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Anybody’s Guess

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Anybody’s Guess

Distributors discuss the state of their lighting sales so far in Q1 2019 and how the year could shape up.

 

From the challenges brought on by recent tariffs to the prospects presented by new market opportunities, the lighting market remains a dynamic, evolving industry that continues to lead its followers on a never-ending journey. So, will 2019 prove to be a strong year for lighting sales?

Following, lighting experts Patricia Adams, lighting and energy specialist at Fargo, ND-based Border States Electric (www.borderstates.com), and Mark Kirksey and Sean Retting, project quotation manager and project quotations representative, respectively, at Colorado Springs, CO-based Blazer Electric Supply (www.blazerelectric.com), share how lighting sales at their firms are tracking so far in the first quarter of 2019 and how they might shape up for the year.

Assessing the Conditions

According to Border States’ Adams, lighting sales early in any year are market-sensitive. “Sales in the utility market are always soft in the first quarter, construction sales are dependent on weather conditions, and the industrial market is historically slow in Q1 as year-end funds for upgrade projects were spent in Q4 2018,” she said.

Such market cycles notwithstanding, “our sales were consistent through the end of 2018 and are continuing into 2019,” reported Blazer Electric’s Kirksey. “We currently have a backlog of projects that are either in the submittal stage or getting ready to move forward, so we’re optimistic about our current lighting sales.”

That’s not to say that obstacles don’t abound.  Among those, “the most challenging part right now is meeting the short time frame that’s expected on more and more projects,” Kirksey said.  “Contractors and end users are wanting fixtures that usually take 4-6 weeks and asking that we have them onsite almost as soon as we get the purchase orders.  Trying to maintain that level of service while keeping realistic expectations on lead times is something we’re continually fighting against,” he said.

At Border States, Adams said that many online and offshore companies are saturating the market via the internet and email outreach and making it more difficult for lighting specialists to demonstrate the importance of choosing trusted manufacturers and high-quality products over low-cost, poor-quality ones. “I feel that this trend will continue until contractors/owners get ‘burned’ with an inoperative product from a company that’s since gone out of business,” she said, noting that Border States encourages its account managers to avoid succumbing to low-cost products and to partner with Tier 1 and Tier 2 vendors for their customers.

As for the recent wave of tariffs on Chinese-made products/components that introduced price volatility into the lighting market throughout 2018, Adams sees a light at the end of the tunnel — a stasis of tariff levels which is enabling price increases following President Trump’s January 1st decision to hold off on raising tariff levels from 10 percent to 25 percent for at least 90 days. “The continuous tariffs caused customers to feel uncertain about moving forward with a project,” Adams confirmed.  “However, with the ‘decline’ in tariffs, confidence has been somewhat restored and Tier 1 and 2 vendors are introducing upgraded, lower-cost products into the market without sacrificing quality.”

Bright Spots on the Horizon

Looking ahead to the full year 2019, Adams is optimistic about growth she’s seeing in several lighting segments.  Specifically, “growth in the market for outdoor upgrade projects is increasing as manufacturers continue to offer easy and cost-effective alternatives to high-wattage HID lighting,” she said.  “In addition, with the legalization of cannabis, lighting interest from the horticultural segment has increased, and, due to the high energy demand and rural logistics associated with that industry, we’re seeing our renewable energy certificate (REC) customers being involved in these projects.”  At the same time, she added, while the market in the Midwest remains sluggish, a few projects that were tabled in Q4 2018 have resurfaced.

Not all projects progress with ease, however, and Adams noted that bid projects that are value-engineered (VE) after the fact by non-specified products currently represent some of the toughest lighting project sells.  “Contractors are bidding projects low and then value-engineering them after the bid date,” she explained.  “It’s a gamble, but most are successful due to the fact that they’re engaging a non-pre-approved manufacturer into the game who’s seen bid-day pricing and is willing to play the low-bid game.”  By contrast, some of the easiest sells her firm has experienced have involved vendor-managed utility roadway projects.  “They like working with a distributor they can trust who delivers value through the services they offer,” Adams said.

At Blazer Electric, “government projects are the hardest to land, as there are so many details that have to be met,” Retting confirmed.  “All of the ‘Made in America’ specifications and the long list of bidders both locally and out-of-state make those projects the hardest to lock down.”  On the flip side, “some of the easiest jobs to land are the second and third phases of projects that we’re already doing with contractors,” he said.  “If you do a good job and provide a high level of service, most of the time you’ll get the second portion of a project without the bidding process.”

Looking Ahead

The forecast for lighting sales in 2019?  According to our experts, it’s still up for debate.

“With an unsettled economy and fear of additional tariffs, I think that sales will remain flat throughout 2019,” Border States’ Adams predicted.

Based on the early-year activity they’ve experienced in their market so far, the team from Blazer Electric sees more promise.  “We’re highly optimistic about our lighting sales, simply due to the larger projects we’ve already been committed for the beginning of 2019,” Kirksey said.  “If we continue at this pace, we’ll have another good year in 2019.”

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Susan Bloomis a 25-year veteran of the lighting and electrical products industry. Reach her at susan.bloom.chester@gmail.com.

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