As their suppliers continue to innovate, merge, and race to outdo one another, lighting distributors are often left to their own devices to figure out new strategies and compete effectively in their own markets.
Look around at the lighting landscape right now and Heraclitus’ infamous, “The only thing that is constant is change” quote appears to be playing out in nearly every corner of the market. Rapid advances in lighting technology, mergers and acquisitions, leadership changes, and changing buyer preferences are all having a profound impact on how electrical distributors go to market and sell their lighting products.
This year, we’ve already seen several shifts at the top of the lighting industry, where manufacturers are joining forces, moving chiefs around, and/or changing up their strategies.
The shifts range from Philips Lighting announcing that it had named Chris White as President of the Americas to TCP International Holdings, Ltd.’s pending merger with Quality Light Source GmbH. Also this year, Cree bid farewell to two of its high-level lighting executives (Daniel Castillo and Keith Eagle), while two Chinese-based companies (including the parent company for Forest Lighting and LEDVANCE), both began preparing their bids to buy GE Lighting.
These and other changes put lighting distributors in the unenviable position of having to stay up-to-date on the news, figure out how it impacts them, educate themselves about new products and go-to-market strategies (e.g., those that are introduced when a new executive comes onboard), and stay competitive in a highly-commoditized market.
None of that is easy for folks like Kip Anderson, lighting business development manager at Kirby Risk Electrical Supply in Indianapolis. Anderson, who put in a decade as a direct sales rep for Philips, says in that role he was well informed about market changes, business plans, and distributor-related strategies. “As account managers, we’d relay the pertinent information to our distributors,” Anderson recalls.
They’re Decidedly Out of the Loop
For the last three years, Anderson has been decidedly “out of the loop” on such insider information, having switched over to the distribution side of the business. “We aren’t kept quite up to speed like we used to be when we worked with direct sellers (versus rep agencies),” says Anderson. “Our reps do a pretty good job of passing on information, but I don’t think they get quite as much information now as we used to back then (as direct sales reps),” he says. “I don’t hear quite as much as I used to.”
That dearth of information can turn into a problem when a manufacturer makes changes to its products, but doesn’t get the related materials out to its distributors fast enough. This creates an especially high hurdle in today’s fast-moving lighting industry, where the LED products sold just six months ago are not the same ones being sold today. “There are so many performance improvements taking place on the LED side of the market,” says Anderson, “and that does cause [us] some pain.”
Not Enough Hours in the Day
In an ideal world, Anderson says suppliers have better mechanisms in place to alert distribution of those changes. He acknowledges that in some cases—like when engineering and R&D develop products quickly and rush them to market—there simply isn’t enough time to spread the word across the entire distribution base. “In most cases,” Anderson says, “we just find out once an item has been department-listed or deleted, or when the manufacturer makes changes to it.”
The latter can be a sticking point for distributors that are carrying lighting inventory in their warehouses, and that get “stuck” with products that have become obsolete overnight. “We carry a lot of inventory to better serve our customers but trying to sell old inventory before getting into the new stuff can be a real problem,” says Anderson. “With price degradation on the LED side, it’s hard to sell a fixture that’s six months old, less efficient, and $50 more expensive than a brand-new model.”
Patricia Adams, lighting specialist at Grand Island, Neb.-based Kriz-Davis, a division of Border States Electric, says her company is feeling similar pressures, and that supplier buyback problems can’t even solve those pain points. “If the manufacturers do buy the old products back, it’s usually two-for-ones or three-for-ones, which means you can send $1,000 in lighting products back as long as you buy $2,000 more,” says Adams. “So now we’re spending more and increasing our inventory; it’s a domino effect.”
Then one or two months later, the same cycle occurs when a newer, cheaper, and/or more efficient lighting product is released. “That’s the hard part about being a distributor and stocking in the LED world right now,” says Adams, who adds that the overall commoditization of lighting is another issue plaguing distributors right now. “We try very hard to promote our reputation and the suppliers we know, like the TCPs, Philips, and GEs,” says Adams, “but then some guy walks in the door and says, ‘Hey, I saw this one online with higher lumens for only $19.99. My response is, ‘Go for it. I don’t know what to tell you.’”
Heard it Through the Grapevine
Knowing that the suppliers she buys lighting from are in a period of flux right now, Adams says she uses sources like tED magazine, lightED, and the Edison Report to stay on top of the latest leadership changes, mergers, and other changes. “Manufacturers are changing names so often and the information doesn’t always filter down to the distributor level very easily or very quickly,” says Adams. “We find a lot out through the grapevine rather than from the manufacturers themselves.”
The fact that many manufacturers have moved to using rep agencies (versus factory-direct reps) doesn’t help, says Adams. And when the shifts involve the rep agencies themselves—like when Hubble and Acuity switched manufacturer’s rep firms recently—getting information out of them gets even more difficult. “Right now there are brand new agents struggling to learn those lines quickly,” says Anderson, “while we’re struggling to figure out who we’re buying from. It’s a bit of mess right now.”
To cope, Anderson says she’s taking the situation day-by-day, knowing that the lighting industry as a whole is going through some major transformations. “Every day is a challenge in one way or another,” she explains. “The fact that lamps have become such a commodity is the biggest challenge for the stocking distributor. You put it on the shelf today and either the wattage goes down and the lumens go up, or the price goes down, and then you’re stuck.”
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