From women’s impact to the relationship between manufacturers, retailers, and sales reps, the lighting industry continues its transformation.
Although there were plenty of highs, 2019 was not without its difficulties – fears of an economic recession looming, tariffs putting a wrench in margins, and the loss of important industry figures such as former Hinkley CEO Rick Wiedemer to name a few. Now that we’re looking ahead to 2020, what’s in store?
The annual Lighting One survey, which gathers members’ thoughts on the upcoming year, may shed some light. “More than 300 locations participated, and I feel confident in saying that the consistent message is ‘challenging,’” says Gregg Garofalo, President of the buying group. “Competition is tougher, distribution paths continue to increase, and the internet and housing market will continue to play a huge role in the outcome.”
Although it seems like an uphill climb, the lighting industry likes a challenge. From the focus on women in lighting, to the consequences of Chinese tariffs, and the status of the relationship between manufacturers, reps, and retailers, 2020 will unfold to reveal the strength, determination, and industriousness of lighting professionals.
The Year of the Woman
2020 is being dubbed by some as the Year of the Woman, as it marks the 100th anniversary of the passage of the 19th amendment, which guaranteed American women’s constitutional right to vote. Plus, from a record number of women running for presidential office to increased attention on fairness and equality in the workplace, women’s time to shine is now.
The lighting industry takes no exception to this sentiment, and the recently formed American Lighting Association (ALA) group Women in Lighting was created to recognize how many successful, strong, and powerful women there are in the lighting industry. The group gives them a voice to learn, celebrate each other’s successes, and champion causes and world views that are unique to women in the world today.
“Women have always played an integral role in the lighting industry, but today more than ever, we have more women in ‘power positions’ within every sector of our business, plus we have more women coming into the business every day,” says Kellee Hollenback Hammond, VP/Sales for Hudson Valley Lighting Group and one of the leaders of the Women in Lighting group. “An organization like Women in Lighting allows us to foster relationships that will ensure women will continue to thrive in the lighting industry for many years to come.”
In 2020, the group will provide more programming to help women navigate their roles in all aspects of their lives, will officially launch its mentorship program, and will ramp up its charitable efforts. It also intends to create opportunities for more women to take active leadership positions within the entire ALA organization.
With an increasing number of women joining Women in Lighting – there were 250 members at press time – and attending its events during Lightovation and the ALA Conference, the group is capitalizing on this momentum.
A 2020 forecast wouldn’t be complete without covering the trade war with China and the tariffs that have put the industry into limbo.
2019 has seen a series of scheduled tariff increases, postponements, and back-and-forth negotiations keeping manufacturers, showrooms, and the ALA on their toes. The lighting industry is most concerned with Lists 3 and 4 of the Section 301 tariffs, which include lighting products and ceiling fans, light sources such as LEDs, and other accessory items respectively.
At press time, a deal on “Phase 1” of the tariffs had been reached and was waiting to be inked, as recent constructive negotiations made the situation look more optimistic. Additional tariffs on Lists 1-3 were delayed as a result of the progress that was made during negotiations earlier in October. While Lists 1-3 had a 25-percent tariff level at press time, List 4 is currently at 15 percent – which includes an additional tariff of 10 percent on List 4A that took effect on Sept. 1, and List 4B’s 15-percent tariff, which is expected to be effective on December 15.
In a statement following the Phase 1 update in mid-October, the ALA reported that while this deal is welcome news, it does very little to relieve American consumers of the burden created by the additional tariffs. These tariffs, especially those at 25 percent, have forced many manufacturers to pass on their increased costs to retailers, who therefore have had to change their buying behaviors and, in turn, pass on increased costs to the end consumer.
“The U.S.-China tariff situation is particularly difficult because of the uncertainty of what might happen next and when,” says Eric Choi, Senior Director/Product at Bulbrite. “There have been numerous tariff changes/discussions/announcements in 2019 and each change creates a level of chaos — regardless of whether the information is positive or negative. Without ample notice and a defined process on when tariffs may change, it is difficult for manufacturers to collaborate with suppliers and retailers to create a strategic plan to mitigate the effect on product costs.”
The overall consensus that no one party should be responsible for swallowing the price increases has renewed cries for better cooperation between vendors and retailers – especially in regards to IMAP holidays and UMP, which many showrooms feel undermine their efforts – while talks about how to increase profit margins in the showroom channel despite these price hikes are making clear that creative and industrious solutions are more necessary than ever.
Ken Lebersfeld, CEO at lighting retailer Capitol Lighting, says vendors will need to make sure there is enough profit margin for all channels to give end consumers the type of modern customer experience they’re expecting today.
“Currently, profit margins are being reduced by UMP holidays and perceived competition between vendors,” Lebersfeld says. “Vendors and retailers must change their perceptions of each other. Vendors can increase UMP multiples and raise prices, and retailers must use that additional margin created to modernize displays and systems to improve the shopping experience.”
The idea of all parties in the industry – manufacturers, sales representatives, and retailers – working together to achieve success is not new, but it is even more crucial in today’s landscape of online shopping and big box stores.
With the end consumer now owning more power than ever when it comes to their shopping habits and buying behavior, showrooms must innovate to provide an experience that cannot be replicated online – one that draws people into their brick-and-mortar environments to buy, and keeps them coming back. Working with their rep and vendor partners to collaborate on these experiences is key.
“In 2020, reps will need to figure out how they can best add value to the supply chain by driving business to partner showrooms, helping to create engaging retail displays,” Lebersfeld explains.
A successful partnership between retailer, rep, and manufacturer will be integral to move the lighting showroom channel forward. According to Garofalo, at the recent Lighting One joint Member and Supplier Advisory Council meeting, the importance of partnership and support was the underlying theme in all discussions.
“Partnership ensures profitability and sustainability to the Lighting One members, suppliers, and the industry, and not divisiveness of circumventing suppliers and excluding reps,” Garofalo says.
Drew Mihelish, owner of Western Montana Lighting in Missoula, Montana, is looking to deepen her vendor partnerships moving into next year, and along the way, working to develop a true understanding of the end consumer the whole industry is trying to target.
“Being a key player in this industry may mean making big decisions, and to Western Montana Lighting, we are truly looking to collaborate more with vendors who support us individually and the showroom industry as a whole,” Mihelish remarks.
This notion of reciprocal support and partnerships is top of mind no matter which party you speak to.
“It will be important now more than ever for manufacturers to support showrooms that support them; and showrooms in return consolidate the number of manufacturers and products displayed by increased breadth and depth with key aligned partners,” Garofalo says.
Brick-and-mortar lighting stores are still very important to the shopping experience, and as they continue to evolve into 2020, an optimistic attitude on the channel’s success is had by many.
“I believe that our industry is finding its way through the distribution issues slowly but surely,” notes Steve Falk, General Manager at Hermitage Lighting Gallery in Nashville. “I’m confident that we will see our brick-and-mortar showrooms rising up as they find their place in our new landscape.”