The Fabric of our Society

The Fabric of Our Society column invites industry leaders to provide experience-based opinions and discussions on various topics. Diverse perspectives are respected and most welcome, but do not necessarily reflect the opinions of IESNYC or the Board of Managers. Want to contribute? Email [email protected]

May 2025

Price Check on the Lighting Industry 

Shant Madjarian
President, Juniper

As lighting professionals, we often get caught in the zero-sum game of lighting specification and sales, such that we forget to ask ourselves if we are creating value for our clients. Are we staying at pace with innovation? Are we contributing to building goodwill in the industry? We see ourselves as “lighting people,” but our clients see us as one piece of the puzzle (and TBH it's not the piece they like dealing with most).

Lack of transparency and pricing practices that border on poor ethics or worse have brought negative attention to lighting sales practices in North America. At its core, the controversy concerns package pricing, overage contracts, product substitutions, and abuse of regional monopoly power. These practices are closely related to dubious sales tactics known as tying and bundling and price fixing. Many lighting industry participants would agree that we are nearing a boiling point and that something needs to change. But few agree on how to go about it.

I would like to propose a solution.

Where are we now?

First, let’s summarize quickly how lighting is sold in North America. (Feel free to skim this part.) The lighting market in the USA is valued at $33bn annually (Statista) there are 16,000 lighting companies in the US, only 337 of which have more than 100 employees (US Census Bureau, IBISWorld). That means that lighting is a highly fragmented and competitive industry.

Lighting manufacturers either source or produce architectural lighting products. Barriers to entry are very low, and with most production done overseas, it is not difficult to source and sell product nationally under a new label. This has led to a crowded industry and a slew of acquisitions in the past few years, as larger companies attempt to absorb excess supply. Competition should lower prices. But customers still complain of exorbitant pricing for luminaires: often many times what was quoted by the manufacturer.

The players

Architectural lighting manufacturers almost exclusively sell through regional and national agencies, known as lighting reps. They do not purchase and resell. They represent a list of manufacturers (their line card), which can be small or stretch to over 100 manufacturers. Many of these products are pretty much the same from manufacturer to manufacturer, or loosely differentiated – all controlled by a single agency under strict regional exclusivity contracts.

By consolidating multiple manufacturers into a single portfolio, reps gain pricing power; thus overcoming the downward pressure from the overabundance of independent lighting manufacturers competing for access to a relatively small set of high-value projects.

Lighting specifiers choose what luminaires are included on these high-profile projects. These consultants or contractors are hired by the customer – typically a builder, commercial real estate investor, or owner. The specifier’s lighting schedule (or spec) is then submitted to a set of lighting or electrical distributors for a competitive bid. Distributors often provide customers with short-term financing, logistical support, and warehousing.

To purchase the luminaires and resell them to the client for a markup, usually 10%-15%, the distributor prepares a submittal, or bid. Distributors get their wholesale price by issuing an RFQ (request for quotation) to the agent that reps that manufacturer in the territory associated with the project. Here’s where it gets interesting.

Rep agent or broker?

Despite the name, reps in the lighting industry act more as brokers. They usually have full autonomy on what price to quote to the distributor for each fixture.

Reps get a base commission on the price they get from the manufacturer, around 10–12%. They also may be paid additional overage: the difference above the manufacturer’s price and the price quoted to the distributor. Agents have attempted to rebrand the practice as value pricing. Whatever the name, it is the  price the rep predicts the client would pay for the light fixture in this situation. In a standard agreement, the agent pockets 90% of the overage (in addition to their 10%-12% commission). The manufacturer gets 10% of the overage.

Imagine the frustration

A client is sometimes quoted a vastly different price for the same product, at the same quantity, on two separate projects. In these cases, the overage incentive for the rep comes out of the customer’s pocket, and often causes the spec to go over budget.

For the maneuver to be successful, the agent buries the overage mark-up by hiding individual fixture prices. This is package pricing. With their extensive line cards, agents can bundle a group of fixtures from multiple manufacturers on the spec, and then submit a single package price, or quote, to the distributor. A distributor can accept the package price, or demand itemized pricing from the rep. Given the large number of submittals a distributor must make daily, they often negotiate with the rep on the single package price rather than the unit prices.

To meet project budget requirements, and to retain their margins, the rep may ask their manufacturers to lower the per-unit price. Otherwise, the manufacturer risks being replaced on the spec: by a similar item either from another manufacturer on the rep’s line card or by a competing distributor’s bid naming a different manufacturer and rep. Here we come to substitutions.

In fact, the agent may make substitutions even when unprompted by a distributor, if a larger commission or overage come by quoting a competing product.

This substitution practice is a violation of trust with the manufacturer the agent represents, but also with the specifier and the client who end with a product they did not ask for.  Packaging keeps the system opaque, so these substitutions are often not discovered by the specifier or customer until it’s too late to explore alternatives.

This practice is a major source of angst to lighting designers and customers across North America. And it often lowers the quality of the project outcome: causing inferior appearance, performance, and increased maintenance costs as the cheaper fixtures fail. It’s worth noting that territories with fewer reps and larger line cards are said to be more inclined to package pricing; versus territories like New York where competition is more prevalent.

Comparison to finance

The lighting sales channel is deep and complex, reminiscent of how stocks were traded prior to the advent of deregulation and online trading. Today, the cost of trading stocks is free regardless of who places the trade and at what quantity they are trading. Despite this loss of revenue, the financial asset management industry has done well. Brokers have contributed to industry growth and increased revenue by creating value for their customers.

However, uncompetitive strategies, opaque pricing, and adverse incentives create friction, distrust, and inefficiency. The finance industry tanked the global markets when banks consolidated junk assets into opaque Collateralized Debt Obligations (CDOs), leading to arguably the biggest financial crisis in US history in 2008. Surely, lighting will not sink the global markets like finance did, but the fundamentals are the same. We are not in a good place.

In game theory, we would say we are stuck in a stable, but suboptimal equilibrium. In plain terms, the industry needs a shakeup in order to land in a better place, where all players are better off.

Creating value

Before we propose a solution, we must acknowledge that the different players in the sales channel do create value, even if it’s not distributed openly and equitably. Reps should be compensated for the additional services they provide. Lighting calcs, custom specifications, and shipping samples may be considered complimentary; but someone must pay for it. Upstream the manufacturer may offer a bigger commission, or downstream the client pays a higher price. Or both.

It is easier to load the rep’s service cost into a project’s package price, versus adding it on individual fixtures. Here the customer is partly to blame.

Having worked in lighting for 15 years, I can attest that our customers do not like added costs. As a result, it is not easy to include a separate service charge on a distributor’s submittal. Some projects require a lot more upfront legwork than others, and agents use overages to even out those differences.

Unfortunately, the result is a per-fixture cost to the client that can be 100% higher than the price from the manufacturer rep. I have been told on multiple occasions by sales agents that “it costs a manufacturer nothing” to sign on an agent. The customer is actually paying the commission and overage. Reps argue that they load up the price to account for services provided. So manufacturers shouldn’t worry about it? While there may be some merit to this argument, the lack of transparency pushes the boundaries of ethics and places the client on the losing end of the negotiation.

Max pricing as a solution

So, how can we fix this? And let’s place the client’s needs at the center.

We need to change the incentives. One way to do this is to employ MAP, or Maximum Allowable Price. This is the highest price any customer should be expected to pay for a given product at a given quantity. Rather than jacking up the price downstream from the manufacturer, the lighting channel would be better suited to look upstream. The MAP price remains transparent for specifiers, owners, and distributors to consider throughout.

For example, the manufacturer publicizes the MAP for a product (at x quantity) at $200 per unit. The rep then quotes a price to the distributor that is some percentage below the MAP, say $150 (25% off MAP). This is the distributor net price (DN). The distributor can mark up the DN, but not surpass the MAP at $200[TS1] [2] . If the distributor margin is 12%, they can still provide a small discount to the customer or contractor/reseller. The manufacturer then pays the contracted commission to the rep on the awarded sale.

The rep’s commission is usually 10%, but the elimination of overages may require that it be adjusted upwards to cover additional services provided by the agent. By the forces of competition, those reps providing better services should earn higher commissions. A focus on service, versus pricing, creates additional value for manufacturers and clients alike.

Capitalize on transparency

By capping the client’s maximum final sale price at the beginning of the process, and by building transparency into the system, every actor in the channel is paid adequately and competitively. And less uncertainty and more trust allow the industry to prosper. Furthermore, on a level playing field, manufacturers can focus on quality and innovation as differentiators, rather than inequitable contracts and quid-pro-quo relationships. Agents and distributors can focus on service, rather than spending time sizing up customers for overage tolerance or unnecessary value engineering.

We’re also opening the door for software-driven technologies and pricing databases to help specifiers, customers, distributors, and reps access information quickly and submit pricing nearly effortlessly; thus reducing costs while expanding capacity and fostering trust.

Unlike just about every other industry in North America, lighting submittals are still often printed out, marked up by hand, rescanned, collated, and sent to the client. This is a poor use of resources that is often paid for by substituting cheaper products. Software as a service (SaaS) technologies can streamline the process, freeing a lot of time for productive, value-creating activities.

I am an optimist and a disruptor. The lighting industry is poised for enormous growth. Controls-integrated luminaires, office and home automation, and innovations in health and wellness offer unprecedented opportunities for our industry to gain influence and increase wallet share in the broader economy. If we don’t embrace transparency and change and take advantage of this opportunity for the betterment of the built environment, then another industry will come in and do it for us.