July 13, 2022
By David Gordon
Last month we solicited input from electrical / lighting distributors, lighting manufacturers, independent manufacturer reps and lighting agents on their forecast for their Q2 lighting business. Over 225 shared their insights.
And, overall, it appeared that the lighting market slowed a little from our Q1 report and forecast and that Q3 outlook is for continued slowing.
In speaking with distributors, their lighting performance lags their overall electrical sales, however, their overall results are further inflated with price increases, and, in some cases, backlogs being filled. According to DISC, Q2 performance was projected around 20% for the industry.
Some highlights from the report include:
- Mid to upper single digit performance, on average (and remember, distributor performance should be higher as it includes their gross margin) across all three audiences, hence the industry performance is pretty “range-bound”.
- Feedback is that “real” growth is in the low single digits (and some report that there is no “real” growth.)
- There is a significant disparity in performance within each audience. Some are down significantly. Some are up significantly and then there is a group that coalesces around the average. Consider it a sine curve.
- Similar, if not slightly lower, sales performance is expected in Q3.
- Realized price increases moderated this quarter. There were still price increases but not as high. And essentially everyone expects more to come in Q3.
- Key industry issues continue to be supply chain and labor-driven. Backlogs have grown.
- With a recession being discussed, it was surprising to find that less than half of the reporting distributors track unit sales. This may result in distributors not realizing that their stock / discretionary business has declined until it is too late (as filling backlogs will mask their overall performance.)
- The supply chain continues to be exacerbated, from a components viewpoint, due to China’s zero COVID policy.
- Transportation (freight) costs are impacting sales, and costs.
- In our “question of the quarter”, respondents were asked about the impact of tariffs potentially being removed / rolled-back. The feedback is that it would have “no” difference” with the caveats that 1) it depends upon the competitive environment, 2) manufacturers need to work through their inventory and 3) sales dollars would decrease (presumably GM dollars would decrease also). A nominal percent think that it could increase business with new projects being released, however, others feel those projects have either been cancelled or that they are postponed due to other cost increase considerations.
Click here to obtain a complete copy of the 2022 Q2 report with data specifics and verbatim respondent feedback for only $29. Survey respondents receive a complimentary copy of the report and advance notice of results.
Thank you to our respondents for their assistance in gathering this information for William Blair as well as the industry.
The quarterly Pulse of Lighting report is a service of Channel Marketing Group.