Q4 Pulse of Lighting was Weak For Manufacturers; 2024 Projection

January 8, 2024

By David Gordon

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It’s time for the Q4 Pulse of Lighting report, with a projection for 2024.

One of the projects that was completed before Christmas was our Q4 Pulse of Lighting Report. We had a strong response, providing good insights into the end of the year and insights into what electrical distributors, lighting manufacturers and supply reps and lighting agents are thinking for 2024.

Closing the Year … Apparently on a Whimper

First, it’s important to remember that the results are national. The reason I mention this is that there is disparity in some of the data. There are some companies that are doing well, others doing poor. Anecdotally we saw some regionality. We also noticed that conglomerates and architecturally-focused (spec) lines seemingly underperformed versus lines that distributors consider more as “value-engineer” lines. The reason … the small and mid-sized markets are performing better than the large market and the new construction market continues to be more challenged than the renovation market.

The macro-economic environment (interest rates), coupled with supply chain issues (switchgear), and contractor labor, continue to constrain the market.

Q4 Feedback

  • Distributors
    • Distributor performance exceeded expectations, up mid-single-digits, however, if some top performers were excluded, response would be low single-digit. While higher than expected, this could be due to 1) distributors are based upon billings, which has a time lag, and could represent backlog fulfillment, 2) could be filling small to mid-sized discretionary orders from stock. The results could also have been skewed due to responses from the Southeast / Southwest, where markets have been stronger.
      • Almost a third of respondents shared that thru-stock sales had increased and 40% commented that they have had projects delayed due to “other products” (switchgear) delays and 20% stated that they have had some projects cancelled due to costs or labor issues.
    • Most project-types reported a “slowing” environment.
    • SomeQ4 inventory adjustments for year-end.
    • VE activity is increasing.
    • Key verticals are education, healthcare, multi-family in the Southeast and Southwest, some industrial
  • Manufacturers and Reps / Lighting Agents
    • Flat market with only a quarter of respondents having more than 5% growth according to manufacturers whereas reps / lighting agents reported higher, which can be an indication of which suppliers are “winning” given that reps / lighting agents represent a broader array of lines as well as more VE-related lines.
    • A third of manufacturers shared that their backlog had decreased.
    • While quoting activity has slowed, the quote to close cycle has lengthened
    • They are seeing more interest in BABA compliant products
    • Some manufacturers are using “strategically using pricing” (SPAs) and being aggressive on selected projects. Indicates a competitive market but an unwillingness to drop pricing overall. Also indicates supporting selected distributors in specific markets.
    • Some layoffs were reported
    • Target, product-specific price increases reported from some manufacturers, but not widespread.
    • Reps report greater VE acceptance.
  • Additional input
    • Price increases were inconsequential, essentially reporting flat.

Looking towards the 2024 Lighting Market

There may be some light at the end of the tunnel, but it isn’t expect to reveal itself until the second half of the year.

Projections included:

  • Low to Mid-single-digits for the year reported by all audiences
  • 50-55% of manufacturers / reps reported that specifiers are expressing a concern / slowdown over the next 6 months.
  • Few expect price increases in Q1 and, those that due, question what will be realized.
  • Top 3 manufacturer lighting drivers for 2024 are:
    • New product launches
    • Focusing on key projects in the market
    • Change in sales representation
  • Top 3 rep / agent lighting drivers are:
    • Focusing on key projects in their market
    • Selling lighting controls
    • Supporting new products
  • Top 3 distributor lighting drivers are:
    • Focusing on key projects in their market
    • Targeting specific vertical markets
    • Selling lighting controls
    • (Supporting new products was tied for 4th.)

For distributors it’s a tale of where you are, what projects you are focusing on, and whom you are aligned with (meaning contractor) to win the business. For manufacturers, it’s a slugfest with architecturally-oriented companies the most impacted.

The lighting market continues to be impacted by switchgear project delays; however, this is an uncontrollable event. Looking to 2024, it’ll be a tough market for the first half but as interest rates drop, it is hoped that the market will pick up in the second half of the year. The renovation / discretionary project aspect of the market is where there continues to be opportunities, especially in markets where the economy is better.

Want the details and want to read the verbatim input shared by respondents?

The report is available for only $35. Click here to purchase the report.

Wondering how Q4 compares to Q3? Check it out.

And if you responded and provided your email address, the report was emailed to you just before New Year’s.

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