Q4 Closes Wild Lighting Year

The quarter is over and the year is done. And what a year it was in the lighting industry.

• It started with the threat of tariffs.
• Then IDEAL Industries purchased Cree Lighting, shocking the industry.
• Tariffs came in May and then there was the threat of tariffs with Mexico.  June was a month that had many wondering what to do.
• Tariff talk continued throughout the summer with discussion of how they were impacting pricing … but all survived even though the summer was challenging for many manufacturers as distributors stocked up on “white goods” in June.
• Fall came and with it the surprise that Signify acquired Eaton Lighting’s business which previously had been renamed Cooper Lighting Solutions.
• And business, at least for distributors, seemed to rebound in the fall.

All this while Leviton, Legrand and others made lighting acquisitions. Product development continued at a torrid rate. China.led hasn’t relented and is now part of the ecosystem of the lighting industry with quality improvements by many. Controls are becoming a more significant part of a lighting sale and, aside from pending answers regarding the future of tariffs, tomorrow business drivers look much like yesterday’s … competition, technology, margin / price pressure, need for specialization, product development let alone online buying and lighting specialty distributors.  Sound familiar?

Q4 Pulse of Lighting

And with this, here are some highlights from the Q4 Pulse of Lighting survey, sponsored by William Blair.

• 228 individuals shared insight, inclusive of individuals from 80 distributors
• Sales performance ranged from 2-6% depending upon audiences.
• 55% of distributors reported sales increases of 5-15% whereas 29% of manufacturers stated their business was +/- 2% and 20% stated their business was down 5-9%
• The renovation remained strong with signs that the large project market, especially the large renovation market, is exhibiting some life.
• 50% of distributors shared that their backlog has increased.
• Conglomerate manufacturers significantly under-performed the manufacturer average … by 10 points!  And these large companies continue to struggle to increase their share of the overall distribution business.
• Cooper Lighting joined IMARK and AD. Grapevine feedback is that Elite Lighting is joining one of the groups.

Interestingly, when distributors were asked about the impact of tariffs

• Less than 10% feel that major lines are more competitive due to tariffs (i.e. they are more price competitive) which is surprising given that they previously felt that China.led had a significant price advantage and that tariffs would balance this.
  • Only 9% of manufacturers stated that they are now more competitive.
• When asked how their lighting sales would change if tariffs were removed, 65% stated it wouldn’t change their lighting growth rate and less than 20% felt it would have a 10% increase.  So, minimal impact.
  • 32.4% of manufacturers state removing tariffs will not impact their business and another 38% state removing them will only increase their growth rate by 10%.

 2020 Lighting Forecast

And for early 2020 forecasts, survey respondents project:

• Distributors are projecting mid-single digits with 46% projecting a 5-9% increase
• Manufacturers are projecting 5% growth in Q1 with accelerating growth throughout the year with the overall average ending higher.
• Reps are projecting mid-single digit increases also, although a low single digit first quarter.

Additional insights that were shared:

• Many distributors commented about Cooper joining AD and IMARK and wonder what this will mean for Acuity and Hubbell.
• Many expect the acquisition market to be active next year.
• Continued price deteriorating is expected.
• Large companies are focusing more on their “contractor-grade” offerings.
• Distributors are planning to offer more lighting services, especially around controls, with commissioning and monitoring billable services planned.
• Lighting control sales are increasing
• Distributors, reportedly, are recognizing to capture a greater share of the lighting business they need to call on end-users / specifiers to generate the renovation business, then “control” the business and integrate a contractor to handle installation.

And there are 13 pages of open-ended feedback from respondents in the Appendix sharing marketplace specific insights and projections.

To learn more about Q4 and lighting forecasts for 2020, you can click here to purchase the Q4 Pulse of Lighting Report for only $19.

Lot’s going on in market.  What does your crystal ball say about the 2020 lighting market?