Navigating the Future of the Lighting Industry: Insights from ALA Leadership

[00:00:00] All right, everybody. Welcome to another episode of the Flowing Sales Podcast. I am joined in the virtual studio today with Larry Locke, the CEO of the American Lighting Association and Michael Weems, their VP of Public Policy. We've never done a show on the lighting space before. We are glad, Larry and Michael, that you've taken some time to talk with us and share your insights with the audience. We really appreciate it. Without further ado, Larry and Michael, if you could take a brief moment to introduce yourselves.

[00:00:30] We'll get into some of the subject matter here.

[00:00:32] Thanks Curtis for having us. I'll start and then Michael jump in. As president and CEO of the American Lighting Association, I've been with the organization for close to 30 years representing lighting manufacturers, lighting retail showrooms, lighting manufacturers representatives, sales representatives, designers, all types vertically structured organization. And we're active in education. And Michael will talk about how we're active in

[00:01:00] government affairs, government affairs, government affairs, government affairs, public policy, which is just very timely coming right off election day and things that we'll be seeing next year. And Michael, I'm sure he'll get into that. And so we're trying to reintroduce the organization or reimagine the organization to come up with some new programs that are beneficial to the membership that they have told us they needed and they wanted. That's been our mandate for this year and next year.

[00:01:55] Awesome. Thank you.

[00:01:56] You know, the membership at ALA. It was an easy transition for me to come over. Since then, I've been with ALA for 10 years. And in that time, the role of government affairs and public policy at ALA has changed and the mindset has changed. Our members are more engaged. They're more aware.

[00:02:13] They're more aware now. They're more aware now. They're more aware now. They're more active in day-to-day rulemakings and paying attention to how things in the government, things that the government does affects their business and affects their lives.

[00:02:25] So yeah, like Larry said, after the election, there's a lot that's going to be happening as we work towards the transition. There's going to be a lot that comes after that from a policy standpoint, laws and regulations that will impact the business aspects of our members, their personal lives, the lives of American consumers for lighting products.

[00:02:49] All right. I'd love to jump into that. You guys are watching the trends, right? Like you say, there's some things we know are coming. There's some that are more reading the tea leaves. Let's talk about some of those regulations and laws that might be coming down the pipe that are both opportunities and risks that reps, distributors and manufacturers should be looking at. What's on y'all's mind?

[00:03:09] I'm sure Michael could touch on tariffs since we've been going up and down that highway and that probably will continue. Michael, jump in there and give everybody an update on the tariff situation.

[00:03:19] But the election is behind us and we know the outcome. During the campaign, former President Trump was very verbal in his desire to not only address tariffs again, but address them in a manner which is going to ultimately be detrimental to American consumers and American businesses.

[00:03:41] These tariffs we're talking about are in addition to the existing tariffs we already have on products coming from China. The president's rhetoric during the campaign is he doesn't want to just go after China again. He also wants to go after other countries. Any country that imports products into the United States, he wants to put a tariff on those products.

[00:04:00] At the end of the day, what we've seen from the first round of tariffs that go back to 2017 and 18 and 19 during the first Trump administration is that it's not China that pays those tariffs. It's the American people.

[00:04:15] Goods are more expensive today, not because of inflation. You look at inflation, the inflation numbers have come back down, but it's because of the tariffs and the trade imbalance between the United States and China.

[00:04:27] We get so much of our products, including lighting products that come out of China and those products with the additional tariffs are coming in at a much higher price and there's nobody to pay that except for the American consumer.

[00:04:39] What does that mean for the distributors and the reps in this space? It's harder to make sales because the price is going to be higher. It's going to be a more difficult market. What do you predict there?

[00:04:49] I think it's up and down the supply chain. Reps are unique because they get pinched from the retailer side and from the manufacturer side.

[00:04:56] They hold so much power from the education they have and the education they do to educate showroom staff and the product knowledge they receive from manufacturers.

[00:05:06] And they take that knowledge and they try to use it the best they can. But at the end of the day, it comes down to prices and what prices the manufacturer willing to let that product go for.

[00:05:16] And then on the other side, what is the consumer willing to pay? If the prices are significantly higher, that amounts to decreased sales all up and down the supply chain.

[00:05:25] It's going to impact retailers and manufacturers, but it's also going to impact the true small businesses of the lighting industry or reps and agencies.

[00:05:33] Got it. So some headwinds potentially coming in there. And was there any strategies or anything that you mentioned the tariffs in the past that happened?

[00:05:43] Was there anything that you found were successful strategies to help weather that storm or get through it or do something to mitigate the risk there?

[00:05:52] You're not going to let this answer, but COVID.

[00:05:56] Because of tariffs, when they first hit, manufacturers ate those costs. They didn't pass them on down the supply chain and to the consumer.

[00:06:04] They ate that initial cost. Eventually, they couldn't keep doing that. That wasn't sustainable for their business.

[00:06:09] So they had to start raising prices. Eventually, the American consumer was going to break or cry uncle.

[00:06:16] And then COVID happened and people were trapped in their houses and they looked around and they realized, gosh, I sure don't like the lights in my house.

[00:06:23] I don't like the furniture in my house. We saw the great clean out of 2020, which led to the great purchasing of latter 2020.

[00:06:30] And people started, that's what allowed manufacturers to weather the first tariffs.

[00:06:35] It wasn't just manufacturers. It went all the way through.

[00:06:39] There were government programs that had to happen that played a part of that, keeping those companies afloat and that sort of stuff.

[00:06:46] But we're not in a better place today because of the tariffs. We're not in a better place today because of COVID.

[00:06:52] We want a second COVID to help.

[00:06:54] It's going to be interesting to see how these increased tariffs impact American purchasing power.

[00:07:02] If everything you go to the store to buy costs more, people are going to have to make hard choices about what they're going to buy.

[00:07:09] As we've seen, the last thing to be to go into a home and home building is the lighting.

[00:07:13] It's the last thing people think about, but it's the thing that makes the most impact.

[00:07:17] Some people like to joke that lighting is the jewelry of the house and it has the sparkle.

[00:07:21] It has the glitz. It has the glam. It has everything that jewelry has.

[00:07:24] When you're going out for a night on the town and everybody's all dressed up.

[00:07:28] But in a home, if you don't have quality lighting, if you don't have the right lighting, if you don't have the proper application of lighting in a home, that affects your circadian rhythm.

[00:07:37] It affects your mood. It affects the weight. It affects the paint on your walls.

[00:07:42] You think that's a yellow on your walls? No, that's taupe and taupe is out from five years ago.

[00:07:46] So it's all these things play into what Americans think about when they go into a store, what they're looking for, what can they afford?

[00:07:54] If I could jump in, another issue that we were hit with is the high interest rates.

[00:08:00] Homebuilders are not building those entry-level single-family homes like they were in the past.

[00:08:06] High interest rates have prevented that.

[00:08:08] And then you have the boomers.

[00:08:11] They say, do you want to refinance or move to another home?

[00:08:14] Why, when you're paying 2.5%, 3% interest, do I want to move out and go to another place and double my interest rate?

[00:08:22] So you've got that until those rates and the Fed's starting to ease those rates.

[00:08:27] But until those rates start coming down to a more attractive, you're not going to have the demand there for when people buy homes, they buy new lighting, buy new furniture.

[00:08:36] That's impacted the entire home building industry.

[00:08:39] Fortunately, that'll be slowly turning around.

[00:08:41] But as Michael said, that and tariffs, what we went through with COVID, all that's got to shake out.

[00:08:46] And it doesn't happen overnight, as we well know.

[00:08:49] Do you see that affecting a commercial or the residential side more or less, or maybe the same across the board?

[00:08:57] Well, it's definitely affected the residential.

[00:08:59] That's why you don't have the activity.

[00:09:01] People aren't turning their homes, buying their homes.

[00:09:04] It costs more for a young starting family now to move into a house.

[00:09:08] My first house, I remember back in my wife and I in the early 80s, interest rate was 18%.

[00:09:15] And that's when they introduced arms.

[00:09:17] We bought it down to 12%.

[00:09:19] And Reagan came in and rates started heading south and dropping two points.

[00:09:24] So it's not as severe as it was back then, but it does have an impact, obviously.

[00:09:32] Yeah, got it.

[00:09:33] And maybe along with that, too, we've talked about tariffs.

[00:09:36] We've talked about interest rates.

[00:09:38] Obviously, that's the things that the government comes in and they put these policies in place.

[00:09:44] There's been this trend towards energy efficiency, sustainability, green energy, which ties into lighting and lots of other types of products.

[00:09:52] A lot of the reps that do lighting also do electrical, and it's extremely tied in there.

[00:09:56] Do you guys see any changes in policy or approach to that trend?

[00:10:01] And what does that mean for the reps?

[00:10:03] You know, I would go back and look at the first Trump administration for an indicator of what's to come.

[00:10:11] There's regulatory work required by EPCA, the Energy Policy Conservation Act 1975.

[00:10:17] Congress has amended EPCA a couple times.

[00:10:19] They put in appliance efficiency regulations.

[00:10:23] DOE is required to do these things.

[00:10:25] The industries, the public have the opportunity to engage and plead their case, figure out what is the right metric to set these efficiency levels at so that industry can continue to succeed.

[00:10:36] And yet we achieve energy savings at the same time.

[00:10:40] That work did not happen during the first Trump administration.

[00:10:43] You know, it's not that they couldn't do it.

[00:10:48] It's just that they didn't do it.

[00:10:49] And it frustrated the efficiency advocates to the point where they had to sue the Department of Energy.

[00:10:55] When President Biden came into office, he had to play catch up in a fast way.

[00:11:00] We, the lighting industry, have pending efficiency regulations sitting with the department right now waiting for review.

[00:11:07] What will happen with those now with Trump's reelection?

[00:11:11] I don't know where we'll go.

[00:11:13] It could just be stalled and we're stuck.

[00:11:16] And then it gets sent to the legal system.

[00:11:18] And there you don't really have a say in how things shake out.

[00:11:22] So it could be challenging times ahead.

[00:11:25] Hopefully the folks that make their way into DOE will do the work that is required of them and open it up, allow for fair interaction by all parties.

[00:11:38] We'll see whatever the outcome may be.

[00:11:40] At the end of the day, that's at the federal level.

[00:11:42] You have the states too that are out there.

[00:11:45] Despite there being a large red wave that happened on election day, you didn't have that red wave necessarily in every state.

[00:11:56] Some states are still blue states with blue legislatures and blue governors.

[00:12:00] Those states are going to be active at the state level.

[00:12:03] There are certain products that aren't federally preempted.

[00:12:06] Where the federal government fails, the states act.

[00:12:08] From an industry standpoint, we like it when there's one policy for the entire country.

[00:12:14] Instead of a patchwork of regulations, you have to jump through in different states.

[00:12:19] That just makes it more difficult to navigate the landscape, right?

[00:12:24] Well, technology has helped immensely.

[00:12:26] Years ago, everybody had old style incandescent lights.

[00:12:29] We were wasting a lot of energy with LEDs in the home now.

[00:12:35] At least that's the engineering improvements that have taken place.

[00:12:39] It really saves the consumer dollars at the home.

[00:12:43] And that's another point, right?

[00:12:44] We were going to talk about moving into innovation in the lighting space specifically,

[00:12:49] whether that's energy efficiency, smart systems, IoT, those kinds of things.

[00:12:56] What do you see in terms of what reps should be aware of, what we think is coming, how that affects the marketplace in general?

[00:13:04] The smart home is something that I think people or homeowners are maybe, Michael, you can jump in, but it seems to be a little slower to embrace.

[00:13:16] I've embraced it from a simple standpoint of putting dimming control systems in your house.

[00:13:21] Control your lighting and other things in the home that way.

[00:13:26] But it does take a leap from the homeowner to change out the technology.

[00:13:32] All of those play a role.

[00:13:35] Maybe it's gone too far in some of these smart home devices that consumers may not be as interested in.

[00:13:43] But in certain place, dimming controls for lighting, I would say it makes a ton of sense.

[00:13:50] As the boomers age, glare has become more of a problem.

[00:13:53] You have to control that glare.

[00:13:56] The technology can help that aging population because the aging eye is something that we have to pay attention to.

[00:14:04] And lighting is a key component to that.

[00:14:08] Got it.

[00:14:09] Interesting.

[00:14:10] Okay.

[00:14:10] And do you guys see, there's been a steady increase in innovation and technology there.

[00:14:15] Obviously, like you say, smart home systems are here, but there's been lower adoption.

[00:14:21] Do you guys see any changes in consumer behavior happening anytime soon?

[00:14:28] Or do we think that's going to still be this gradual uptake of some of this technology?

[00:14:33] Do you guys see any changes there in the time?

[00:14:36] I think the technology is the challenge.

[00:14:39] Because you go to the store today and you invest in this technology.

[00:14:45] And tomorrow, there's a new technology.

[00:14:48] Americans typically want the latest thing.

[00:14:50] The new technology that is there tomorrow doesn't talk to the technology that's today.

[00:14:55] Or if it is, it requires a different app.

[00:14:58] We just need the technology.

[00:14:59] The technology is just evolving so rapidly.

[00:15:02] It's better in the commercial space because there's much more design specifications.

[00:15:09] There's a lot more requirements for what goes into commercial buildings.

[00:15:15] And things can be more steady in that regard.

[00:15:20] But it's so individualized in the residential setting.

[00:15:25] You buy one thing and you come home, you're excited about it, and you get all.

[00:15:29] But then your spouse or your partner or whoever, you've got to get them to buy into it as well.

[00:15:35] Otherwise, somebody just sitting at home has got all this technology in the house and it's only being used by one person.

[00:15:41] And when that happens, maybe it's not being used to its fullest potential.

[00:15:45] Yeah, that's a good point, Michael.

[00:15:47] Let's go back 10, 15, even 20 years ago.

[00:15:50] How many TV remotes did everyone have?

[00:15:53] And has that changed?

[00:15:55] You log on to your smart TV.

[00:15:57] You've got to find your app to stream.

[00:15:59] You may be using Apple TV and you've got your Samsung remote.

[00:16:03] You may have another remote because it's going through your stereo system.

[00:16:07] So just take that one unit, apply that to every appliance, your lighting, all of that.

[00:16:16] And we had a saying when CFLs came out.

[00:16:20] Is it going to meet the lady of the house test?

[00:16:22] The color did not.

[00:16:24] And we knew that.

[00:16:26] I would say that still applies here.

[00:16:28] If the individual is, like Michael said, is early adopter of new technology and used to upgrading to get the latest and greatest, they'll always be there.

[00:16:40] I don't care if you're putting in lighting controls or buying a new TV.

[00:16:43] But if you've got other members of the family that are slower to adopt that, you've got a challenge.

[00:16:51] The standardization of technology then is a challenge, right?

[00:16:55] Like you're saying, I've felt that actually in our own.

[00:16:58] I haven't bought into the smart systems because I haven't articulated or thought about that.

[00:17:02] But I think that's one of the main things is then how does everything talk to each other?

[00:17:06] What if we have to upgrade?

[00:17:08] How does this all work together?

[00:17:09] It's complicated to figure that out.

[00:17:11] You just have a folder on your smartphone and it's got 14 apps in it for the 14 different.

[00:17:18] Exactly.

[00:17:19] And then have you really achieved anything?

[00:17:22] Has it made your life simpler?

[00:17:25] And you just go back to that simple technology.

[00:17:28] If it can make your life easier and simpler on day-to-day activities versus more complex.

[00:17:36] And these individual companies are trying to beat the other one to the goal line.

[00:17:41] And so the consumer is totally confused.

[00:17:45] And you really need, if you go to, let's just say you go to a lighting retailer in which the manufacturer sales reps are talking to these retailers,

[00:17:54] they're going to be more up to speed on, say, dimming control systems or the lighting or the latest and smart ceiling fans, for example,

[00:18:03] and what to look for, what not to look for.

[00:18:05] But if you're just wandering down the aisle and you're randomly buying something,

[00:18:09] unless you enjoy reading up, reading or viewing YouTube how-to videos, it's a challenge.

[00:18:16] Yeah.

[00:18:17] Yeah.

[00:18:18] There's something also that people are okay with giving up convenience in certain, I won't say applications,

[00:18:30] but in certain levels of wealth or something like that because they want the features that come with it.

[00:18:36] They want to have a light bulb that can harken back to the old days of 2700K Edison incandescent,

[00:18:45] and they want to turn it up to 5000K, super white, bluish light.

[00:18:52] They want to have that technology.

[00:18:53] And it's okay if it takes a minute to pull out the app and go through it because if they're having a party,

[00:18:58] they want to change the mood of the party.

[00:19:00] They want to have that dimming capability with the controls and in-wall dimmers and that sort of stuff.

[00:19:06] So there is, but that's the challenge of which consumer, what do consumers want,

[00:19:11] and which consumer just walked in the showroom door.

[00:19:14] And that's the challenge for reps and agents is they've got to be able to carry those lines

[00:19:19] and know which showrooms or train the showroom staff to be able to then sell that product,

[00:19:24] identify those consumers and say,

[00:19:27] Hey, you clearly are the person that doesn't mind having,

[00:19:31] it's much easier for me to stick a key in a deadbolt on my front door and unlock it and come in.

[00:19:37] But it's also nice not to have to carry around a pocket full of keys and I can just punch in a code on my front door

[00:19:42] and walk in whenever I want.

[00:19:44] So it's the same kind of thing.

[00:19:46] You've got to find the consumer that is willing to maybe take that extra step to have that additional feature.

[00:19:54] And it sounds like that's still something of an emerging market

[00:19:58] and early adopters are still the main buyers there for that.

[00:20:02] It is because look, we survived on Edison's incandescent light bulb for a hundred something years.

[00:20:08] Where we are in the world of lighting is a fast paced, everyday evolving technological world.

[00:20:17] And a lot of companies are just doing their best to keep up.

[00:20:21] And that's not just the manufacturers, that's the retailers.

[00:20:24] And it's really on the agents and the reps that are the in-between to be able to have all that knowledge.

[00:20:31] And it goes back to the education piece I talked about earlier.

[00:20:33] It's really up to them to get that, to understand what the manufacturers are doing

[00:20:39] and get it to the retailers who have to get it to the consumers.

[00:20:42] Well, and then with lighting, you throw in what's the latest style, the latest trends, personal preference.

[00:20:50] Are you contemporary?

[00:20:51] Are you mid-century modern, traditional?

[00:20:54] And you've got all of that doesn't have anything to do with really the technology.

[00:20:58] But the technology comes up.

[00:21:00] But you want the technology in a fixture that meets your design aesthetic.

[00:21:04] So that puts another layer of challenges on top of a sales rep being more knowledgeable

[00:21:10] and educating retail showroom who will be selling that product to the designer, the homeowner or whatever.

[00:21:18] A lot of stuff to think about there.

[00:21:20] In terms of, we talked about technology, emerging markets, things that are coming.

[00:21:26] Are there other, and these could be residential, these could be commercial, maybe large scale,

[00:21:31] I don't know, like smart cities, if this factors in at all, things like this.

[00:21:34] But are there any emerging markets, large opportunities, maybe infrastructure-based across the U.S.

[00:21:41] or anything like that you guys see coming on the horizon?

[00:21:44] That's a big, broad question.

[00:21:47] As far as lighting is concerned, I would say commercial has done a pretty good job as far as modernizing.

[00:21:55] Just look at something that's like parking lots and how the light is.

[00:21:59] We work closely with the International Dark Sky Association, and our members work with them.

[00:22:05] And how we're aiming the light down, and it's not being mindful of the light pollution on the outdoor lighting.

[00:22:12] Now, landscape lighting has become more popular and residential.

[00:22:16] So we try to educate consumers in that, versus someone who's installing the lighting and has no clue of a proper way to light your home.

[00:22:27] And some people want to put street lights all around their house for security, when actually all you need is just a little light and make it very tasteful.

[00:22:35] So inside buildings, then you get into the architecture.

[00:22:38] And architects I've talked to, they'll just say, we'll hire a lighting designer.

[00:22:43] Because they go through school architecture, they don't spend a lot of time on lighting design.

[00:22:48] So they'll hire a lighting specialist to come in and spec that office with the fixtures.

[00:22:54] Same with the home.

[00:22:56] Michael may have something else to add.

[00:22:58] No, I think that's, yeah.

[00:23:00] Got it, okay.

[00:23:02] All right, yeah, good stuff, guys.

[00:23:03] So, and maybe we'll just do, I know we're on time here.

[00:23:05] So one last question, maybe focused on the reps and the distributors themselves.

[00:23:10] We've talked about the market, some policies, those kinds of things.

[00:23:15] Anything that you guys are seeing in terms of things that will help the actual reps or the distributors be more efficient, work better with manufacturers, those kinds of things.

[00:23:27] It could be technology or otherwise.

[00:23:30] But what are you guys seeing in terms of that?

[00:23:33] Yeah, just helping our reps and our distributors.

[00:23:35] Larry, let me go first and then I'll let you close and have the last word.

[00:23:38] I think the thing for me is being a member of ALA.

[00:23:42] There's going to be a lot changing next year politically.

[00:23:46] There's going to be a lot of tax provisions that are expiring from the 2017 tax law.

[00:23:50] Are those going to get renewed?

[00:23:52] How are they going to be handled in the new year with the new Congress and a return to the White House by President Trump?

[00:23:58] Those tax policies have a real impact on agencies that sometimes run as 1099 organizations or pass-throughs or small businesses.

[00:24:08] What's going to happen?

[00:24:09] I know there's been rumor about reopening up or the attempt to reopen up the Affordable Care Act.

[00:24:15] You know, health care is a big thing that's going to impact reps.

[00:24:19] ALA is going to be that resource for those agencies and those rep organizations to stay up on what's happening and also to then have a voice because we are active in our own efforts to engage the government.

[00:24:32] And having those reps involved with ALA lets us know their opinion and we can be that voice for them at the federal level, at the state level, and then we can be that conduit of information back to them.

[00:24:45] So I think being involved in ALA is the biggest thing I think will be helpful for reps at least next year and going forward.

[00:24:54] Michael's right.

[00:24:55] Being a member of your organization like American Lighting Association and staying abreast on these changes that will affect their business, affect their bottom line, that's our job.

[00:25:07] We have reps that have joined.

[00:25:09] We introduced ALA Health Plan and rep agencies have taken advantage of that, have saved money from health care costs.

[00:25:17] Health care costs will not be going down.

[00:25:19] We can promise you that.

[00:25:20] They're participating in the ALA Health Plan as a member of ALA and saving thousands of dollars there for their sales agents that work for their agency.

[00:25:30] So things like that, we'll have member forums where reps can, through Zoom call, we'll talk, we'll take a topic and we'll address it and they'll share ideas and challenges in their marketplace and what other reps in other parts of the country are doing.

[00:25:45] So all these things we're going to be doing next year and we started this year will continue.

[00:25:49] It's well worth the investment for the future of your being a manufacturer sales representative.

[00:25:56] Perfect.

[00:25:57] Thank you.

[00:25:58] Larry and Michael has been, I think, informative.

[00:26:00] I think there's lots of, like you guys have talked about, there's lots coming down the road here that reps and distributors need to be aware of, thinking about.

[00:26:08] If you're a rep in the lighting space, you're not a member of ALA yet, check them out, American Lighting Association or in your own particular industry.

[00:26:17] Thank you guys again for being on the show and helping us think through some of this stuff and we appreciate it.

[00:26:22] Thank you.

[00:26:24] We appreciate it very much.

[00:26:25] Thank you.