LED Lighting Manufactures Race to Stake Claim in Distribution Channels

LED lighting over the next 3-5 years will experience rapid development. Whoever gains access to distribution channels will ultimately win the market as they are the key recourse for LED lighting application. Channels and brand name still remains as the main barrier for lighting applications. Brands with control over export markets will be in an active position. Lighting manufacturers employ different channel strategies depending on the market segments and client demands. High quality distribution channels are conducive towards manufactures that have a controlled accounts receivable turnover ratio and can avoid producing bad debts, as this can increase company revenue and profits.

Manufacturers race to seize command over the channel market

LED lighting has entered into the era of distribution channel competition. Traditional lighting manufacturers and newly established LED application manufactures are all aware of the importance of distribution channels. Philips, a large traditional lighting manufacturer, has expanded LED production into the company’s already established distributor and retail channels. NVC Lighting and Yankon lighting, both with 10 years of development under their belt, are strengthening distributor cooperation and retail investments. Changfang and Honglitronic are expanding from LED packaging to downstream application out of cost control considerations, keeping investment for in-house channels conservative and focusing on distribution model.

Channels and price drops drives up LED lighting penetration rate

Increasing channel investment also increases distribution power for lighting manufactures. This is beneficial towards quickening the replacement of traditional lighting with LEDs. Large manufacturers including Philips and Cree are releasing more affordable LED bulb products, and by comparing products with similar features, the price difference between LED bulbs and CFL has been reduced by one to two times. LED lighting penetration rate is currently increasing at a fast pace. Large international manufactures and major organizations anticipate that LED lighting penetration rate to reach 50 percent by 2015 (substantial increase compared to 5 percent in 2012). Channel expansion and drops in price have garnered large amounts of market demand. Penetration rate is hoped to surpass expectations.

The following are worth considering:

1.    Distribution channel structures are diverse. There are related manufacturers in commercial, residential and other lighting fields.
2.    After many years of investment in distribution channels, companies now cover a much broader distribution network with obvious advantages for early entrants in the market.
3.    Companies that have deep roots in specific lighting fields, where it is difficult for other companies to replicate its success.

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