Flat Q4 in Lighting but Hopes for a Brighter 2025

2024 was a challenging year for the lighting industry. Continuing from the Q3 Pulse of Lighting report, feedback from our Pulse of Lighting respondents consistently revealed a stagnant (and nominally declining) market, which unfortunately continued into Q4.

But there is some light at the end of the tunnel!

Our Q4 Pulse of Lighting report, which had 234 respondents, shared:

Distributors

• Nominal negative distributor performance with only 5% of respondents reporting being up more than 5%
• Nationally, the opportunities continue to be in the small to mid-sized market and lean more toward the renovation/remodeling space. The industrial segment appears to be “okay”, possibly benefiting from the IIJA (ports, roadway opportunities) and companies needing to spend end-of-year budgets. Larger opportunities are still a challenge with much of this due to the lack of office construction in most markets (there are some areas where there are cranes.)
• The supply chain issues in other sectors that impacted the lighting market (can’t install lighting without power!) have mitigated, although not eliminated with almost 50% reporting some projects being delayed “due to other products”. This is helping distributors dissipate their backlog (but unfortunately many are not refilling it.)
• Distributors appeared to be not stocking their shelves. Some of this is end-of-year inventory management, some is manufacturers having quick shipment policies, and some relates to lack of brand loyalty with the price to support projects being paramount and ease of doing business being a #2 business driver.
• An area of concern for some distributors is the growing customer expectation that distributors store lighting project material until the contractor needs it. Frequently this is due to project delays caused by other material. In many cases, distributors are not charging for this and are not able to bill for the material, so this is becoming a margin issue.

Manufacturers

• Manufacturers reported a flat market with only 45% reporting growth greater than 2% and only 16% over 5%! Further, their backlog levels decreased, an indication of a lack of incoming orders.
• They also commented about an aggressive pricing environment which is leading to some market share moves.
• A number of manufacturers commented that a key to their success is “partnering” with local distributors as well as contractors.

Reps / Lighting Agents

• Correlating with the distributors and manufacturers, the rep / lighting agent community reported a flat Q4 with slightly more than a third reporting sales of over 5%.
• They affirmed manufacturer feedback about marketplace price erosion and that they are seeing distributors being reticent to stock inventory as well as they, and distributors, doing more “value-engineering.”
• Reps / lighting agents also commented that the design approval process is taking longer, and is becoming more complex, with more participants (inclusive of GCs). This adds labor costs and can delay projects.

Other Insights

• When manufacturers and reps / lighting agents were asked what they were hearing from specifiers looking out 6 months, the outlook is brighter. Those reporting “concerned” dropped 90%!
• Price appreciation is minuscule. While distributors reported a slight uptick, manufacturers and reps reported as flat. Essentially it is flat, and pricing can “easily” be negotiated given the number of supplier options in the market and supplier aggressiveness for projects, especially if the project is brand agnostic. Looking forward, many expect some type of price increase, exclusive of tariffs, in 2025 (most likely in the realm of recouping inflationary operating costs.)

2025

The Q1 outlook is for slow to modest growth, accelerating during the year, presuming no tariffs. The question was phrased this way as 1) no one knows what a tariff initiative will be (what countries, how much, what products) or 2) when it would be initiated. We do know that presuming tariffs are implemented, pricing for products will increase, hence skewing revenue projections, but what it could do for longer-term lighting demand?

While not much is known about what will happen with tariffs, one question that was asked to manufacturers is “What percentage of your material comes from various countries?” Slightly over 50% came from Asia (not only China) with almost another 20% from Mexico. And it should be noted, that “assembly” could occur in the US with components coming from overseas, hence making the material from the US.

There is economic optimism given the incoming administration, however, there was no feedback as to “why” in the short term.

There is some hope that lower interest rates could lead to increased investments (although it has not manifested into lower mortgage rates at this time.)

2025 growth segments are projected to be the same as current – markets with aggressive utility programs, healthcare, education, retrofit projects, infrastructure, data centers, and lighting controls. Some shared multi-family, however, this is market specific, as well as luxury residential housing.

Some distributors shared their lighting initiatives to accelerate their lighting performance. This included increased resources on lighting controls, focusing on end-users / influencers, improving eCommerce initiatives, and aggressive outbound demand generation initiatives targeting small to mid-sized renovation / energy-saving opportunities.

For manufacturers, their growth initiatives related to new products, distributor education branding / digital marketing (don’t forget about US Lighting Trends, a Channel Marketing Group initiative, which reaches 29,000 readers! – Yes, a shameless plug!), focusing on selected verticals, and increased commissions and rebates to targeted companies.

Rep initiatives for 2025 will focus on more specifier face-to-face interaction, increased eMarketing, promoting lighting controls, and promoting / seeking Made in USA brands. Some recognize that contractors, either design / build or those focused on value engineering, have gained influence in the lighting space, and are seeking to strengthen these relationships to win lighting projects.

We asked manufacturers, reps / lighting agents, and distributors about their growth projection based upon value-engineer / white goods and architectural / spec products. For manufacturers, the growth rate was the same, which is expected as most companies are one segment or the other. For reps / lighting agents, however, the value-engineer / white goods market is projected to significantly outperform the architectural / spec market (almost 3:1!) For distributors, they expect the value-engineer / white goods market to outperform by about a third.

Overall, each audience is looking for the lighting market to realize a growth rate of 2-3X the overall electrical distribution market projections!

So, there appears to be light at the end of the tunnel!

To obtain a copy of the Q4 Pulse of Lighting report, with verbatim feedback from respondents for only $35, click here.