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LEDs: The Time is Now

<i>The author believes electrical distributors need to take a more proactive role in the market selling LEDS and other solid-state technologies.</i>

LED usage in commercial lighting is expected to grow at an annual rate of 39 percent for the next three years, putting LED commercial lighting sales at $4.5 billion a year by 2015 (from a report published by the Strategies in Light conference). The overall market for LED products for applications such as backlighting for televisions, laptops and mobile devices is declining due to the saturation of the TV market, which will cause a flood of LED components into the commercial lighting market bringing lower prices and increasing adoption rates. In 2010, the global LED market — all products included — increased by 93 percent (Strategies in Light report). Such impressive growth rates for products using LED technology have brought major global attention from electronics manufacturers eager to enter large markets that previously had barriers to entry, such as the U.S. commercial and residential construction markets.

LED is here. And, the world's largest lighting companies are in the game, manufacturing competitive LED lamps and fixtures, and investing in new research and development. However, their legacy channel strategies have hampered their success in this arena — slowing the sales process significantly. The electrical industry has been largely inbred, such that we refuse to listen to new ideas. The entry of new technologies like LEDs, wind, solar and environmental controls muddies the way things have always been — including the LED sales process. Change or become irrelevant is a mantra for the modern electrical industry.

The construction industry is grounded (pun intended) with the electrical contractor. If the technologies entering our industry aren't designed, constructed and intuitive from an installation and application perspective to the electrical contractor, then market acceptance will either have to adapt to understanding the electrical contractor, or move to another channel of the market. Electronic products and technology have slowly migrated into electrical contractors. Electronic or low-voltage wiring systems have long histories; from doorbells to alarms to sound systems to premise wiring to cabling systems for data centers. The introduction of each of those technologies has historically introduced a new trade into the mix. Alarm systems required security certification training, contractors installing sound systems required CEDIA certification, telcom installers needed to get BICSI certifications, and so on. As each channel emerged, the core electrical contracting firms either added specially trained/certified contractors as an adjunct to their company, or simply abdicated those trade contracts to the emerging companies.

With each technology introduction, the traditional electrical market became more disenfranchised by electronics. Electronic installations require significantly different skills and tools. Software-controlled systems behave and are sensitive to specific installation processes more so than traditional electrical installations. The adoption of controls into electrical systems has been ongoing for many years: factory automation has incorporated controls into HMI (human machine interface), drives, safety systems and supply chain interactions for several years. Installing a 480V three-phase motor became significantly more technical than traditional approaches with the introduction of variable-speed drives (VSDs) technology and the integration of those drive systems into the overall factory floor environment.

Technology is changing the face of the electrical industry, and to ignore this fact is to be ignorant of a massive shift. Small players in the market who grasp and expand LED and energy-saving technology are gobbling up a majority of a market sprinting ahead. There are more than 400 manufacturers of LED equipment most of those are based in Asia, according to the Strategies in Light Directory of Manufacturers. LED adoption in the United States has occurred primarily at the end-user level, not through the traditional electrical industry channels, which makes tracking LED success virtually hidden from any of the traditional players: distributors, manufacturers and contractors. The LED adoption rate has also been helped by the incentives for energy reduction available at the municipal, state and federal level. These incentives are nearly always paid directly to the building owner (under some circumstances rebates can be paid to a specifier or contractor, too). The LED companies have arrived with products in hand and little knowledge of the barriers to entry, so they've simply followed the money: calling on municipalities, large building owners (property managers, retailers, banks, etc.) or institutions where a short return on investment (ROI) with long-term financial benefits make for a receptive audience. When you're fighting profits and cutting costs, reducing your energy footprint for the future of your company makes a lot of sense, especially if you're able to receive significant tax and utility rebates.

Now the race to the end-user is not completely new. Many companies have dedicated channel-focused sales and marketing organizations to target narrow niche markets: mining, process industries, government sales, etc. The difference this time though is the creation of large sales organizations within large and small commercial manufacturers of traditional electrical equipment targeting end-user communities and selling end-users on a direct basis. Essentially, this represents an admission that channel partners aren't serving the needs of their manufacturer partners. Examples of these programs: ESCO teams of the major switchgear companies, national account or energy-market specialists within the largest lighting manufacturers, and the diversity of more electrical product categories within the major building automation companies (Honeywell, Johnson Controls, etc.).

How does this trend impact the industry? The transition will be transformative. The relationships with traditional partners of distributors and contractors will change. The reaction from those partners will be interesting because it's time the rest of the industry recognizes a race is on to maintain market share through the upgrading and training of a sales organization that can sell products for the future. Training salespeople to make professional presentations to building owners that speaks to equipment and financial ROI is tantamount to survive in the new era of electronic solutions.

Distributors and manufacturers have largely trained their salespeople to not lose orders. I believe very few companies have trained sales professionals who can talk with a CFO or CEO about the long-term costs of ownership of a lighting or control system. This isn't because they don't have the mental agility to do so. It's because it's never been a requirement of the industry to approach sales from this perspective. That time is now, and the need for sales teams that are proficient in electronics, software and investment presentations is urgent.

Ted Konnerth is the founder, president and CEO of Egret Consulting Group — a retained search firm specializing exclusively in the electrical industry. Ted was the global V.P., Sales for Cooper Lighting prior to starting Egret and holds a Ph.D in psychology. The opinions he offers in this month's Speaking Out are entirely his own and do not necessarily reflect the opinions of the editors of Electrical Wholesaling.

His intentions in this article are to wake up distributors to the changes afoot in the LED market and the potential market opportunities they may represent. Konnerth believes a quote by retired United States Army four-star general General Eric Shinseki accurately sums up the technological revolution in the electrical market and the role distributors need to play in marketing newer electronic products: “If you don't like change, you'll like irrelevance even less.”

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