14575 Thu, 05/29/2008 - 3:36pm
By Nancy Meyer
The hardwire lighting business has fallen on hard times.
Directly attributable to the sharp decrease in new home construction and a subsequent decline in remodeling, the lighting fixture business plummeted 15 percent in 2007, to $2.6 billion, from more than $3.1 billion in 2006.
Consumers are putting off spending money on lighting fixtures, a purchase that involves a lot of forethought and planning.
The situation threatens to worsen this year, executives said, because of the depth of the housing crisis and credit crunch. Executives from the leading lighting companies told HFN the economy hasn’t bottomed out and they’re prepared for a rough ride for the next year and a half. Even the most optimistic among them said that once the housing market does improve, it will be a gentle recovery and won’t reach nearly the levels of housing starts of the peak a few years ago.
One lighting president said his company is gearing up for an eventual turnaround in three or five—or even seven—years that may see 1.4 million housing starts, rather than the 1.72 million the market enjoyed at its peak in 2005. As a comparison, in 2007 there were just 1.046 million housing starts, a 39 percent decline from 2005. The first quarter of 2008 saw just 161,000 starts, contrasted with 369,000 starts in the first quarter of that peak year of 2005, amounting to a 56 percent decrease.
The retail landscape for fixtures is still dominated by the home centers and the lighting showrooms, which duke it out in virtually every market in a fight to service the customer. In 2007, the home improvement retailers stole market share from the independent showrooms and specialty stores (which include some big-box chains like Restoration Hardware and others that sell lighting). The other channel that picked up share is “other,” which is the pure-play Internet sellers of lighting, a very hard channel to track.
In terms of product, beyond the core categories, bright spots continue to be decorative pendants, track and cable systems, and outdoor lighting. Decorative fluorescent has become more important to retailers’ assortments, but as a category, energy-saving lighting continues to meet with price resistance from builders who are loathe to spend any more on their current basic incandescent lighting.
Vendors see this as a real roadblock to marketing energy-saving lighting.
The industry is also gearing up for some breakthroughs in light-emitting diodes. While there’s been some success—Progress Lighting’s outdoor LED lanterns and Kichler’s LED undercabinet and landscape lights—the real excitement will happen when the technology for LED general illumination becomes attainable not only from a performance standpoint, but a price one as well.