Q1 Pulse of Lighting Survey Results

The lighting market, for many distributors, depending upon their business focus, represents 20-40% of sales.  It’s substantial, especially given that they next two categories are switchgear / automation and wire / cable, as performance in this product category can significantly impact company sales growth and profitability.

The challenge for distributors, however, is that the LED “revolution” changed lighting. It created:

• growth opportunities (or perhaps better defined as “customer interest”, especially when supported by rebates)
• a growing market that became of greater interest to a wealth of “new” lighting manufacturers
• proliferation of overseas contract manufacturers who are seemingly willing to sell to anyone and
• hence we now have too much supply chasing demand and therefore leading to price erosion.

While some / many are evolving into the controls and data management markets thinking those are a seamless next step and a seamless

Recognizing the importance of the lighting market to distributors and the above changes / challenges that the conversion to LED created (changing product types, declining prices, more functionality, more imports, etc).  William Blair, a leading investment banking firm with an industrial practice, sought to better understand the impact on distributors.  They partnered with Channel Marketing Group to launch a quarterly Pulse of Lighting Market study to solicit feedback according to the electrical distribution channel (so direct sales and other channels are excluded).

This report provides an independent sense of the market versus the “quiet” industry networking or being captive to information from manufacturers.

William Blair has authorized distribution of the report, for free.  It is available in our Research Reports section.  The survey and report will be conducted quarterly with results made available to the industry.

Highlights from our Q1 Pulse of the Lighting Market report:

• 200 respondents with about 75% being electrical distributors
• Feedback from manufacturers and reps coincidentally mirrored, within an acceptable range, the feedback received from distributors
• Market is “strongest” for small and mid-sized projects … new and renovation.  The large market is ….much slower
• The market challenge is price and the outlook is continued pricing challenges.
• Many are seeing interest in wireless controls, but there is still confusion / hesitancy in the marketplace
• “Unfamiliar” brands represent a significant percent of the market. This was defined as “non-top 7” companies
  • We recently completed a project and were “amazed” at the number of lighting companies we had never heard of.  In the coming weeks I’ll aggregate and share.  Distributor purchasing / senior or product management may want to develop a report of the # of lines that they purchase from to gain a better understanding of this segment of their business.  The number may be right to serve the customer, but it is serving you profitably?
• Backlog remains steady. Inventory remained steady / improved a little … perhaps due to what segment of the market is growing and any stocking is on “white goods” … commodity, price-driven SKUs.
• From a sales perspective … depending upon the audience 5.5-7%.  Distributors are reporting 6% in dollars, slightly higher in units.
  • Note: while many expected that units would be significantly higher, the issue is 1) more prevalent on lamps, 2) regarding fixtures, new ones are coming out with “new” features so manufacturers are pricing where replaced product was … cannibalizing sales with “old” product being pushed out and 3) it’s questionable how many distributors are proactively tracking this vs “guessing”.

And there is more in the report, inclusive of open-ended, unsolicited feedback.

Hopefully this information is helpful to you in bench-marking your business.  Click here to download the report.

And due to the number of AD members who responded, we developed a report to compare AD member performance vs industry performance. If you are an AD member and would like a copy, email me.

How is your lighting business performance? What are you seeing in the marketplace?