With lighting products accounting for more than $26 billion — or roughly 30 percent — of U.S. electrical distributors' sales this year, lighting is a product area that deserves to be in a large spotlight.
Worldwide demand for lighting fixtures will grow 6.2 percent annually through 2008, according to a report published in December 2004 by Freedonia Group, an international business research company headquartered in Cleveland.
The report credits the increase to a shift toward energy-efficient products and advanced technologies like light-emitting diodes (LEDs) and fiber optics as well as construction and manufacturing activity.
Energy-efficient lighting products have deservedly been in the limelight for more than a decade with U.S. Environmental Protection Agency (EPA) programs like Energy Star and its predecessor, Green Lights. The U.S. Green Building Council and its Leadership in Energy and Environmental Design (LEED) Green Building Rating System has also gained national recognition as more cities mandate that municipal new construction must be LEED certified. (See related article on page 34.) Energy-efficient lighting contributes to LEED certification.
“Lighting costs can be as high as 50 percent of a commercial building's electrical load,” said Steve Goldmacher, director of public affairs for Philips Lighting Co., Somerset, N.J.
Savvy facility managers have always known about the potential savings on lighting's energy costs, said Goldmacher, but others have been hesitant when it comes to the upfront cost of a lighting retrofit.
“Initially there was this skepticism about whether the savings would really be realized,” said Bernie Erickson, vice president of O.K. Electric Supply, Perth Amboy, N.J.
The subject of a 1993 Electrical Wholesaling cover story, Erickson and O.K. Electric have made the most of selling energy-efficient lighting products by employing utility rebates and pointing out lighting retrofits' long-term energy savings and return on investment.
“I think one of the biggest benefits we found with Green Lights early in the game was the awareness it created,” said Erickson.
Indeed, public awareness of Energy Star has jumped to 64 percent of U.S. households, according to a recent nationwide survey by the EPA. In many major markets where local utilities and other organizations use Energy Star to promote energy efficiency to their customers, public awareness of Energy Star is even higher, averaging 74 percent.
The voluntary market-based partnership to reduce air pollution through increased energy efficiency has expanded to more than 40 product categories for homes and offices since 1995 when the EPA formed a partnership with the Department of Energy (DOE). Products that have earned the Energy Star designation prevent greenhouse gas emissions by meeting strict energy-efficiency specifications set by the EPA and DOE. As a signal to consumers, product packaging includes the Energy Star emblem.
Last year alone, with the help of Energy Star, Americans saved about $10 billion on their energy bills while reducing the greenhouse gas emissions equivalent to those of 20 million cars.
For electrical distributors with residential lighting showrooms, calling attention to a product's Energy Star emblem might propel an environmentally conscious consumer — or someone simply interested in trimming expenses and saving money on energy costs — toward a purchase. For homeowners who don't opt for an Energy Star fixture, suggest compact fluorescent bulbs, which will still save plenty.
O.K. Electric's Erickson continues to see plenty of room for commercial, industrial and institutional facilities to realize savings through lighting retrofits. “It's a growth area because there are still facilities that need to be done,” he said. “But more over, technology has changed. We're revisiting facilities we've already done once and are doing them over again.”
As lamp manufacturers continue to produce lamps that require less wattage with greater light output, opportunities will grow.
“During the next five years, ceramic metal-halide lamps should be available in almost all wattages, and electronic ballasts will be more fully developed for HID technology,” said Joseph Howley, manager of industry relations and environment marketing, GE Consumer & Industrial Lighting, Cleveland. “In addition, dimmable CFL lamps will continue to improve.”
In the past five years, there have been significant advancements in the development of compact fluorescent lamps, 28W and 30W T8 linear fluorescent lamps; T5 linear fluorescent lamps; electronic ballasts; pulse-start, metal halide lamps; and higher wattage ceramic metal-halide lamps, said Howley.
Utility rebates vary, but many qualified retrofits include T8 or T5 linear fluorescent lamps, pulse-start HID fixtures, occupancy sensors, compact fluorescent lamps and fixtures, and LED exits signs, to name a few. (See related article on page 22.)
“Review existing accounts regularly,” said Doug Stoneman, senior product manager, Advance Transformer Co., Rosemont, Ill. “Look for customers using outdated lighting products such as T12 40W lamps and magnetic ballasts. These customers could be well-served by an upgrade.”
TIPS TO GROW ENERGY-EFFICIENT LIGHTING SALES
Tremendous opportunities abound in the energy-efficient lighting upgrade arena. Distributors who are most prepared will have the best chance of succeeding in this fast-growing market.
Begin by raising awareness throughout your organization — from field sales to counter personnel — on recognizing opportunities to improve customers' lighting.
A solid understanding of the market's range of energy-efficient lighting products and their features, functions, and benefits will further enable distributors to capitalize on opportunities to improve their customers' lighting.
Review existing accounts regularly. Look for customers using outdated lighting products such as T12 40W lamps and magnetic ballasts. These customers could be well-served by an upgrade to T8 lamps and electronic ballasts or other energy-efficient lighting products such as T5 lamps, compact fluorescents, LEDs, pulse-start metal-halide lamps, and dimmable systems/lighting controls.
Ensure productive and informed exchanges with customers by having a strong understanding of the customer's business and energy costs as well as standard business terms (such as payback period, ROI, etc.). Arming yourself with this knowledge will increase the likelihood of securing an upgrade.
For those customers concerned about the up-front expenses that may accompany an upgrade project, offer financing options or suggest a revised upgrade schedule such as upgrading one floor at a time.
Align your distributorship with a local network of service providers as well as utility company personnel (along with knowledge of current rebate programs). This will broaden your reach and allow you to bring a greater value-added offering to customers.
— Doug Stoneman, senior product manager, Advance Transformer Co., Rosemont, Ill.
DIMMERS CAN BRIGHTEN SALES
Lighting control systems are good add-on sales. They also help the end-users control their costs.
Distributors who creatively sell lighting jobs can capture add-on sales. If a distributor gets a contractor to install a dimming ballast in one office, co-workers may want to know why that person got the dimmer and they didn't, driving follow-up sales.
In projects that don't have lighting controls in the original specs, it's an opportunity for wholesalers to add value by helping customers save money and improve productivity.
On a residential job, suggest to your electrical contractor customer that by simply exchanging dimmers for switches, he or she can increase profit margins, without increasing the difficulty of the installation or adding hours of labor.
Lutron Electronics Inc., Coopersburg, Pa., provided an example: A basic toggle switch costs between 50 cents and $2.50, generally with a 20 percent profit per switch. If an electrical contractor were to install 30 switches that cost him $1, he would make a $6 profit. Lutron dimmers, on the other hand, are priced at $15 to $30 each, with profits usually between 25 and 30 percent. By replacing just five of the 30 switches with $30 dimmers, an electrical contractor's profit would increase by almost $40 per home. Those incremental sales add up — for distributors and contractors.
Technology exists to address virtually any lighting control need: from simple single-circuit wallbox dimmers, to entire-room lighting controls, to sophisticated whole-house/building dimming systems that integrate with timers, occupancy sensors and security systems. The solutions are infinite.