LED Growth Exploding

June 14 2016

David Gordon

Our friend Bill Attardi at Energy Watch shared interesting data he obtained regarding the exploding growth of the LED market… the growth is startling and has major ramifications relating to the LED market.

Here is his five-year chart of LED luminaire sales:

Figures in $US. Source: NEMA, per Bill Attardi

So, what does this tells us and what questions should distributors be asking themselves?

The outdoor market is an LED market. While the percentages may not be 100% accurate (as not all manufacturers share information with NEMA), the trend is evident.

Indoor is quickly going the same way.

Given that LEDs by definition are electronic products, distributors need to become more adept at managing electronically-oriented products.

As a starter, this relates to

• becoming accustomed to continuous new product introductions from suppliers which requires purchasing acumen, sales training / awareness and marketing of the new products, their features and to the appropriate markets

• inventory that obsoletes itself (consider what this may mean for supplier return strategies)

• the need to closely manage inventory while also developing a discount strategy to ensure that they don’t retain old product too long

• products where pricing continuously drops

• greater commitment to product training for all staff as well as a need for specialists (unless you want to be an order receiver / quotation engine)

• conversant with the Internet of Things

• understand the usage of lighting controls

Distributors should consider this market the way electronic retailers think about electronics. The product lifecycle is short, product differentiation is incremental and has a shelf-life, discounting is normal (and in retail this discounts often get pushed back to the manufacturer… SPAs?), marketing is important, training is important.

The good news is that the energy efficiency benefit generates new markets and new opportunities; hence, expanding the market. Distributors should also consider identifying where the product is sold and installed to help the “resale” opportunity. Although LED lamp and fixture manufacturers claim product longevity, the reality is that future functionality will hopefully justify upgrades. Maybe not in a year, but three years? For those of you who remember TVs that had tubes in them, the upgrade cycle was infrequent. Now with larger screen LED TVs, thinner TVs and more, the norm is a quicker upgrade cycle, typically at a lower cost.

LEDs may no longer be a segment of a product category. They can be a separate application, or business (especially if you consider various types of projects and services that could offered… and with PoE, electrical contractors may not be the only customer segment).

The data show the market growth. The question becomes, is the business the same but the product has changed, or can the product change the business that you may be in?

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. He can be reached at 919-488-8635 or dgordon@channelmkt.com.