The Market's Wild West

March 1, 2013
LED lighting and photovoltaic products are challenging conventional distribution strategies.

Two new technologies are now riding down Electric Avenue and shooting up conventional distribution strategies.

I am talking about the LED (light-emitting diode) and solar businesses, where new-age marketers are using utterly unique go-to-market strategies that don't look anything like what electrical manufacturers have used for decades to get their products in front of end users and buying influences. At the recent annual conference of the National Electrical Manufacturers Representatives Association (NEMRA), Portsmouth, N.H., more than one independent rep told me both markets are like the Wild West, with few established rules of distribution.

Full-line electrical distributors may not be top of mind for the marketing execs at manufacturers of LEDs or photovoltaic (PV) products. These execs often aren't convinced they need electrical distributors to provide that local touch, including local inventory, credit and market expertise. They are instead employing a full range of alternate channels that include but are not limited to selling direct through online storefronts, dealers with limited product offerings, reps, and even Apple Computer stores, in the case of Philips' Hue LEDs.

Execs at these LED and PV companies aren't wearing white hats and black hats in these marketing scenarios, like the ones worn by cowboys in old-timey Westerns so movie-goers could differentiate the good guys from the bad guys. That's because there's no right or wrong way to sell LEDs and PV products, as long as all involved are doing it ethically.

What's happening in the LED and solar markets are two classic test cases of the perceived value of electrical distributors. Plenty of marketing execs in both niches don't have any previous experience marketing their products through full-line electrical distributors, so distributors will play in these markets based on their merits. That's a good thing and a fair challenge. Game on.

While both LEDs and PV products have been around in one form or another for decades, they are both still very much emerging technologies, and nothing is set in stone as to what's the best way to market them. When you take a step back and analyze each market, you see both have some big challenges before either comes onto Main St. in the electrical market.

LEDs may revolutionize the lighting market from tip-to-tail because of their long life and the ability they offer designers and installers to tune their color and light levels to virtually any environment. But LEDs will only reign supreme when the manufacturers selling products with inferior color quality either step up their game or leave the market space.

Another big challenge for LEDs that EW will be exploring during the next few months is identifying which LED manufacturers will emerge as the key players. It probably won't sort out as it has with traditional lighting products, where we have the Big Three (Philips, Sylvania/Osram and GE), and a second tier of smaller companies with more narrowly niched product lines. You will probably be hearing more about Cree Inc., Durham, N.C., a formidable one-stop provider of LEDs and lighting fixtures; Sharp, Panasonic, Toshiba; and possibly Lighting Science Group (LSG), Satellite Beach, Fla., a small, publicly held LED specialist with an in-your-face marketing emphasis.

It's a different scene in the solar market, where way too many Chinese PV companies are flooding global markets with PV panels, and a mish-mosh of other specialists that are part-manufacturer, part-distributor and part-installer compete for attention. There's a big shake-out brewing in this market, because it has way-too-many vendors and way-too-little real demand not artificially stimulated by financial incentives.

The solar market could choke on an even more volatile concoction, when you consider that without federal tax breaks, local financial incentives and utility rebates many solar companies might not survive, and mix in the fact that recent R&D developments haven't improved the sunlight-to-electricity conversion rates of PV panels enough to create more palatable payback scenarios.

There's no right or wrong way to market LEDs or PV products. Whenever companies in either of these niches find they need their products warehoused locally by skilled selling and logistical organizations that can create demand for their products from electrical contractors, industrial MROs and other electrical end users in local markets, they will come a-knocking on the doors of the electrical distributors.