Lighting Industry

8 effects of the crisis on the lighting sector

An electrician in a boiler suit installs a light fitting
Wholesalers, contractors, OEMs and others along the supply chain are demanding longer payment terms. The danger to a supplier is if they allows terms to slip from from 30 days to 120 days, it’ll be difficult to reverse.

THE LIGHTING industry, already in the throes of a painful adjustment to a post-LED world, has been thrown into further turmoil by the Covid-19 pandemic. Ray Molony predicts eight ways the crisis could change the sector. 

Shuji Nakamura’s invention of the blue LED in 1993 swept away many of the lighting industry’s most treasured certainties:  a high barrier to entry, the lucrative replacement lamp market, significant product differentiation and, crucially, healthy profit margins.

For most of the 2000s, CEOs and executives have been scrambling to restructure their businesses to reflect the new reality. Much of this re-engineering was reactive, painful and incomplete. 

Already it’s painfully clear that the covid-19 crisis of 2020 will make a more dramatic and longer-lasting impression on the sector than Nakamura’s discovery almost 30 years ago.

We predict eight of the most immediate effects.

1 We’ll lose some familiar brands

The ‘creative destruction’ of the free market will accelerate. Put simply, not every company is going to make it through this period. Firms which are indebted or financially fragile will fold, despite continuity loans and job retention programmes. 

2. Big brands will benefit from a flight to quality

‘We’re putting iGuzzini on tenders now and we never did that before’, says one contractor. It’s a sensible policy – big brands with financial muscle will be around in the coming years to provide support to projects before and after installation. 

3 Company owners will focus on basics

When your focus is on shifting your inventory and trying to get enough cash together for the end-of-the-month payroll, your interest in things like websites and product innovation goes out the window. 

4 Payment terms will lengthen

In a crisis, cash in king. No wonder contractors, OEMs and others along the supply chain are demanding longer payment terms. The danger to a supplier is if they allows terms to slip from from 30 days to 120 days, it’ll be difficult to reverse. 

5 Local production will be an advantage

With a disrupted supply chain, local production will obviously be a benefit. But this advantage can be overplayed – the industry’s reliance on China is huge. And if we’ve learned one thing in recent years, it’s that clients want cheap luminaires.

6 The tech savvy will prosper

It goes without saying that companies without cloud-based accounting, business communication and customer relationship management (CRM) platforms will struggle to adjust to a working-from-home model. 

7 We’ll have to respond to changing sectors

The industry has been driven by three key sectors in recent years: retail, office and hospitality. The latter will probably stage a tentative bounce back, but the office and retail sectors could permanently contract. Logistics may take up some of the slack. 

8 Interest in UV-C will rise

Interest in ultraviolet lighting, once dismissed as a niche, has soared during the crisis. Specifically, the focus is on UV-C which has viricidal properties and scientists confirm can kill the coronavirus. However, UV-C is dangerous to human health in the wrong hands.