January 21, 2025
We’ve Got 25 Channels but a Niche Ain’t One
Ted Konnerth unpacks the diverse avenues for selling lighting and controls products
[Intro: Al Uszynski]
The lighting industry’s path to market is anything but straightforward. With no single way lighting products are sold, companies navigate a complex network of overlapping strategies to reach their customers. Even within the industry, we often reduce expertise to categories like "spec person," "national accounts person" or "distributor-contractor guy," highlighting interplay of the various channels needed to capture market share. The broader a company’s product line, the more challenging it becomes to balance these channels while also avoiding conflicts.
Channel strategy requires important strategic decisions: Should manufacturers risk alienating certain distributors by selling through big-box retailers? Can e-commerce coexist with traditional sales reps and distributors without undermining them? Drawing on decades of experience, Ted Konnerth explores 25 unique sales channels, offering a big-picture playbook for navigating the complexities of the lighting market.
Guest Author: Ted Konnerth, Egret Advisors
Lighting is ubiquitous. Indoor, outdoor, in cars, planes, trains and Army tanks. Lighting can be powered by electricity or solar pipes or flames or batteries. With over 1500 manufacturers of lighting fixtures in the US; it’s a saturated market, that competes via product differentiation, performance, aesthetics or price. But the best kept secret to Lighting is… Channels.
Preface
My background includes over 40 years in Lighting. I’ve ‘carried the bag’ around the globe. I’ve managed over 100 lighting salespeople, toured over 100 independent lighting manufacturers’ facilities and been fascinated with the variety of lighting channels.
Definitions
Channel is defined as the path from a manufacturer to a group of end buyers that is large enough to warrant a lighting manufacturer to develop specific products for that channel, and the group is large enough to support a dedicated sales/marketing team to service that channel. My list is specific to lighting fixture manufacturers (OEM’s).
I estimate the total US Lighting market size around $25B; the commercial market (C/I) has ~50% of total sales of new lighting equipment. That’s a big channel, but that also leaves significant revenue for products that are sold into alternative channels.
Below, I have a list of 25 separate channels. For each channel, the products may differ from the C/I channel and the buyer of those products are outside of the C/I market. As a cautionary comment, many C/I distributors sell into these channels; with their own dedicated sales and operations personnel. The thesis of this paper is to expose similar and smaller markets that are being served through some form of distribution (or direct sales from the OEM) that meets the unique channel requirements of the buyer. I consider the list to be a target for any Lighting business to capture a presence on this list. Most require some expertise, or… just a salesperson or two to target them. I hope you find this interesting.
- Commercial/Industrial (C/I): This is the preponderance of lighting sales, served through lighting rep firms and tied to new construction and remodeling through the specification market (Architects, engineers, lighting designers).
- Departments of Transportation: Products= street lighting, sign lighting. ‘Buyer’ is the respective DOT; for each State. Typical path= DOT rep firms
- Utility: Products= street lighting, municipal projects like ball fields, etc. and also ESCO incentive products (see #4). Buyer= IOU’s (Investor owned utility and alternative power producers). Typical path= Utility reps
- Energy service companies (ESCOs): Products include all LED fixtures and/or bulbs. Buyer is an ESCO, typically through distribution. ESCO’s are contractors and supply a broad range of electrical equipment. ESCO’s utilize IOU rebates to support the financial costs to the end user. Typical path= OEM ESCO sales specialists, products sold through C/I distributors.
- DIY/Hardware Retail: Products= lighting fixtures and bulbs. Buyer= large retail firms; Ace, True Value, Home Depot, Lowes, Menards. Path= Direct to DIY’s.
- Showroom: Products= decorative/residential. Buyer= lighting showrooms. Path= showroom reps, some C/I reps
- Stock/flow: Products= standard stock products, troffers, strips, downlights, etc. Buyer= C/I electrical distributors. Path= lighting, electrical supply or showroom reps.
- E-commerce: Products= generic stock/flow products. Buyer/Path= DTC, commercial and end-user (e.g: Bulbs.com, 1000bulbs, com, LampsPlus.com) Requires a sophisticated CRM system.
- National accounts: Products= specific to each national account and often beyond just lighting. Path= OEM direct to national account via NA sales team. NA targets are retailer accounts that are building or remodeling stores. Hospitality. Other multi-location regional and national businesses. Significant logistics required. Some OEM’s sell direct to national accounts.
- Home Builders: Products= resi lighting downlights, bath, kitchen. Buyer/Path= direct to major tract home builders via NA sales team.
- Municipalities: Products= outdoor lighting, street lighting, sports lighting. Path= Muni/Utility agents, via distribution or direct sales to them.
- Government: Products= variable. Path= a dedicated OEM expert in registering and servicing GSA government procurement processes.
- International: Products= modified for electrical code/installation differences. Path= international rep organizations. Sales outside of the US have significantly differing standards and procedures.
- Cinema and live events: Products= aisle lighting, seat lighting, area lighting. Buyer= distribution. Path= specialty cinema reps, NA sales team.
- Theatrical & Stage lighting. Products= stage lighting equipment. Path= specialty stage lighting reps
- Industrial Lighting: Products: highbays, emergency, area, hazardous, etc. Buyer= MRO or industrial distributors. Path= C/I reps (weak), alliances with large industrial distribution. Industrials can also be served through national account staff.
- Electrical contractors: Products: full scale. Path= catalog, web presence, C/I reps. Ruud Lighting created the first large scale channel direct to contractors, via catalogs.
- Amazon market: Products: full scale, Path= direct with Amazon
- Marine lighting: Products: outdoor marine grade and shipboard lighting. Path= specialty reps or direct to cruise lines, or muni reps for port requirements. Naval requirements direct to government.
- Transit: Products: tunnel lighting, subway lighting, platforms. Path= direct to municipality transit authorities. Tunnel lighting for railways and highways are direct to railway and/or DOT.
- Healthcare: Products: surgical theater, bedlights, wellness. Buyer/Path= Distribution via C/I reps, and direct to hospital buying consortia. Wellness is a burgeoning market.
- Prisons: Products: high abuse products. Buyer= distribution. Path= C/I specification and direct contact with prison management.
- CEDIA: Products: home theater equipment/dimming controls. Path= AV dealers/CEDIA reps, Integrators
- Solar lighting: This is a growing market and heavily influenced through the muni market.
- Airport lighting: Highly specialized for runway lighting, but also includes specific optics for outdoor terminal lighting. Indoor terminal is typical C/I spec influence.
I welcome your comments or questions on Channels.
Ted Konnerth owns Egret Advisors, a Mergers and Acquisition advisory service exclusively for lighting manufacturers.
www.Egretadvisors.com
tk@egretadvisors.com
