This interview is my contribution to the December 2015 issue of tED Magazine, published by the National Association of Electrical Distributors (NAED). Reprinted with permission.
Last month, we talked with Christopher Brown, CEO of national lighting distributor Wiedenbach-Brown, about the risks solid-state lighting pose for electrical distribution. Brown believes the longevity of LED sources, coupled with intelligent lighting and new players entering the industry, will result in the virtual demise of distributor lighting MRO sales while disrupting the lighting industry as a whole—what he calls Illumigeddon.
This month, we focus on risks posed to an important distributor customer segment, the electrical contractor. David Levine has served Mid-Atlantic electrical distributor CapitalTristate as VP of Energy & Maintenance Services since 2006. Prior to that, he spent six years with Hagermeyer and 10 years as a contractor performing lighting projects. Levine believes solid-state lighting poses some big risks for the electrical contracting community.
What are these challenges, how will they impact contractors and distributors, and what can both do to mitigate these risks? tED lighting editor Craig DiLouie, LC interviewed Levine to find out.
DiLouie: You’ve been actively engaging electrical contractor audiences talking about some big challenges they face due to the solid-state lighting. What are these risks?
Levine: In a nutshell, as several major trends related to LED lighting align, lighting is likely to become more complex with a more competitive landscape in which their relevance may be severely challenged.
DiLouie: What are these trends?
Levine: LED adoption is rapidly growing as performance steadily improves and costs continue to decline. According to McKinsey & Company, LEDs will represent 70 percent of the global market in just five years. Alongside the LED revolution, we have a similar revolution going on in intelligent lighting control.
DiLouie: In the short term, that’s actually an opportunity.
Levine: That’s right. There’s a huge retrofit opportunity coming into focus, though the fact is lighting is getting more complicated. Lighting is transforming from a slow-moving industry into one that is rapidly changing, fast-moving and based on technology that is solid-state and increasingly intelligent. Electrical contractors need to educate themselves on LED and control technology and products to offer their customers the greatest value.
Which brings us to a related trend: As LEDs and intelligent control become more common, we have another revolution just getting started: the industrial Internet of Things. The LED luminaire is an ideal multiservice platform for the Internet of Things. Large technology companies are showing interest, which brings influential new players and business models to the market. And as these devices are low-voltage, it is entirely possible that power-over-Ethernet power delivery systems may become more commonplace.
DiLouie: As you point out, some major technology companies are looking at intelligent lighting control, the Internet of Things and power-over-Ethernet power delivery systems. What risks do they present to the industry as it currently stands?
Levine: These new players will bring a ton of influence along with new ways of doing business. Chris Brown has said that if they enter the market in a big way, it will call into question who will be specifying and selling the next generation of intelligent LED lighting, and I agree with him. Regarding the Internet of Things, it’s a wide open question at this point who will be in the space, who will own it, who will drive it. For contractors, there’s another big risk in that these companies may bring their own integration and installation services. And if power-over-Ethernet goes mainstream, the competitive landscape will change, as this type of installation typically doesn’t need a licensed electrician, resulting in lower labor rates.
DiLouie: What potential role do you see for electrical contractors in the Internet of Things?
Levine: The Internet of Things may play out as a spectrum of capabilities depending on what each market and organization needs. Electrical contractors should get to know these permutations and how they may be realized, and then determine where they fit.
As with other major trends, we know this trend is emerging, but we don’t know how fast, or to what extent, it will transform the market. For now, the best advice is to watch the market for change, be flexible, and be prepared.
DiLouie: And power-over-Ethernet? What can electrical contractors do to maximize value of those projects?
Levine: Should demand increase and costs fall for power-over-Ethernet installation such that it becomes commonplace, contractors should consider either returning to the Datacom and low-voltage market, or partnering with good firms that can be subcontracted as needed.
DiLouie: How can electrical distributors support their electrical contractor customers in a way that will be helpful to them navigating future disruption?
Levine: Two keys for electrical distributors will be education and the hiring of specialists. From an educational perspective, our industry must be ahead of the implementation of new technologies and we have an obligation to take that information to our contractors. While the majority of our customers may not be early adopters, we will fail if we are playing catch-up.
DiLouie: How will these same trends affect electrical distributors? What are the risks?
Levine: The pace of change is certainly one of the most challenging aspects of the LED revolution. For the distributor, the old stock and flow rules no longer apply. Also consider the possible electrical package of the future versus what is in the warehouse today. Lighting load reduction alone will require less electrical material from the panel size to the wire used. Additionally, who might be installing the lighting system of the future? If this becomes a low-voltage or Datacom installation, do we have the right customer mix?
DiLouie: What can electrical distributors do to navigate these risks?
Levine: Read, listen, attend and learn. We need to know what our manufacturers are planning two to three years out, how energy codes will impact our business, what new products are just around the corner and what new customers could look like.
Lighting has always been a specialty in electrical distribution but never more than today. Distributors wishing to be impactful and relevant now and in the future need to be technically competent and savvy in all the emerging aspects of LED and controls.
DiLouie: Thanks for the though-provoking conversation, David. Is there anything else you’d like to add?
Levine: For electrical contractors, I’d sum it all up: Get knowledgeable about lighting, in particular LED technology and intelligent lighting control. Understand the Internet of Things. Come up with a game plan for power-over-Ethernet projects. And keep an ear to the ground.
