RACE TO THE BOTTOM
Evolution of the Market
When LEDs were introduced to the American marketplace, it wasn’t long until they started dominating commercial/industrial lighting. First in low wattage applications, like lamps and tubes, then they started capturing the high wattage replacements like 1,000-watt metal halides hanging 100 feet above the ground. Each additional phase saw high prices and short, insignificant warranties. As with all new technology, the price eventually drops as competition increases. Now we have a marketplace full of $5 tubes and $99 cobra heads with 10-year warranties. And everyone manufacturers their own LEDs, offers quick ship and best price.
For decades, companies in North America have used the engineering, technology and intellectual property of Asian manufacturers to sell LED lighting. Major brands like GE, Phillips, Lumera and more “private label” their lighting products to sell to their customers. Private labeling means the original manufacturer allows companies to brand, market and sell the manufacturer’s products as their own. In the commercial and industrial LED market, the sales process works through distribution, lighting reps, ESCOs and agents.
Direct from China
With Asian manufacturers starting to sell directly into the North American market, many U.S. lighting companies are re-evaluating the products they market and sell. Because the Chinese now sell into the U.S. and compete for the same customers, profits for high quality LEDs have fallen significantly. According to LEDInside, prices and profits have dropped for LED lighting manufacturers. The trade war and imposed tariffs have also affected the entire industry.1
Supply Chain Solution
Due to the changes happening in the lighting industry, many brands are starting to fall by the wayside. If you spend a few minutes on Google, you can find an alarming number of brands closing up shop in recent months. A competitive market has created a new sales person to hit the streets called an independent lighting broker. These brokers have little overhead, no manufacturer’s affiliation, often unqualified and unnecessary middlemen. They have undermined the pricing of LEDs and affected pricing everywhere! The impact is felt across the globe.
With lighting manufacturers dropping out of production and lighting reps/agents/distributors cutting prices to the bare bones to win a project, it is a race to the bottom. Will it ever end? Companies that provide creative supply chain solutions and adapt to the evolving industry changes are surviving and thriving. If you can meet demand with a quality supply at a great price, everybody wins. I’ll take a win.
Dennis Newhouse, General Manager