In order to understand where the lighting industry is headed, we first need to determine what stage in the industry life cycle we are in. Specifically for LED lighting, as this has taken over as the primary light source going forward. An industry life cycle typically consists of five stages – startup, growth, shakeout, maturity, and decline. Each of these stages can last for different amounts of time, some can be months or years.
The first visible spectrum LED was invented in the 1960s using red diodes. It wasn’t until the 1990’s when the blue diode was invented which quickly resulted in the discovery of white LEDs that the lighting industry started to take notice. The actual startup phase of the LED lighting industry can be argued, but in 2008 the US Department of Energy offered the L-prize (a competition designed to spur the development of ultra-efficient solid-state lighting products to replace common lighting technologies) and from there the LED lighting industry started.
From 2008 to 2013 most lighting manufacturers started to invest in LED and develop new products with mixed results. Anything that provided proper lighting cost too much for most practical purposes.
In 2013 LED lighting products developed far enough that the price and performance were at a point that made upgrading from standard lighting technology to LED lighting worth considering. From this point, LED took over the industry and was at the beginning of the growth stage. New companies emerged, efficiencies continually improved, pricing decreased rapidly, and lighting companies were growing at a record pace.
Then in late 2017/early 2018 things started to change. The industry was still growing, but well-established lighting companies changed names, were sold, went out of business or drastically changed their business models.
This brings us to today. 2018 might have indicated the next life cycle, but 2019 will be the official start to the shakeout stage. Lighting manufacturers will emphasize efficiencies over innovation. They will work on improving their manufacturing process through automation with less reliance on China. There will be more consolidation and companies going out of business than in previous years. Lighting companies will need to focus on what differentiates them from their competition and fight for business harder than they ever have.
Reading this and thinking about it might seem like a negative for the industry, but the last 5 years in lighting has been the wild west and it’s time for some stabilization. This does not mean innovation will shut down and growth will go away, but rather those who belong in lighting will stand out. Those companies can and will include companies with a long history in lighting as well newer companies who jumped into the LED game. It’s all about those who best listen to their customer while providing reliable and innovative products and service at a fair price.
The traditional lighting industry distribution model of a manufacturer to distributor to contractor/end user has changed to some degree, but there is still a place for companies in any of those categories.
If you are a lighting manufacturer and you want to thrive going forward, you need to do the following:
- Stock your product or have your product available within 4 weeks. Easier said than done, but when someone’s mind is on lighting, they often want it taken care of now as it can affect their daily tasks. If your product takes longer than 4 weeks, the customer will often go elsewhere.
- Carry multiple lumen packages, Kelvin temperatures, and sizes.
- Provide innovative products. Understand what is lacking in the market place and focus your innovation efforts on finding a solution.
- Offer efficient and flexible services – quick shipping, online availability, adjustable payment terms, and samples.
- Understand market place and be competitively priced.
- Provide a clear, straightforward warranty and back it.
If you are a distributor and you want to thrive you need to do the following:
- Partner with more than one manufacturer that check all of the boxes in the above list. Doing this allows you to be a solution provider for the end-user/contractor. Partnering with multiple manufacturers gives you options to ensure you have what your customer will need.
- Partner with efficient, capable and dependable contractors to offer turn-key lighting retrofits. You can also consider becoming an electrical contractor.
- Educate yourself on all new and existing lighting technology. There are many lighting distributors who only know LED. It’s important to have an understanding of traditional lighting so you know why LED is a better solution. Just as important is continuing to educate yourself as new technology arises. Stay on top of it so your customer doesn’t have to.
- Make lighting easy for your customer. As much as we want our customers to care for lighting as much as we do, they typically don’t. Many end users just want their lighting to provide the light they need to do the task they need to do. Don’t overcomplicate it. Give them options and recommendations based on your knowledge and experience. If they trust you, they will listen to you and ultimately become, or continue to be, your customer.
If you are a contractor and you want to thrive:
- Partner with a distributor who meets the qualifications above.
- Understand new lighting technologies and the most efficient way to install them.
- Be flexible and communicate with your distribution partner and customer.
The first two stages of the LED industry life cycle each lasted 5 years, so there is a chance the shakeout stage will last that long as well. There will be fewer manufacturers and distributors after the shakeout is done, but those who stay will be the ones that have the possibility of as much growth or more in the next 5 years as they had in the previous 5 years.
What the lighting industry’s future will look like after the shakeout stage is anyone’s guess, but as we have seen over the last 100 plus years, lighting has a way of reinventing itself. This LED lighting shakeout stage could very well concurrently be the startup stage of the next big thing in lighting.
Are you staying or are you going?Tagged with industry, LED lighting