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End Run on Distribution?

David Gordon Posted On June 3, 2011
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Recently the big buzz at Lightfair was about a “New Technology” named LED. LED’s have been around for a while…distribution has struggled to gain some traction. But there is an end-run brewing in the retail world. It is a little early to be talking about football, but there are some plans that retail has up their sleeves to sell a few LED’s.
The trouble about watts and lumens…is Education
LED’s have been around since computers gained popularity, in the form of an Off/On button. The problem was that the buying public never recognized the LED for what it could be, namely a source of very bright light that costs less to operate.
But the cost to buy a LED replacement bulb needed some marketing and push. The overriding problem was brought to the surface in a June 1 Wall Street Journal Magazine article entitled “Stores Stock New Bulbs for the Light Switch”.
The article describes how Home Depot, along with the help from major LED manufacturers, propose to educate (force) the buying public on what to buy.
And interestingly, in the article, they mention the different “coding” systems some of the major lamp companies will use (which will probably add to consumer confusion) and the article references Home Depot as a major LED brand … in the same breadth as Philips, GE and Sylvania!
The End run on Distribution
Recently I had to make a quick trip to Lowe’s and the local Home Depot along with a side trip to a Wal-Mart (no, I didn’t purchase any electrical material!).  In walking the aisles it became apparent that not only were the stores stocked with longtime Name Brand Lamp manufacturers, they were well stocked with less familiar brands (their own private label brands) that were at eye level.
This was true in all three stores that I visited. (and I wouldn’t be surprised if the private label product came from the same factory as the branded products)
Coincidentally all these private labeled,  second tier products, were about $4-$8 per unit less than the brand name products.
A Home Depot regional person explained that they intend to market the brand name products as specials and offer coupons for their products. They want the store traffic. Eye level product selection counts for a lot in the retail world.
Somewhere in the past I recall that Philips released some figures that they had sold more lamps through the big box stores than through distribution.
And a couple of other thoughts:
  • Did you know that WalMart has 41% market share of the CFL market? Think they are waiting for LEDs to drop in price to then entire the LED residential market bigtime?
  • With the cost of LEDs as a replacement lamp currently being expensive and people potentially having the need to relamp their house, could Home Depot or Lowes run a promotion tied to home relamp financing (on the Home Depot / Lowes credit card?)
  • Why is Sylvania so focused on selling Lowes special LED lamps and fixtures?
While most distributors have abandoned the home replacement market, could the Home Depot / Lowes also be taking leadership in the education of LEDs.  Could this expand into selling LEDs to contractors? To property management companies? To hospitals, hotels and retail?  Could the lamp replacement market slowly move from distribution to “retail”?
So what is your plan to counter this end run? Tell us what you think can be done. Or do you think LEDs are just a fad and you’ll wait till they are the same price of an incandescent?



3 Comments

Anonymous
June 3, 2011 at 2:32 pm
Reply

As a distributor I’m concerned about LEDs. Varying product quality, lots of small companies in the space of which many sell direct and the technology keeps changing so I don’t know what to stock (not to mention the pricing concerns). We sell some fixtures with LEDs but I don’t know about for lamp replacement. And I can’t seem to get an answer from my lamp manufacturer on how to go after the replacement market – no wonder, they are supporting the big boxes … thanks for the support!


Anonymous
June 3, 2011 at 9:51 pm
Reply

I checked out local HD and Lowe’s and the post is right on when it comes to pricing.
There is a big newspaper insert for today and right on the front is an ad for LEDs with a coupon.
Like the earlier comment, I hate to say it, but I am clueless about the sell price levels.


Anonymous
June 6, 2011 at 12:20 pm
Reply

Wow I remember thd days that the electrical distributor was the major supplier of lamps to contractor, hospitals, industrial, MRO. but not any moe we as distributors have allowed he manufactures to support the Home Depot – Lowes and we have dont nothing about it. Now here goes another produt group that us as distributors will no be participating in as much as we might think in the future


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Author

David Gordon

Gordon is president of Channel Marketing Group. Channel Marketing Group works with manufacturers, distributors, manufacturer reps and technology companies in the electrical industry to help companies accelerate their performance through strategy development, marketing creativity and market research. CMG generates ideas that generate results.

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