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Watsco Reaping Benefits of Tech Investment

Focus on helping customers order more efficiently pays huge dividends.
Eric-Smith-84x84

Investing in technology is paying off for Watsco Inc., which rode its commitment of improving the shopping and ordering capabilities for customers to increased cash flow, sales and profit in the third quarter, according to CEO Albert Nahmad.

"Watsco is generating record cash flow in 2016, representing a 47 percent increase over the same period last year," he said. "Over the last 12 months, operating cash flow has been $268 million, or $8.22 per share. Along with our historical focus to drive consistently strong cash flow, we have made progress from our recent technology launch designed to enhance inventory turns, which improved approximately 30 basis-points during the year."

As I noted in blog posts from July and last October, the Miami, FL-based HVACR distributor is proof of something we at MDM have been saying all year – investing in your business, especially technology, is critical for adapting to changing customer demands and remaining competitive in today's marketplace.

Technology is where distributors lag, yet it often takes a backseat to other business considerations, according to Mike Marks of Indian River Consulting Group in 'Invest or Die'. "Given that most industrial channels are way behind the digital process, the smart play is investing in making it easier for customers to deal with (the distributor) electronically," Marks said. "It’s about selling. It’s about being sticky.”

For Watsco, creating more stickiness meant devising a technology strategy that would build "innovations to enhance the buying experience of our 88,000 customers and the service capabilities at our 568 locations," the company says.

Those innovations include mobile apps, business intelligence and data analytics, and supply chain optimization – all with a long-term focus on helping customers do their jobs better, Nahmad said on this week's earnings call with analysts.

"We continue to invest in several innovative technologies to transform our business and, more importantly – or as importantly – that of our customers into the digital age," Nahmad said. "We're going to take this technology thing and change what we do to help our contractors be much more efficient and more loyal to everything that we're doing."

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