The Sears Home Central Division also will continue to sell and install the Kenmore hvac line, which is manufactured by a unit of International Comfort Products, and which will be acquired by Carrier. Sears also sells some Goodman products.
The deal, which takes effect in January, will broaden Trane and Sears coverage of the residential market.
The national housing stock is composed of 100 million housing units, containing about 48 million central air conditioning units and 56 million furnaces, offering a deep replacement market. In addition, new single-family housing absorbs at least 1 million hvac systems annually.
The NEWS estimates that Trane has a 10% share of this market, translating to about 600,000 central air conditioners, and that Sears has a 5% share of the market, representing 300,000 unitary products. The same market share also applies to gas furnaces.
Trane has annual sales of $4 billion, half of which is in its big system chillers, and half in its residential-light commercial unitary line.
The new alliance claims that Sears’ network of licensed installation technicians and service specialists is the largest home improvement provider to serve as a Trane dealer.
For its part, Trane gets additional distribution of its marquee brand name. Not included in the deal is the manufacturer’s American-Standard brand.
Choice of brands
“Customers have told us they want a choice of premium brands, providing them with a wider selection of hvac products, in addition to its exclusive Kenmore and Kenmore SmartSystems brands,” said Daniel DeMeo, president of hvac services, Sears.The Trane-Sears deal makes sense, he continued, noting that “More than 80% of consumers purchase their heating and central air conditioning equipment from a company that offers more than a single brand.”
DeMeo told The NEWS that “nothing changes” in its sales of hvac products, which are installed by “third-party” (independent) contractors.
Dale Green, Trane’s Unitary Product Group vice president of sales and marketing, said he is “excited” about the alliance. “The relationship will be good for Sears and Trane and for our current partners, since existing distributors will act as suppliers for the large Sears network.”
Trane unveiled the move last week at its national distributor meeting in Phoenix, where about 50 independent distributors and a dozen company-owned outlets were gathered. The deal gives Trane distributors an entrée to all of the Sears stores in the nation, a tremendous boost to their sales volumes.
Sears Home Central, with 800 locations, is the largest home improvement services provider, which inventories equipment as well as 4,500 parts for appliance repairs. The unit employs nearly 500 hvac sales associates nationwide.
It also includes 15,000 home repair-improvement specialists to handle everything from refrigerators to roofing. The organization completes 17 million customer transactions annually.
Cross-selling
The deal offers “huge cross-sell opportunities” for both companies, said Sears.Trane will leverage Sears’ marketing muscle, with direct access to 50 million Americans each week through the Sears newspaper insert. The arrangement also gives Trane exposure to Sears’ 90 million customers.
Sears customers who buy Trane units will have access to a “money-back” pledge, and 24/7 access to service technicians.
Sears has removed hvac equipment from its outlets, but its stores have a Home Central kiosk, along with a direct-line phone for customer access to a sales staff that visits customers’ homes to close the deal.
Sidebar: Another jolt to dealers
For Trane dealers as well as those allied to other brands, the news about Sears is one more jolt from hvac equipment manufacturers, who have been changing the traditional two-step (manufacturer-distributor-dealer) distribution pattern.Many dealers are still trying to fathom the news that Lennox is buying up some of its dealers to capture the retail profits of the market. They question whether independent Lennox dealers get fair treatment when they compete with the company-owned stores.
Added to this is Carrier’s acquisition of International Comfort Products, which manufactures the Kenmore line sold by Sears.
Finally, independent dealers have seen their competitors rolled up by gas and electric utilities around the country — another layer of cash-rich competition.
Where does the Trane-Sears alliance leave Trane’s estimated 4,000 independent dealers? This is not immediately apparent. They learned of the partnership last week via letter (some learned earlier when contacted for comment by The NEWS).
Dealers speak out
“I don’t care for it,” said Aaron York of York’s Quality Air Conditioning, Indianapolis. “I think Trane is shooting themselves in the foot.“Trane is not going to sell to Sears and me at the same price. If that’s the case, forget it. I’m not benefiting. I don’t own stock in Sears.”
Indianapolis is “ground-zero” for three of the four publicly traded consolidated contractors, each of which has at least one dealer in the city. The city’s independent hvac dealers have seen a lot of competitive pressure from very large contractors.
“I’m not happy about it. It’s one more piece of the changing puzzle,” said Steve Miles of Jerry Kelly Heating & Cooling, St. Charles, Mo. “I rate it right up there with the news of the contractor consolidation movement.”
Jeff Somers of Monsen Engineering Co., Fairfield, N.J., wants to know this: “Will Sears begin taking service technicians from other contractors?”
A more fatalistic reaction came from Harry Friedman, N&M Heating & Air Conditioning, a Blue Dot dealer from Sarasota, Fla. “It’s not surprising. It was just a matter of time.
“Sears is probably the biggest retailer of hvac systems, so whatever they do impacts us.”
