Ted Konnerth
I just returned from speaking at Strategies in Light. SiL is the largest conference dedicated to LED. My topic was selling new technology into an old culture and it was well received; from both the ‘tech guys’ and the traditional lighting guys. My point was simply that our industry has begun to be impacted by technology in ways we’ve never imagined, and has been, frankly shunned. I remember when electronic ballasts were being introduced and the largest ballast manufacturer bought up electronic companies to slow the adoption of the technology. Based upon their legacy investments in steel stamping and coil winding, I understood the rationale, but the long term focus of becoming a leader in new solutions was misplaced considerably. Electronic ballasts were dismissed as unreliable, too expensive, no industry standardization, etc. Everything that the current lighting community is saying about LED.
The LED conference was replete with statistics: attendance was up 40% despite the East Coast storms. Total attendance was over 3,000 people. LED as a category grew “only” 9% in 2009; a definite soft year for the category, but it’s projected to grow 32% in 2010. LED has multiple applications, with backlighting in TV’s and monitors a big factor in their adoption, but Lighting is the second largest overall market and the largest growth market for LED, and that’s both commercial lighting and lamp replacement. In 2009, LED Lighting (fixtures and replacement lamps) was $2.3B, projected to be close to $3B in 2010. The total LED component market was $5.3Billion, projected to be $20B by 2014. Lighting will be around $14B in 2014.
Now SiL was held coincidentally at the same time as the Central NAED conference. Attendance for NAED was slightly down with a total of roughly 450 people (ElectricalTrends, by David Gordon of the Channel Marketing Group). 450 ‘electrical industry’ movers and shakers elected to wander to south Florida for a couple of days of golf and dinners and conference presentations on improving gross margins, and grumbling about buying group rebates or members, etc, while 3,000 LED ‘techies’ gathered for 2.5 days of non-stop technical presentations, product demonstrations, market research and new technology concepts. No one could have walked away from that conference without a firm belief in the future of the technology as well as the long term contribution it holds for benefiting our country’s energy challenges. There were practical presentations on changing entire cities over to LED and incorporating sensor and smart controls to dim street lights or turn on/off alternate ones at low use times, etc. Designers spoke about the benefits and troubles of using LED lighting. It was high energy with everyone talking about growth.
The electrical industry is conservative in its adoption of new technologies. In no small way, that’s the right thing to do. We need to ensure that ‘new’ things are sound and robust enough before we deploy those technologies into our homes and buildings.
But conservative approaches have morphed into resistance. Our distributor clients openly claim they don’t understand or wish to promote LED solutions, as well as solar or wind power solutions. Manufacturers have been very slow to adopt LED, including several manufacturers who have told me they are waiting until the technology is fully adopted. I ‘get’ skepticism and caution. I don’t ‘get’ letting the train pass you by. The traditional electrical industry has lost market share in 2009 and 2010. In a year when we all collectively need new revenue opportunities, the industry has simply denied the potential of new technologies.
New channel partners have begun to emerge. Solar and wind power specialists have formed in the lurch left behind by electrical distributors. LED companies have used direct sales channels to promote their products, bypassing OEM relationships and distributor channel partners who are confused by too many vendors all with similar claims of ‘best’. Channels will change with the rush of new technologies. The commercial lighting market will have to fix its anachronistic rep channel and take far more ownership in that relationship. LED can be sold into markets that traditional reps don’t have experience in and letting a rep take 100% control of your business on a local level no longer makes sense. LED will open the door to new players, of sizable presence and capabilities. LG, Samsung, Mitsubishi, Sony could become the next lighting manufacturer and I can assure you their channel will not mirror the traditional one we’ve seen for decades.
The electrical industry has daunting issues, but the thought of selling a $75 PAR lamp on an ESCO-focused sales strategy seems to make a lot of sense to me; more sense than haggling over the price of a skid of troffers. The idea of orchestrating a cabling solution for solar installers also makes sense to me… but we tend to go back to the same old story and let our market dwindle. Premise wiring has largely been abdicated to CEDIA-installers and datacom suppliers, with Graybar being a notable exception of a distributor who addressed the emergence of that market by dedicating unique sales, marketing and operations staff to develop and capture the market.
The industry is changing. New competitors are emerging daily. The investment community is spending hundreds of millions on emerging technologies. These technologies will require training for contractors, distributors and reps but only if they want to learn. Otherwise they’ll simply develop their own channel paths, leaving the traditional channels to selling the same stuff at the same margins and riding the waves of economic cycles in a smaller overall market. Conservative may just turn into preservative.
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