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Lighting leaders weigh in on the state of the industry

THE LIGHTING AND HARD-WIRETHE LIGHTING AND HARD-WIRE fixture category has seen more than its share of the rough economy. As the product category that is most impacted by home sales, the recession and housing market downturn have disproportionately affected its sales.
     It's also a challenging category for retailers to sell, because it is a complicated product that requires extensive electrical capabilities and knowledgeable salespeople to present effectively. Many furniture and home accent stores avoid carrying these pieces altogether because they are more difficult than other, more straightforward products. But as a key design component to any room, fixtures are an integral part of the home decorating process and should not be overlooked by retailers in the home space.
     The key producers in the lighting industry think these barriers can be overcome. Home Accents Today interviewed representatives from six leading manufacturers to get their input on the state of the industry overall, where the best opportunities lie, and how retailers can and should take advantage of this important product category to maximize their sales.

 

Jeff Dross, corporate director of education and industry trends for Kichler Lighting
What's your forecast for 2012?
We believe 2012 will see modest growth. With our current domestic economic uncertainties and similar scenarios playing out in Europe, both consumers and businesses have cautious outlooks. Add that to the high unemployment rate, and you have a formula for slow growth.

How was 2011?
2011 was OK. Despite the economic uncertainty, retail consumer spending increased in most months in 2011.

Other than the economy, what external factors are impacting business?
In an attempt to strengthen their economy and build a meaningful "middle class," China has mandated wage increases that directly affected manufactured products, such as lighting. Combined with material price increases and the higher cost of technology-based lighting, the timing is unfortunate.

Any particular products (constructions, materials, price points) within your fixtures offerings that are working particularly well?
The message, urging consumers to employ energy efficient product in their homes is taking hold. Despite a slow-growth economy, energy costs are soaring. Americans are coming to terms with the fact that they must find ways to save money and selecting fluorescent and solid-state lighting is a step in that direction. Despite their slightly higher initial cost, the 75% reduction in energy consumption results in lower lifetime cost.

What changes have you made in this economy to stay competitive?
Lighting is becoming more complic

Jeff DrossJeff Dross, corporate director of education and industry trends, Kichler
ated. The single piece selected solely for its aesthetic composition is giving way to a suite of products, all serving a function in the total lighting plan. To support that, designers must be exposed to the idea, the consumer must be educated, electricians need to be guided, and distribution personnel must be provided with the tools to help them all. Understanding that trends continually change and often change faster in slow economies has forced us to step up our education efforts.

What's the mood among your customers?
I believe our customers remain cautiously optimistic. They are coming to terms with the idea that new home construction is not returning to 2005 levels. They understand that business simply does not appear at the door and that they must now work to bring consumers to their store. They realize they must provide service that differentiates them from the competition, and they know the patron is far more educated than their counterpart of even five years ago. The smart retailers are refocusing their efforts and their business models to fit this new inevitability. By working through this new reality now, they are setting a firm foundation for success in the coming years.

Many furniture and home accent stores think there's a (real or perceived) barrier to entry for them in this category. Do you have any advice for these types of stores on how to get started in this important category?
The days of simply taking a lighting order are over. The sales assistance required for a lighting purchase is much more complicated then in the past. If retailers are serious about increasing their sales in lighting, they need to employ associates who understand the product. They need to be trained to handle the more complex environment surrounding lighting. A number of states and communities are now mandating energy-efficient lighting. The salesperson must know the rules and offer solutions.

What are your strongest-performing channels of distribution right now?
Each channel has strengths and weaknesses. Well-run showrooms remain powerful drivers of business; unfortunately the reduction of staff at a time when seismic changes are occurring in the business has left some customers unprepared to build upon their strength. Online retailers are picking up some of the slack, but still only a small minority of consumers are purchase lighting or other home improvement products online. It is going to take some time before a new paradigm is created. The larger issue may be the timing of a return to economic normalcy and how that affects the various channels of distribution.

How are you bridging the gap between the powerful online retailers (with low overheads) and still taking care of your brick and mortar customers?
Most consumers have demonstrated that they want to do their product research online and make their purchase from a storefront retailer. Because of slowing sales, many retailers have reduced staff and, as a result, service to their customers has suffered. To keep customers shopping at brick and mortar stores, it is critical that the retailer offer an experience that cannot be matched by an online store. Since the Internet has made product offerings and pricing easily visible to shoppers, having a knowledgeable, welltrained staff to complement a strong product selection and competitive pricing is the key to continued retail success.

 

Brownlee Currey, president, Currey & Company

What's your forecast (specific to lighting fixtures) for 2012?
Chandeliers shall remain roughly flat; pendants will grow another 10% to 20%. Wall Sconces (an underserved category in the market) will continue to grow by 10%.

How was 2011?
Excellent. Far better than 2010.

Other than the economy, what external factors are impacting business? Example: Price increases, freight rates, materials costs?
Resourcing in China continues to be challenging as the Chinese economy continues to evolve. But at least this creates a level playing field!
     The housing market is pushing end users to redecorate rather than relocate, which I believe has a knoc

Jeff DrossBrownlee Currey, president, Currey & Company
k-on effect on our business, in this case a positive.

What changes have you made in this economy to stay competitive?
We have aggressively increased our service levels, so that we can ship customer's orders very quickly. We have actually increased new product introductions, rather than cut them back. People still want new product.

What's the mood among your customers?
Pretty good, actually.

Many furniture and home accent stores think there's a (real or perceived) barrier to entry for them in this category. Do you have any advice for these types of stores on how to get started in this important category?
Hire someone with experience hanging fixtures to educate your staff on how to mange the displays. There are plenty of people around with experience doing so, and they can teach you what you need to know in a few hours.
     Hire a sales associate with some experience selling lighting. They can easily be found, as so many lighting centers have reduced staff in the last few years. Have them educate your staff about the ins and outs of selling lighting.

What are your strongest-performing channels of distribution right now?
Interior designers and specialty retailers.

How are you bridging the gap between the powerful online retailers (with low overheads) and still taking care of your brick and mortar customers?
A functional and fair IMAP (Internet minimum advertised price) policy is our answer. This levels the playing field, and in our case allows the retailers enough room to price their goods.


Rick Spicer, VP of sales and marketing, Pacific Coast Lighting

What's your forecast (specific to lighting fixtures) for 2012?
We believe the hard-wire category will show improvement in 2012. Although new construction will still be a challenge, many homeowners are investing in their current homes. We expect that trend to continue.

How was 2011?
Specific to hard-wire, we experienced minor growth. The year was a collection of up and flat months compared to 2010. We will finish out the year ahead, but we experienced some months with very meaningful growth and other months somewhat flat. In short, it was a year that was very difficult to predict since all the usual indicators didn't always match up with what we or our customers were experiencing.

Other than the economy, what external factors are impacting business? Example: Price increases, freight rates, materials costs?
There is no doubt that the Far East is a much more challenging environment. Not only due to raw material increases, as well as rising freight rates, but labor has become a significant issue in China. Plus an emerging middle class in China is an opportunity to those factories that are licensed to sell domestically, which creates competition for the capacity at those factories. Here at home we have seen some customers put all their focus on the lowest price as a strategy. Although we understand the need to have competitive pricing to draw customers into their stores, especially in this tough business climate, but unless you provide the consumer with an opportunity to "step up" then all you sell is low price and most likely leave money on the table.

Any particular products (constructions, materials, price points) within your fixtures offerings that are working particularly well?
Again specific to hard-wire, we have seen growth in the pendant category. We offer many of our pendants as swags so they are easy to install and are portable. In terms of materials and price points, the key is the product must be perceived by the consumer to be worth far more than the price. Using this as the guide, we then decide on the materials which help to deliver the highest perceived value for the least cost.

What changes have you made in this economy to stay competitive?
Many of the tough cuts were made some time ago when this tough economy began. Since then, we have become more efficient and carefully employ our resources where we get the best return. The key for us is to manage our business for growth and not to "get by." We, for example, have made sizeable investments in our inventory so we can ship quickly. We know customers are managing their inventories very carefully, so if we can help them by being "their warehouse" and get product to them quickly we believe they will choose to do business with us. We have coupled our inventory strategy with a very customer-friendly freight policy that enables them to place smaller orders more often.

Many furniture and home accent stores think there's a (real or perceived) barrier to entry for them in this category. Do you have any advice for these types of stores on how to get started in this important category?
There is no doubt that hard-wire is a challenge for many furniture stores. Many don't have the ability to hang product plus since the sales floor is a constant moving jigsaw, it would require ongoing movement of the hardwire hanging over tables, etc.
     The stores that seem to do well have a dedicated hard-wire area which accomplishes a couple of things. One is you don't have to keep moving the product when you move the furniture and the other is it sends a clear message to the consumer that the retailer is in the business and committed to it. Further, you need to have a "lighting professional" on staff that can address the same questions that lighting stores are prepared to answer. It only makes sense for furniture stores to sell, at minimum, the lighting that would coordinate with the furniture they offer. Knowing all good furniture retailers are looking for incremental profitable opportunities, it would seem that offering even a limited selection of hard-wire lighting would be a natural.

What are your strongest-performing channels of distribution right now?
Furniture stores and department stores.

How are you bridging the gap between the powerful online retailers (with low overheads) and still taking care of your brick and mortar customers?
First I disagree with the premise of this question. Maybe in the beginning of the e-commerce business were low overheads a reality, but today the successful e-commerce retailers have very sophisticated back offices with rooms filled with IT, graphic, logistic, etc., professionals. Plus the costs for search optimization and keywords with mobile search layered on are in no way inexpensive. In addition, I find the successful e-commerce retailers also need to have very well-trained customer service staffs available to their consumers. So the overhead may look very different between a brick and mortar retailer and a "pure play" e-commerce retailer, but I don't think either would agree that they have "low overhead".
     With that said we have a UMRP Internet policy for our e-commerce customers (regardless if they are pure play or a combination of brick and mortar with e-commerce). So the days of some e-commerce retailer operating out of their garage with low overhead are over.

 

Maria Scutaro, incoming president, Murray Feiss

What's your forecast (specific to lighting fixtures) for 2012?
For Feiss, we feel optimistic about 2012, but overall we feel it will be another challenging year.

How was 2011?
It was a good year - we are enjoying good growth this year and renewed confidence in our brand.

Other than the economy, what external factors are impacting business? Example: Price increases, freight rates, materials costs?
All of the above impact us, but it is just part of doing business, and staying in close contact with our factory partners and customers has helped us mitigate problems being caused by these factors.

What changes have you made in this economy to stay competitive?
We have streamlined our operations and focused on areas of critical importance such as product development and operations. We need excellent product at a great value, and we need to be operationally strong for our customers.

What's the mood among your customers?
Hopeful, weary, ready for positive change in the economy, resilient.

Many furniture and home accent stores think there's a (real or perceived) barrier to entry for them in this category. Do you have any advice for these types of stores on how to get started in this important category?
It can be challenging to get into lighting, but starting small with mini chandeliers, or a pendant display or some single category is a way to try lighting. Make sure your salespeople understand what they are selling and have some basic lighting training, too; knowledgeable sales people make a huge difference. Many furniture and home accent stores are very successful in selling lighting.

What are your strongest-performing channels of distribution right now?
We are experiencing growth across the board.

 

Paul Spano, director of produc development, AF Lighting

How was 2011?
AF Lighting continued to see growth in both portables and fixtures. We see this as having an assortment across all categories that features a good, better, best price point.

Other than the economy, what external factors are impacting business? Example: Price increases, freight rates, materials costs?
All of the above however lead times from China manufacturers have been quite the challenge. We believe this is probably true for everyone in the industry.

Any particular products within your fixtures offerings that are working particularly well?
We are finding that printed shades on our newest fixture designs are taking off extraordinarily well, selling above projections. These offer style and dimension to a relatively simple frame, bringing color and excitement to the room.

What changes have you made in this economy to stay competitive?
Promoting our proprietary exclusive designs that include Candice Olson and the designers for our Horizon Collection. Combined, these exclusive designs cannot be found anywhere else in the industry.

What's the mood among your customers?
Cautiously optimistic, but we are seeing that our dealers have been refreshing their galleries with new product for a new look in 2012.

Many furniture and home accent stores think there's a (real or perceived) barrier to entry for them in this category. Do you have any advice for these types of stores on how to get started in this important category?
Yes, we agree, this is a perceived barrier, and we are not quite sure why. Adding chandeliers, wall sconces and portable lighting is a relatively low-buy in for the retailer. Lighting not only enhances the vignettes, but is also a fabulous add-on sale with a strong margin and this category can increase the average ticket on any home furnishings sale. AF Lighting has no minimum order requirement and the retailer can order just one piece if they choose to and also provides free freight options. This is a challenge that we continue to try to overcome when we work with our customers.

What are your strongest-performing channels of distribution right now?
Home furnishings retailers and specialty stores, with an amazing performance by the independent interior designer that is looking for unique and exclusive items.

How are you bridging the gap between the powerful online retailers (with low overheads) and still taking care of your brick and mortar customers?
If we had the solution for this issue we would wrap it up, tie it in a bow and sell it to everyone in the industry. This most certainly has become a concern for our brick and mortar stores. We continue to try to enforce MAP pricing, but are not always successful. The online merchant has taken a life of its own and is a monster to manage. When we are confronted with a specific issue from a retail merchant, we make sure that they receive the lowest possible pricing so that they can compete with an internet merchant that violates MAP. We honor that price for the retailer and then immediately reach out to the online dealer to correct their pricing.

 

Ron Hersh, president, Authenticity Lighting

What's your forecast (specific to lighting fixtures) for 2012?
We believe that the majority of "bottoming" has taken place and that the prospects for improvement in 2012 are strong. Considering our niche in the market with our focus on the upscale, designer-oriented consumer, we feel that growth in the 20% range (at the upper end) is very realistic.

Other than the economy, what external factors are impacting business? Example: Price increases, freight rates, material costs?
All of the above! The laws of business are firm. Reduced consumption usually leads to increased costs and that is what we're all dealing with across the board. Less freight means higher rates and expense. Lower production needs promotes increased production costs. And, to add to all of those elements, material costs of commodities continue to go up.

Any particular products within your fixtures offerings that are working particularly well?
One consistent statistic throughout the economic downturn has been the increase in luxury brands and higher end price points. Most recently, when Walmart reported reduced revenue, Saks Fifth Avenue was going up, as it has been all year. People are looking for unique, high-quality products that bring them pleasure. We like to think that is the "sweet spot" of our line and what we targeted when we came back into the industry.

What's the mood among your customers?
Our customers are survivors. Most, if not all, have been faced with making some very tough decisions to maintain their businesses. Remarkably, the vast majority are optimistic that, when things begin to turn back around, they are the right place to go for lighting.

Many furniture and home accent stores think there's a (real or perceived) barrier to entry for them in this category. Do you have any advice for these types of stores on how to get started in this important category?
For good or for bad, we are a society of specialization. Those who do the best job in whatever it is they do tend to be the most successful. Lighting, particularly lighting fixtures, have to be seen and felt by the consumer or designer because people are not familiar with the category. That's simply because it's not something that's shopped or bought on a regular basis by the homeowner. Therefore, selection and product knowledge are critical aspects of lighting as a commodity. Because furniture and home accent stores are the specialists in furniture and decorative accessories and, typically, don't devote space or time to lighting fixtures, they're not considered serious in lighting. If those stores want to compete with the lighting showroom, they would have to become as expert as the lighting retailer.

What are your strongest-performing channels of distribution right now?
Our strategy of distribution was and is the brick and mortar lighting showroom. By targeting dealers in markets throughout North America and making them Certified Dealers, they are the only place to go for Authenticity Lighting. Considering the issues of competition, fair and not-so-much, we strongly believe that this totally levels the playing field and enables our dealer to be profitable with every piece of our lighting they sell. The lighting showroom is the only channel we sell through.

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