This is part of a series of articles covering CE Pro’s Lighting Fixture Deep Dive. If you’re interested in learning more about this hot category of products and the opportunities it holds, be sure to check out the full lighting fixture deep dive available here.

The custom installation has quickly become the realm for lighting fixture manufacturers to ply their wares. But why? Well, all those advancements in technology have simply moved smart lighting fixtures outside the realm of electricians. However, that doesn’t stop there from being a bit of conflict between integrators and electrical contractors on projects.

According to Joe Borress, president of Tri Star Electric & Automation in Malibu, Clalif., it’s natural for there to be friction between the integrator and the electrical contractor at first, especially if the integrator is supplying the fixtures.

Even Borress, who is a unique custom integrator in that the company is also an EC, says he goes out of his way to forge relationships with other electricians regarding lighting fixtures, and he advises other integrators do the same, as he’s seen first-hand what can happen when an integrator and electrician butt heads on a project. But why the friction in the first place?

To understand that, we need to look at why manufacturers have opted to bypass electricians and hawk their wares at integrators instead.

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Why Are Manufacturers Turning to Integrators Over Electricians?

There are several reasons manufacturers of intelligent fixtures are less thrilled with electrical contractors these days.

First, electricians tend to earn the bulk of their profits from labor, not from equipment. Therefore, the importance of selling luxury lighting fixtures is lessened. It means they don’t have the need or desire to articulate the value of more expensive products. 

Second, their business models are designed to be in and out of the home quickly. Electricians are not structured to offer service to their clients over the long term. 

“Most electrical contractors earn 70% of their profit on labor and 30% on product,” says Lee Travis of Wipliance. “For an electrician, their big variable is ‘Can we get this done in the amount of time and hours we have allotted.’ That means if you want to start your own electrical business, it will be a different business model than custom installation.”

On the opposite end of that, custom integrators want to have multidecade-long business relationships with customers and they benefit from selling higher-end gear. Plus, when those factors are paired with the fact that integrators are already designing and installing motorized shades and lighting controls, it is very compelling for manufacturers to target this channel.

For integrators, it creates a naturally irresistible differentiating business model to let customers know they intend to help manage and control the light in a client’s home for years to come. 

This also creates an interesting dynamic shift, as most projects do often feature a lighting designer. Thus, the integrator goes from simply being an installation contractor to having a more consultative role.

The issue there, Travis notes, is that outside of some power management products, lighting is usually the most profitable driver for an electrician’s business. 

Cultivating Contractor Relationships

Borress recalls a few jobs he’s seen where electrical contractors have purposely installed the low-voltage adapter rings for voice and data improperly and blame the integrator’s elevation plan. But, Borress notes, if the integrator has full knowledge of the electrician’s role and the challenges he faces, it can alleviate any animosity.

In fact, according to Borress, integrators need to become more knowledgeable about fixtures than ECs. He does not believe integrators should be satisfied merely by purchasing the downlights (and making their margin on the products), drop-shipping them to the jobsite, and then letting the electrician do the installation. It’s not enough even if you are doing the lighting control. 

“You either have to partner with an electrical contractor and bring him into your company umbrella, or you have to become very friendly with the electrical contractor on site, which may or may not be a challenge,” he says. In either case, Borress says not being involved in the lighting at all is not an option. 

“If you’re on a project where you’re not doing the lighting, you’re allowing another trade to install a system that you’re going to be controlling through your lighting control system. There’s such a gap between the integration and electrical trades. It’s like you don’t speak the same language and I think that’s wrong,” he suggests.

The lighting layout, including the depth of the ceiling and location of the lights in conjunction with ceiling joists or automatic fire sprinklers, cannot be left to the decision of the electrical contractor. That same level of care goes for knowing how the lights are mounting and how to terminate and label the wires, he recommends. 

“If you’re going to want to supply the lighting, you have to own the lighting. You have to own the understanding of the installation practices of the lighting. If you don’t, everything’s going to fall on your shoulders and you’re going to end up having nothing but headaches,” he predicts. 

For example, Borress says if the integrator is supplying the lighting and programming the controls, it is vital to understand where the lights are being placed, just like it is imperative to know the location of in-ceiling speakers.

“For me, I think it is easier to find electricians that have open minds to work with. The new lighting technology is intimidating to many electricians. So if you come in asking to be a partner with them, they will be receptive,” says Travis

It’s a Win-Win for Both Parties

It’s not as if electricians are getting edged out of the picture entirely, though. Dealers can offer a “handling fee” to the electrician based on the fixture cost. That handling fee is often more profitable for them than if electricians themselves had purchased and installed the fixtures. 

As an example, if an electrician was going to charge $10,000 to purchase and then install lighting on a project, their profit margin would be about $2,500, with almost all of that in labor profit. When an integrator is involved in a project, many times the cost for lighting will be quadrupled, so $40,000 in this example. That means the electrician will make $10,000 in labor profit, while the integrators earn margin on the product.

For larger projects in which the lighting fixtures costs might reach $100,000, the integrator might offer a much smaller percentage to the electrician, such as 5% or 10%, but it would still enable the electrician to earn 3X to 4X in profit from what they would have made on their own. 

“So, while the electrician originally viewed us as a competitor, we are now making them a lot more money, while at the same time we are specifying the lighting fixtures, handling all the controls and the panels, and purchasing the product,” says Lee Travis of Wipliance in Bellevue and Spokane, Wash., and Scottsdale, Ariz. 

He advises integrators to listen for cues from their electricians when they balk at the integrator “eating into their profit” before offering them a higher percentage of the pie. 

“Once you offer it, you can’t go back. So, you don’t want to be stuck giving them a higher percentage on the next 10 projects,” he warns. 

“Whenever I hear an electrician complain to me about adding more and more fixtures to a job so that it is holding him up from getting to the next project, I say, ‘You’re welcome’ because I am making him more money.” 

Addressing the Value Vendors Bring to the Table

Travis also believes choosing the right vendors to work with is also key to success in lighting. Wipliance, a ProSource member, works with several vendors engaged with that buying group. He made sure to be selective, using suppliers that are not available in every electrical distribution outlet. 

“You want to get great vendor support, and get the margins you need to make,” he says. “If it was easy, then everybody would be doing it. In lighting, there are a lot of SKUs and parts you have to learn. No one is just going to ‘give’ you a lighting business.” 

One way Wipliance avoids the potential for channel conflict is not to employ a full-time lighting designer. In some cases, the Wipliance team will specify fixtures, especially on projects that have tight timelines and can’t wait for outside lighting design to be performed.

Vendors like DMF Lighting offer in-house design assistance for dealers. In other instances, Wipliance uses third-party designer Light Can Help You. It also steers its interior designers to that firm for questions and support. 

This is part of a series of articles covering CE Pro’s Lighting Fixture Deep Dive. If you’re interested in learning more about this hot category of products and the opportunities it holds, be sure to check out the full lighting fixture deep dive available here.

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