October 6, 2023
Pulse of Lighting: The Latest Report
Author: David Gordon
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Each quarter Electrical Trends issues the Pulse of Lighting report based on a survey of electrical industry professionals.
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The survey's audience tends to skew towards electrical distributors and the manufacturers and agents that sell standard general lighting products for distributor inventory.
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Below are some of Electrical Trends' insights from the just-published quarterly Pulse of Lighting report:
Sluggish Pulse of Lighting in Q3
Our Q3 Pulse of Lighting survey revealed a continued sluggishness in the US lighting market, barely showing positive on a national basis.
With almost 200 members of the industry reporting,
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A slowdown from Q2, but still overall positive although over 40% reported flat or negative performance. It’s a bifurcated market with almost 45% reported growth exceeding 5%. So, there are the “haves and have nots”. On the manufacturer and rep front, overall, it is a flat market (distributors sales benefit from their margin as well as backlog.)
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And remember, when comparing to last year, and the prior year, the comps are higher as there were price increases and lower interest rates which encouraged construction.
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The markets that appear where the business is are the small and mid-sized retrofit projects with specifically healthcare, education, multi-family (in some geographic markets) generating demand. The new construction market is “challenged”, as expected with interest rates continuing to rise.
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The inventory “right-sizing” we saw the first half of the year appears to have moderated although there is anecdotal evidence that it could continue in Q4 if the market remains flat / declines as companies prepare for the end of the year.
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While 39% of distributors report backlogs are up, 22% report they have declined indicating some distributors are achieving sales growth by working down their backlog and not replenishing it.
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80% of manufacturers reported that their backlog either declined or was flat. This is a red flag for Q4 and early 2024.
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So, outbound sales are up, inbound orders are down … not a good omen looking forward.
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Distributors report that switchgear shipment delays continue to impact their lighting business due to the delay in projects being ready for lighting.
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From a pricing viewpoint, flat to very nominal price appreciation. Anecdotally we hear of distributors able to negotiate better into-stock SKU-specific pricing if they are open to conversions or stock buys. Contractors are rebidding projects with the hope of price concessions to stimulate business … or are open to value-engineering ideas to lower costs
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This quarter we did ask about lighting controls.
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40% of distributor respondents reported that their lighting controls business is up with growth coming from both embedded and wireless functionality. Given manufacturer investment in this functionality over the past few years, it is good to see that some are starting to have success. Overall controls represented about 5% of a distributors business with wireless / embedded representing about 1.7%.
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Manufacturers and reps, in their conversation with specifiers, still have 40%+ expressing concern looking out 6 months.
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All parties expect Q4 to continue to decline, albeit nominally. Essentially, we’re in a “flat” market looking forward, with some of it supported by backlog.
So, a sluggish market with a dour outlook given that there is nothing to drive the business. It’s a “beat them up” market for every order. A couple of national chains have shared that their performance with large name brands significantly lags their performance with other “white goods” channel-oriented brands. This accounts for a difference in supplier performance vs national lighting market performance.
There are opportunities, however, they vary by market and by market segment.
Survey participants received a complimentary copy of the report earlier this week. If you’re interested in the report details, the report is available for $35 by clicking here.
