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The Truth About Disintermediation in the Lighting Industry

Publisher’s Note: So here we go. We have already posted stories about disintermediation and “Illumigeddon” at tedmag.com in the past. Now we are asking the questions to the manufacturers and distributors who are directly involved in the situation. This is just our first response, but we are aware there are more questions, and equally as important, more answers. What questions do you have, and what solutions can you provide? We ask that you go to the bottom on this story and post your thoughts, or you can email Chris Brown at chris.brown@wblight.com or me at scosta@naed.org.

Scott Costa, publisher, tED magazine

By Chris Brown

Disintermediation may be the best thing that could happen to lighting distribution in the Age of Illumigeddon! Really! If nothing else compels lighting distributors to review, rethink, innovate, evolve, transform their business models, strengthen their client and vendor relationships, and find new ways to stay relevant, the fear of being bypassed in the supply chain should be the wake up call of all time.

We all hear stories of lighting manufacturers selling direct to end user, but the question of how large the issue is, is still difficult to define. How significant disintermediation is, is easy to understand. Making exceptions to a manufacturer’s historical policy of selling only through distribution, and with lighting as the Trojan Horse for the Internet of Everything, the issue takes on a whole new aspect. With the tech gorillas like Apple, Cisco, Google, Intel, LG, Qualcomm, Samsung and others in or possibly coming into our lighting business, the game changes, and the traditional rules will begin to change with it. Will lighting simply become a component of connectivity systems? If so, who will be selling the lighting?

Back to the issue at hand, if lighting distribution can’t provide clear, appreciated value to the selling equation, we’re making ourselves vulnerable to inevitable disintermediation. Ideally we add value to both vendor and client, but our best defense will come from being invaluable to the client. And for most distribution, this means expanding client solutions, removing pain from the process, and never letting our relevance be challenged, by again, reimagining and reinventing our businesses.

And when it comes to disintermediation, instead of surmising about which manufacturer is doing what behind our backs (or directly in our faces), I will be asking lamp, fixture and controls companies, both new and old, for their comments on several questions, hoping to clarify their policies. Over time, we hope this will help you understand the new rules of the game. Because questions recently arose about the role of distribution, if any, in Cree Solutions and their ‘No Hassles’ offering, I went to Cree first. Here are their answers to my questions:

Q: What is your opinion of lighting distribution’s value, in general, in today’s new age of SSL?

A: Electrical distributors’ services are vital to Cree’s relentless pursuit of the development and deployment of offerings that save energy and enhance the quality-of-light.

Through maintaining local inventory and smoothing supply variability, distributors are able to support relationships with local contractors, as well as provide credit, delivery, staging and pre-assembly that is essential for today’s SSL applications.

Q: What new skills and solutions will lighting distribution need to stay relevant now and in the future?

A: As direct-sell sites increase, lighting distributors are in a unique position to take advantage of their core strengths of localized service and expertise. It is imperative that lighting distributors expand their abilities to serve as energy consultants, providing audits, recommendations and specifications for lighting upgrades that help contractors achieve their efficiency goals. The leading lighting distributors of the future will combine this advantage with online stores that enable customer support – such as moves, add-ons, changes or damage reporting, after hours.

Q: What is your policy on direct sales to end user? What exceptions to traditional policy do you feel compelled to make? How will you compete with other manufacturers who do sell direct?

A: Cree’s model is built on how to best service the customer. Cree does not sell direct as a standard policy; however, some businesses are large enough to dictate the terms of conducting business.

Q: What about direct sales to contractors or ESCOs?

A: Cree utilizes our distribution partnerships in supporting ESCOs and contractors.

Q: Amazon Business, jet.com, and other direct sell sites…..will you deal directly with them?

A: Cree offers very limited product options through direct sale sites, and those same products are offered to our distributors at competitive prices.

Q: Please explain Cree Solutions. How does lighting distribution stay involved in the Cree Solutions offerings that have traditionally been the roles of distribution?

A: Cree is dedicated to offering easy access to better quality light that helps customers save without settling. As part of our mission to achieve 100 percent LED adoption, Cree Solutions helps commercial building owners make the switch to LED in cases where it would not have been possible otherwise by coordinating with financing, contractors while distribution provides a role in logistics support.

Q: Please explain E-conolight. How does E-conolight not compete with traditional lighting distribution?

A: The primary audience of e-conolight is small contractors, and even distributors themselves. (Cree is just the first manufacturer to be asked these questions. Any suggestions for additional questions for other lighting manufacturers, follow up questions for Cree, and who else should be asked these questions, would be greatly appreciated.)

In conclusion, disintermediation is for real. It’s happening. But lighting distribution has its future in its own hands if it finds new ways to add value, stay relevant, become invaluable to the client and remain relevant for both the vendor and the client. That may require bold thinking and dramatic changes to existing distribution business models, along with redefining distribution from being a product supplier to being a solutions provider.

More on that to come.

Brown is the CEO of Wiedenbach-Brown. Find him on Twitter at @illumigeddon.


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