Channel construction: a powerful tool for LED lighting companies to seize market opportunities

Since 2011, LED enterprises have been hit hard by the European debt crisis. In addition, LED enterprises are restricted by a series of problems such as overcapacity, technical bottlenecks, low R&D level, and single products. In order to cope with fierce market competition, many LED lighting companies such as Hongli Optoelectronics, Nationstar Optoelectronics, Elec-Tech, and Zhenmingli have started to compete for domestic sales channels since the beginning of 2012; and traditional lighting brands such as Philips, NVC, and Opple have also tried to expand their domestic LED lighting sales channels. Under the current situation, building channels has undoubtedly become a weapon for LED lighting companies to compete for market opportunities. Whoever can control the channels can take the initiative in future competition.

Currently, LED lighting companies are constrained by factors such as the penetration rate and price of LEDs in lighting fixtures, and sell their products more through engineering (invisible) channels, circulation (distribution) channels, e-commerce, OEM and other channels.

Invisible channels - a rising star in the LED industry channel

As the country advocates energy conservation and emission reduction and conforms to the inevitable trend of international practice, the engineering field has also set off a replacement frenzy. Hotels, street lamps, and government offices have begun to use LED products in large quantities, so the engineering channel has become the main market for LED manufacturers in recent years. At present, the penetration of LED in invisible channels has been expressed by commercial lighting companies, architectural associations, design companies, etc.: the trend is very obvious. Since the invisible channel group can directly affect the choice of the owner, they can play a great role in promoting the brand's influence in the local area and play a role in word-of-mouth publicity.

Take designers as an example. On the one hand, they do not directly sell lighting products. On the other hand, they are the starting point of engineering projects and the style setters of engineering projects. They influence the entry threshold of materials into the project. They are the only special professional group that can connect Party A, Party B, and Party A of the materials. Therefore, designers have become the main focus of various LED companies, including lighting dealers.

Numerous distribution (distribution) channels attract many LED companies

Currently, the distribution channels are mostly agents and distributors. Therefore, the bulk distribution is still the main mode adopted by manufacturers for retail. Some manufacturers adopt the operation mode of direct sales or image flagship stores, such as Ainiya, which adopts direct sales, and Zhenmingli, which adopts image flagship stores. They even spend a huge amount of money to buy properties in Beijing and Tianjin for image building. Generally speaking, the profitability of specialty stores and image stores is not particularly ideal at present, so it is recommended that small companies should not take such risks for the time being if their financial resources do not allow it. Large companies with sufficient financial resources can intervene in advance to warm up the market.

Why is e-commerce not popular as a new channel model for LED lighting products?

Proponent’s view:

The first advantage of e-commerce channels is derived from the habits of social consumers themselves

As the Internet generation born in the 1980s and 1990s gradually become the main consumers, coupled with their quick acceptance of new things and fashionable consumption concepts, this seems to contain unlimited business opportunities for the online shopping field of the future LED lighting industry.

Secondly, when LED lighting is not yet popular, e-commerce channels are better than traditional lighting channels in terms of promotion and purchase.

At present, the LED lighting market is not yet popular. If consumers need to buy high-quality LED lights, they cannot buy them in regular distribution channels such as supermarkets or hardware stores. According to statistics, more than 95% of traditional lighting channels in China do not cover LED lighting products on a large scale. Only a few large supermarkets sell a small number of styles of LED bulbs of a few brands. Faced with the dilemma of channel shortage, many consumers who know something about LED lighting can only turn to the Internet to find products, which has promoted the enthusiasm for online shopping of LED lights.

Third, online sales have low costs and wide coverage.

For LED lighting companies at this stage, it is very difficult to quickly enter the distribution channels of traditional lighting fixtures with their LED lamps, and the initial capital investment is very large. In contrast, the advantages of low cost and wide coverage of online sales are obvious.

Counterpoint:

Although online platforms have become a popular way of shopping, we should consider that the main target of online shopping is retail, and the retail target accounts for less than 35% of the Chinese market, so we are not optimistic about e-commerce channels at this stage. In addition, the current end users of LED lighting are mostly engineering and decoration companies, and a small number are ordinary consumers. Engineering companies and the like directly look for manufacturers for supply, so engineering and distribution (distribution) channels are king.

E-commerce is a new channel model for LED lighting products. The excellent resource integration ability of online shopping platforms makes it likely to become a future trend. For some industries with sufficient production capacity, the profitability of this model even exceeds product research and development. Therefore, LED companies can gradually increase the sales volume of products through e-commerce, and use this platform to open up new sales channels to occupy more market share.

The OEM channel model is growing rapidly, but there are hidden dangers

The OEM model is mainly a way for small factories to process products for large companies, or for manufacturers to process products for traders. It is one of the fastest ways for traditional lighting companies to develop LED lighting business. For LED companies without sales channels, OEM will be the first choice. However, the disadvantage of the OEM model is that the relevant technology is limited. If a company really wants to do a good job in LED lighting, relying on the OEM model will have great risks.

Traditional lighting companies, in order to maximize profits, often control production costs to the greatest extent possible, resulting in product quality that cannot be guaranteed. Coupled with the continuous compression of OEM costs by companies, products frequently fall into "quality issues", including Philips, Osram, Opple and other brand companies.

At present, LED lighting channels are still struggling and summarizing practical experience in the process of continuous growth of the lighting industry. As lighting application groups gradually become popularized, accepted and used, LED lighting channel construction will surely become clear. Therefore, LED companies should give full play to their subjective initiative, actively expand channel construction, and seize market opportunities. Of course, companies should also improve both internal and external aspects in channel construction to ensure that products can flow smoothly from the source to the terminal.