2B, so we’re a wholesale company. Our mission is to inject value in the channel wherever we can and exceed customer expectations every time. It’s really as simple as that. We focus on selling to mechanical or HVAC contractors, not necessarily directly to the end user. We have a pretty wide product offering, handling parts, residential heating and air conditioning products and even applied products for very large industrial buildings. I should mention we’re on the Infor ERP system, we’ve been running Infor since around 2002. So when you think about our business, there’s a lot of complexity in trying to bring everything online. That’s why I’m excited for this conversation today.
I&A: Thanks for that intro Bill. Let’s talk about DCNE’s digital journey. What were some of the problems and challenges you were trying to solve when you first invested in eCommerce?
BF: That’s a great question. We’ve been doing eCommerce in some form since 2012. If you look back on it, we don’t have a super inspiring reason for getting online. Basically, our competitors were investing in eCommerce, so we invested in eCommerce. Our strategy wasn’t very thought-out in the beginning. It was more of a “stay with the pack” type of thing. We initially moved forward with what I’d call a legacy eCommerce platform in 2012. It was a turnkey, right off the shelf, packaged solution. It was low cost but provided some value for the cost with content development, price pages, catalogs and eCommerce. Our team was very hands off.
I&A: Did that platform help you achieve business results?
BF: It delivered what we needed at the time. It worked well for us for a while, but over time we realized that it wasn’t going to get us to the level we wanted to be on because it wasn’t scalable. The architecture was slightly outdated and features were lacking. We were kind of handcuffed. We would wait for the provider to develop things and didn’t have our own full access to develop the features that were pertinent to our business. In addition, there wasn’t a true ability to tie the platform into third party technologies and tools. Another issue was content. We made the decision to syndicate content, which sounds like a good idea up front. It takes a lot of the work off your hands, but you risk search engine rankings. When a company syndicates the same content, images, descriptions and titles that other companies are syndicating, search engines aren’t very happy. We started getting banned from Google for duplicate content. We knew we needed our own content moving forward. That’s when we decided we needed to invest in something else. We probably could have squeaked by for two or three more years on that platform. But in the technology world, two to three years is an eternity. We needed to move fast.
I&A: Thanks Bill. So you’ve made the decision to invest in something new. Then what? What were you looking for in a new eCommerce development partner and a systems integrator?
BF: We considered something like 30 different eCommerce platforms during our initial discovery phase. There seemed to be a lot of small, off-the-shelf, turnkey solutions like the one we were already using, or full enterprise grade solutions that were too far out of reach. There frankly weren’t many options in the middle. Plus, many of the solutions were built for B2C purposes, not B2B.
The biggest obstacle we ran into was around pricing. Our Infor ERP has a complex pricing model with different price types and algorithms. There were almost no eCommerce solutions that were packaged to handle integration with our ERP out of the box. So we were able to rule out a lot of platforms on that criteria alone. We narrowed it down to Unilog and Magento. Honestly, Insite wasn’t on our radar initially. As we looked into Magento we discovered Absolunet, an implementation partner of theirs. Absolunet introduced us to Insite. Absolunet played a key role in evaluating our business. They encouraged us to check out Insite because they knew how focused Insite was on B2B and that the technology worked very well with Infor ERPs. Out of the box, Insite has a lot of strong B2B features. On the development side of things we would save quite a bit of money and time with Insite over Magento. That’s how we settled on the platform.
I&A: Sounds like quite the journey! How did you get internal buy-in for the investment?
BF: Right, so after we settled on Insite and Absolunet the next step was getting ownership to buy-in to the plan and get the rest of the company on board. Our initial proposal for eCommerce and PIM was probably a bit of a sticker shock to ownership compared to what we were doing before with our turnkey solution. But I pushed forward because we honestly could not afford to do nothing. As distributors who don’t manufacture anything, our long-term viability is really predicated on injecting value in the channel. We had to own eCommerce. We couldn’t be reliant on some other third party developer’s roadmap or somebody else’s content.
When I pitched this to ownership their initial questions were around whether eCommerce would reduce head count or automate certain jobs within the building. I remember taking a deep breath and actually reinforcing that eCommerce wouldn’t replace anyone and that I’d actually probably need more people.
The truth is eCommerce is not a tool to eliminate people. You have to look at eCommerce as a tool that changes what people do. Think about it this way: 65% of children entering primary school today will ultimately end up working in a completely new job that doesn’t even exist yet. We were never looking to reduce head count with eCommerce. The goal was to reduce low value transactions and replace them with higher value tasks.
We got the go ahead from ownership to proceed and we ended up choosing Insite as our eCommerce platform, InRiver for PIM and Absolunet on the implementation side.
I&A: Absolutely love your perspective on eCommerce. We completely agree that eCommerce is about enabling your team to be more efficient, not about replacing them. Once you got ownership to buy-in what was implementation like?
BF: The first thing we did, under the direction of Absolunet, was assemble a team. Absolunet was sure to urge us to get a Business Analyst on staff. The guidance from Absolunet was invaluable. There’s no way that I would’ve been able to keep up on my own with testing, documentation, training and everything that goes into the implementation. So thankfully I took Absolunet’s advice and hired a seasoned Business Analyst that was able to help through the process.
The journey itself had some bumps along the way. But anyone who thinks an eCommerce and PIM implementation is a completely smooth process is probably kidding themselves.
I&A: Sure. These are tricky but important journeys to go on. What advice would you give other companies in the implementation phase?
BF: If I were to give advice I’d start with letting go of the idea that you have to replicate everything in your legacy system into your new system. Just because you had a feature before, doesn’t mean you necessarily need it now. You have to focus on what your customers and team are actually using.
During phase one of implementation, Absolunet was really great at questioning us on the features on our wishlist. They were able to convince us to think in terms of outcomes and not the feature itself. They asked us what we were trying to achieve with each feature and offered that there may be better ways to do things. They have a very agile approach to implementation. They focus on getting what we need done first, then building on top of that. We quickly realized that there were a lot of features included in our original roadmap that we honestly still haven’t implemented today because we realized there wasn’t a need for them.
So my best piece of advice is to really question if you need a feature or not. Also, of course, look at your analytics. They will help you understand what features people are using.
I&A: Did you interview customers, internal sales, customer service or anyone else to help you build out your phase one requirements and priorities?
BF: Yes we did. We had a pretty involved workshop planning session where we brought in many different key stakeholders from various departments. We prioritized our requirements by considering impact, cost and complexity. We wanted to focus on things that were high value, low cost and low complexity first, then work our way up from there. It was really valuable to get everyone’s feedback and buy-in on the implementation.
I&A: It’s great to get many perspectives. How did customer adoption go?
BF: Our total build out took about 10 months. We didn’t end up accomplishing everything we wanted to, but we felt we had a solid product and were ready for prime time. We launched about two and a half years ago now. The customer rollout was an interesting thing to navigate. I’m never a big fan of bribing or incentivizing customers to buy online. But in a way, we actually did that. Coincidentally, there were a lot of tariff increases going on in our industry during the time of our eCommerce rollout. For that reason, we had three consecutive, substantial price increases over a very short period of time. We decided to waive or hold the last price increase if people ordered online through the end of that year. That definitely kick-started our momentum online. Like I said, I’m not really a fan of incentivizing because I really want the platform to speak for itself. In this case, we were concerned about getting that price increase through to customers without pushback, so it just worked that way. The real test was analyzing whether they would continue buying from us online when we stopped incentivizing.
I&A: So, what happened when you stopped incentivizing?
BF: We obviously had a big initial wave of customers buying online. After we pulled the incentive back in January, we only saw a slight drop from a few select customers. Overall, customers went back online. Customers were actually very thoughtful. They wanted to talk to their sales reps because they knew the reps would make commissions from their orders. Some customers were convinced we were trying to reduce headcount or take away a personal touch. That’s why we wanted to stop incentivizing. We just wanted to continue to build out features that had high value and attract them in that way.
I&A: So there was some hesitation on the customer side, but overall pretty solid adoption. What was it like getting your sales team onboarded?
BF: We definitely had some challenges on this front as well. But we worked through them. We didn’t want to only use eCommerce as a customer-facing tool. We wanted to use it as a point-of sale system as well. It was very important to leverage the platform to reduce training time and get new employees up to speed faster. We got some pushback from veteran counter reps and inside sales folks who thought they could do things a lot faster in a non-eCommerce environment. I think some of them also felt a bit threatened from a job security standpoint, which was understandable. But we made it a point to reiterate that our salespeople who have been around for years are absolutely essential to our organization. They have a ton of inherent knowledge and can recall SKU’s off the top of their heads. We needed everyone at that knowledge level. It used to take six to 12 months to get a new employee up to speed. We were able to cut that time in half by leveraging eCommerce. Over time, our sales reps definitely came around. They started to see higher ticket prices online, which meant higher commissions for them.
I&A: Did you change anything about their comp plans or commission with the site rollout?
BF: The first year we actually increased their comp plan on the eCommerce site. As mentioned, we were trying to drive new customer adoption. So, each of our sales reps picked 10 customers they wanted to target that weren’t already buying online. We gave them an incentive for achieving certain goals with those customers.
I&A: Makes sense! You’ve mentioned before that this isn’t a one-time thing you set out in the wild and forget. With that being said, what does your phase two, three, four, ten, twenty look like? And what does the new DCNE world look like?
BF: Yes, great question. So we’re about two and a half years into development now. Like you said, we don’t see this as a one-time investment. I really urge others to look at eCommerce as an opportunity for continuous improvement. We are consistently making improvements to the platform. Over the last couple years, we’ve integrated with third party billing systems. We also recently rolled out tablets in all of our trucks. Now when our customers place an order, they can receive delivery updates. At any point customers can go in and see exactly what their estimated arrival time is. It’s updated after every stop. They can sign up for delivery alerts via text message or email. Additionally, we work with several manufacturers. We’ve integrated a warranty with that as well. For example, customers can look up a serial number or a model, determine if it’s under warranty and find out how many years are left on the warranty. They can see a history of warranty claims and submit new claims. We’re focused on expanding delivery options as well. We’re partnering with Uber-type delivery companies to be able to do same day delivery, one hour delivery and get the same tracking that we offer in our trucks. It’s the same kind of experience you would expect from Uber. You can track your shipment the whole way.
We’re working on product configurators as well. We’re using some third party APIs to help drive product configurators because in our business we don’t deal as much with individual components. A lot of our customers buy systems and it’s not always easy to determine which products go with what. There’s an infinite amount of combinations. Product configurators will help with that. We’ll focus on kitting and bundling as well.
We’re just trying to accommodate changing customers’ behaviors and how they buy. We’ve tied in quite a bit of PIM data feeds from both our ERP and from manufacturers. We’ve integrated replacement parts lookup and we actually rolled out pickup lockers just this week to address changes we’re seeing from COVID-19.
I&A: Speaking of, how else is COVID-19 impacting DCNE right now?
BF: Like others, we’ve ceased in-store pickup within our branches. Customers need to call ahead and are encouraged to purchase online. We’re trying to deliver a touchless experience with our customers. So if somebody normally came into a store to pick something up, now we have pickup lockers. Customers can simply scan a code after they’ve placed an order online, their locker will open and they can grab their item and go.
I&A: The pickup lockers are really interesting. Was that something your competitors were doing? Or are you just ahead of things?
BF: We sit on a lot of advisory councils with other distributors across the country. There was another distributor going through the process last year and I really liked the idea. So I went ahead and made the call to beta test pickup lockers in our main location. Because of the situation we’re in, we kind of have to force people to use them at this point. But I am willing to bet that customers will actually like it and continue using it. Eventually we’ll want a deeper integration with Insite so we can have QR codes go out automatically when items are placed in lockers. We’ll work on that advanced integration later this year.
I&A: Awesome. Now the best part. All the work you’ve done, everything you’ve been talking about for the last 30 minutes or so, what do you have to show of it? Let’s talk about your results.
BF: We were doing about 2.5% online on our original platform with 8,000 SKU’s online We’re projected to be at 28% online at the end of this year with more than 115,000 SKU’s. But that projection doesn’t take into account the unprecedented times we are in right now. I wouldn’t be surprised to see an even bigger spike in that percentage.
As I mentioned, we have three segments of our business. Our parts side of the business is at about 36% online today. Residential is about 60% online. Commercial is sitting at about 6% so we are trying to focus on increasing commercial volume because that will bring our overall totals up.
I&A: Those are some incredible increases in adoption! What are you doing to increase the commercial numbers?
BF: One of the ways we’ve been doing that is by leveraging the quote feature on Insite. We’ve received 1,800 quotes so far on Insite mostly within the commercial side of our business. Our jobs are often custom quoted by our sales reps. With Insite our sales reps can go in, create a proposal, send it out to the customer and it’s done. When customers are ready to order they can simply click accept and they’re able to go ahead and check out with the order.
In addition, we’ve done some modifications to the platform to allow our internal people to assist the customer along the way. So, for example, they can easily override prices. We’re excited about that.
I&A: You are clearly thinking about ways to improve the customer journey with eCommerce! What other results have you seen in addition to adoption?
BF: The growth year-over-year is huge, but the most impressive result is apparent when we look at what eCommerce has done for our bottom line. We’re consistently experiencing a 200% increased average order value. It amazes me. Higher average order value also leads to a greater gross profit. We’re seeing people leverage our suggestive selling. Overall, we’ve realized about a three point gain in gross profit which is huge with the slim margins distribution usually sees.
Our main goal is to drive as much business online as possible. We’re also breaking down the walls and divides that previously existed in our company. Traditionally, we’ve had a siloed equipment sales force and a parts sales force. The problem with that was our equipment team never felt comfortable talking parts and the parts team wasn’t comfortable talking about equipment. Now, with eCommerce, there’s no division of the company anymore. More of our orders are have equipment and parts included because there’s no divide. Our sales team is empowered to sell more or our breadth of products.
I&A: That’s really interesting. How are you tracking success and what KPI’s are you monitoring?
BF: Great question. We use Google Tag Manager and Google Analytics to track site performance. We’re also consistently monitoring how many people are using the quoting platform, searching by part number or looking up our warranty. We’re able to filter by stock and store availability. We’re really focused on suggestive selling as well.
I&A: Talk to us a little more about suggestive selling. How are you managing that?
BF: So we actually use machine learning to make suggestions. If someone puts something in their cart, it will say something like ‘22% of people also bought this item’. The suggestions get more refined and intelligent as you add more items to the cart. The system is quickly learning and recognizing what people are looking for.
That’s important to monitor too. If something like suggestive selling is having a big impact on sales, gross profit or customer engagement, then we need to prioritize it. When making system enhancements you have to look at the numbers and determine who is using which features.
I&A: That’s a good point and brings us to our next question, were there any features that you expected were going to be used or that you wished you hadn’t spent time or money on with your implementation?
BF: Another great question. I would have to think about that one. I wouldn’t say we’ve really nixed any features or regret releasing any features we’ve announced. The key is making sure your team and customers are using the features that you are making available. We strive for continuous improvement on all fronts.
I&A: Sure. We have to close out this interview by asking how did you earn the title ‘Amazon of HVAC’ from the American Supply Association?
BF: Ha, yeah that’s definitely not a self-proclaimed title. It’s actually pretty interesting that the article phrased it that way. Because for many distributors, Amazon is the enemy. We’re trying to be opposite of Amazon and we have that conversation a lot as a company. Amazon is leveraging scale and automation to really drive transactions. Whereas at DCNE, we’re trying to use technology to minimize low value-add transactions and free up our employees so they can focus on delivering value in other areas. So the title sounds pretty impressive and I’ll take it as a compliment, but that’s definitely not self-proclaimed. We’re doing a lot of things right when it comes to building a better customer experience through digital and Amazon sets that gold standard, so I can see why we’d be compared to them.
I&A: A worthy title, even if a bit of an oxymoron. Anything else to add Bill?
BF: Appreciate you having me. Our website is open to the public. If you want to check it out to get ideas you can find us at dcne.com. Although it’s live, not every feature I referenced in this interview is public-facing. A lot of the action happens behind the login. But definitely check it out if you’re looking for general inspiration.
Interested in hearing the original interview with DCNE? Check out The Amazon of HVAC Webinar here.