The Future of LEDs and CFLs

Home Channel News’ August 11th issue provided insight into the lamp market. With incandescents effectively being banned by 2014, the future appears to belong to CFLs and LEDs. But with LEDs “at $50 for a light bulb”, what is the market for LEDs?

According to the electrical merchant at Home Depot, they see LEDs becoming the defacto standard for resi lighting over time and are actively working with manufacturers for hard-wired products, accent lighting in ceiling fans, undercabinet and pathway lighting. They also see LEDs replacing MR16s and GU10s with pricing coming down enough to be price competitive in 2012.

Retailers look at the CFL market as a resi opportunity for the next 2-3 years before LEDs take over. The reason – price. From a performance viewpoint, LEDs are perceived to be much better, and safer for the environment (no mercury) and have greater longevity.

The article further explains that LEDs are focused on the architectural and commercial markets due to the willingness of the professional market to pay more, hence manufacturer profit margins are greater.

Interestingly, the article emphasizes that Home Depot and WalMart are working with manufacturers to drive product improvements (makes one wonder about how distributors could influence product development?).

So, the questions about “light sources” (i.e. lamps, LEDs, CFLs) become:

1. Where does “my” lamp company stand with each of these three product categories?
2. If not them, then whom should I be buying / sourcing from?
3. Do I have access to all of the line? At competitive prices?
4. Which products should I be promoting to whom?
5. Can I show a payback analysis to my customer to justify an upgrade sell? (including maintenance, replacement and energy savings?)
6. How do I promote this to my salespeople? My customers?
7. What should my CFL and LED margins be?
8. Given my customer mix, what should I be selling? (with WalMart and Home Depot focused on residential, it is expected for them to take the lead on CFLs, but if you are resi oriented, or have showrooms, are you price competitive?)
9. Given that 90% of CFLs are made in China, is this the future of LEDs also?

With the trend towards energy savings, light sources will play a critical role in achieving this goal. Although the products will become commodities, having the knowledge to direct your customers to the right products, and why, can determine whether or not you get the business.