What are the three major challenges facing LED lighting companies, and how should they respond?
Published Time:
2021-08-03
In March this year, many lighting companies reported unsatisfactory results from their dealer conferences. The off-season, which typically arrives in June, was felt as early as April. This suggests that 2018 may see six months of relatively slow business. Currently, lighting companies are facing three major challenges:
In March of this year, many lighting companies reported that their distributor conferences were less effective than in previous years. The off-season, which usually arrives in June, was felt as early as April. This suggests that 2018 may see six months of sluggish business. Currently, lighting companies face three major challenges:
First, channel diversification.
In the past, distributor channels accounted for 80%, Guzhen retail for 10%, and designer engineering channels for 10%. The vast majority of companies relied on the Guzhen lighting industry cluster effect, surviving and developing through distributor procurement.
Today, channels are severely diversified: Guzhen retail accounts for 15%, the internet for 10%, pre-fitted housing channels for 10%, designer engineering channels for 15%, and distributor channels have dropped to 50%. This means that while the number of distributors hasn't decreased, 30% of the market share has been eroded.
It is expected that by 2020, Guzhen retail will account for 20%, pre-fitted housing for 30% (national policy is 40%), designer engineering channels for 20%, and internet channels for 10%, while distributor channels will be compressed to 20%. This sharp drop in market share will lead to a large number of distributors closing down, and the national lighting market may face severe challenges.
Second, "factory purchases" intercept consumers.
Brands like Leishi Lighting and Op Lighting have launched "factory purchases" in major cities across the country, attracting thousands of local families to purchase. Their showrooms are bustling with people, while local lighting markets are deserted, and the customer traffic of lighting specialty stores has plummeted.
Third, "three-no" companies offer rock-bottom prices for inferior lights.
Guzhen Station and various lighting accessory cities are flooded with inferior lighting products, with prices so low they defy belief. Take crystal chandeliers as an example: before 2012, an 8-head chandelier cost 3600 yuan, in 2013 the "price war" brought the price down to 1700 yuan, and in 2017, despite a 50% increase in labor and raw materials compared to 2013, the price dropped to 1000 yuan. Unlicensed factories even sell them for 200 yuan/piece.
Companies that operate ethically and follow the rules find it difficult to survive. Even with extensive explanations, it's hard to persuade distributors to buy high-quality products, ultimately having to drive customers to inferior light factories to order, paying in cash, and queuing for collection. It's a blatant case of "bad money driving out good money"!
How should we respond to these "three major challenges"?
First, we must discover and uphold our core competitiveness. Research and development, design, production, sales promotion, and brand service…we must identify and focus on the company's strongest competitive advantages to break through!
Second, we must strengthen brand building and create an omnichannel sales model. Currently, the lighting industry generally uses a sales channel based on distributors. The loyalty and product promotion rate of distributors determine the sales volume and market share of lighting companies.
For distributor channels, companies must either create omnichannel strategies or select and cultivate high-quality distributors to become regional omnichannel specialty stores.
Pre-fitted housing channels are rapidly emerging, but payment methods are usually settled once every six months or a year, making companies hesitant. We can alleviate financial pressure and mitigate risks by integrating financial platforms or collaborating with brand companies.
We must maintain a keen awareness and foresight of economic and industry trends. The biggest cost for a company is the decision-making cost of the boss, and the boss's judgment of future trends determines the direction and ultimate fate of the company!
Finally,
We must be adept at integrating industry chain resources for integrated development. Industry reshuffling has reached a critical point. The lighting industry urgently needs to integrate and connect various links in the industry chain, optimize and consolidate the small and scattered lighting market and distributors, and jointly create an industry platform similar to Juxia Home and Red Star Macalline, extending from selling materials and products to selling design, scenarios, and brands. (Source: Guzhen Lighting News)
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