Selling Direct … A Growing Lighting Trend

Our Q4 Pulse of Lighting survey is currently open and while perusing some of the feedback regarding market trends, one of the dynamics that was repeatedly mentioned was lighting manufacturers selling direct. In fact it was mentioned that it is not only the smaller, less-known companies doing this but that, in one respondent’s words, “becoming a trend.”

While its been known that manufacturers sell direct, especially for selected market segments (i.e. utilities and municipalities), many have quietly sold to ESCOs (and the definition of ESCO has broadened significantly) as well as periodically decide to take large or sophisticated projects direct, the trends is becoming more common.

• Last quarter Acuity mentioned that distribution represented less than 60% of its business (7th bullet in the posting) … for the first time!  They’ve mentioned previously that they have at least 13 channels to market (and some understandable, especially retail and showrooms to name two.)  It would be understandable if their core competitors do the same. (although would distributors like to know all 13?)
• e-conolight, a division of Cree, has infamously sold direct.

And then in this month’s issue of Electrical News LSI’s Renovation Lighting initiative and their Power Play program were mentioned along with a new leader for this initiative, Martin Woolard.  What is Power Play you ask? According to the article, “a turnkey solution aimed at delivering the most efficient technology and code compliant results for reducing operating costs, improving on life cycle cost of operation and functionality, increasing system sustainability and saving energy, LSI seeks out partners who can collectively deliver an array of specialized services that are critical to a successful renovation experience. These services can include installation and recycling and disposal services for retired fixtures to minimize carbon footprint and support environmental objectives.”  And according to LSI’s website, “The LSI PowerPlay Program is designed to provide key products and services directly to our renovation contractor partners.” To LSI’s credit, they have developed a certified contractor program. Click here to see which contractors, in each state, are in the program.

Not familiar with LSI? Atlas Lighting is a division of LSI.

Today’s mail also brought this month’s Electrical Solutions magazine.  The cover ad? ContractorLighting.com with a headline of “Get the Competitive Advantage”.

Now, the issue isn’t that these companies sell direct.  It is a viable manufacturer strategy, especially when they are challenged in getting sales representation as well as distributor support. After all, they have a fiduciary obligation to their ownership to generate sales.

And contractors, as well as end-users, are voting with their wallets. They are purchasing direct based upon what they perceive as a value proposition.  Essentially, “why pay more when they don’t see value in a distributor’s services.

The questions that distributors should be considering is:

• What is their value proposition in selling lighting fixtures to some of these audiences? If they customer only values a “transaction” but can wait for delivery and perhaps doesn’t need credit, are they wrong for purchasing based upon price … and perhaps convenience?
• What are the characteristics of “their” customer profile?
• How do their manufacturers go to market? At least know the competitive channels for the same customer with the same supplier. Where are the “aligned” interests?  Knowledge can be power.  Also, what, if any, cost differential is there and is it valid (yes, large DIYs may get better pricing as they have the volume as well as logistical benefits, that’s the reality.)
• And if the knowledge leads to “support” decisions within a distributor, it is important to communicate that throughout the company. Watch for “maverick” buying.

And, not to say any company is “pure”, in the same issue of Electrical News, Satco was highlighted for recognition for earning a Sales Excellence Leadership at the recent IMARK meeting.  According to Bill Gildan, President, ““The IMARK Group is a key strategic partner with Satco and these awards are a meaningful acknowledgement of our efforts to show the importance of the IMARK relationship within the Satco organization”.  The IMARK award capped a double play for Satco as they also earned the AD US Supplier Percentage Growth Award at the recent AD North American Meeting.  Two awards in one month earned from independent distributor organizations may say something about commitment to distribution.

We’ve commented before on sales leakage and there have been numerous articles on how customers are, or will, order online (the threat of Amazon and more). As the the NBC public service saying goes, “the more you know …” and the goal is that you’ll act as knowledge is power.  How can you learn more about “why” customers buy direct so you can be more competitive … or perhaps accept that a percentage of prospects, and perhaps customers, shouldn’t be customers?

Seeing other lighting trends?  Take our Q4 Pulse of Lighting survey, share your Q4 insights and receive marketplace 2019 lighting projections and the full report. We need your input by Monday, December 17th.