Q3 — An Improving Lighting Market
October 7, 2020
Distributor, manufacturer, manufacturer rep and lighting agent feedback in our 2020 Q3 Pulse of Lighting report show an improving lighting market.
While the data had a disparity of -12% to flat versus Q3 2019, depending on the audience, this was a vast improvement from Q2’s Pulse of Lighting report which found a -19% across all audiences. At the worst case, the market improved by 50%.
What is most important is that the trend is upward… recovery. Improvement was expected as almost anything would have been better than Q2!
Whether this is the “V” shape recovery hoped for in the lighting space is debatable as many expressed concerns for the fourth quarter as well as the beginning of the new year.
Highlights in the report include:
• Large construction market is still challenging.
• Residential market is strong.
• Small to mid-sized renovation market was good.
• Margins are tight and it’s a fight to win business.
• There was some supplier price erosion, most likely due to competitive nature to win business.
• Some of the pricing pressure spurred by smaller lighting manufacturers winning business to potentially support cash flow needs.
• Distributor respondents shared that only 50% of their business was derived from one of the seven “large” brands.
• Bidding activity is strong. However, there are concerns about what is funded.
• A number reported project delays, although few cancellations.
• Some supply chain issues that are leading to value engineering (VE) opportunities which creates demand opportunities for 2nd and 3rd tier lines
• Acuity and Cooper appear to be “hungry” for business.
• 48% of manufacturers had sales declines of 10-20% vs. 2019. However, considering Q2, this is an improvement.
• Manufacturers and many manufacturer reps/lighting agents are severely limited in their ability to visit distributors and lighting specifiers. This could have an impact on brand specification.
With the large construction market viewed as “down” and the distributor results relatively benign, it is suspected that the encouraging distributor results are due to where respondents are geographically (hence few large projects) and performance of non-conglomerates in these markets. Geographic dispersion can affect results. Further, with the wildfires, the disruption of COVID in selected markets in July and the protests in selected markets, this could have an impact on respondent performance in selected markets.
When asked about their forecast for Q4, feedback was for continued improvement ranging from -6% to 3.7%.
While demand is lower, the business drivers in the industry have not changed. While there is improving demand, competition for the business is fierce, margins are tight and it is a “dog eat dog” battle.
Without large projects, lighting industry revenues will remain “challenged” and it will continue to be a battle for market share.
Over 200 individuals shared their input for the survey. Respondents, at their request, received a complimentary copy of the report.
The report is available here for US$19.
David Gordon is President of Channel Marketing Group. Channel Marketing Group develops market share and growth strategies for manufacturers and distributors and develops market research. CMG’s specialty is the electrical industry. He also authors an electrical industry blog, www.electricaltrends.com. Channel Marketing Group does not engage with clients on detailed pricing strategies, however, given that pricing is a critical element of sales, marketing and growth planning, we do get asked about the topic and can share opinions and refer to those who focus on the area as well as share anecdotes. David Gordon can be reached at 919-488-8635 or dgordon@channelmkt.com.
