The solar market’s rapid growth has made it a very attractive industry for businesses large and small. Solar power was pioneered by small entrepreneurs and passionate users (with just a truck and some panels, you’re in business). But as the solar market has increasingly showed its true potential, more and more companies have jumped on the solar bandwagon, and now there are a multitude of large, national brands competing with smaller businesses in markets across the country.
This is not isolated to major markets like California, nor is it driven by a specific factor like energy costs or tax incentives. Rather, it is simply a clear sign that the market has reached a critical mass. A recent article in the Boston Globe states that “the impressive growth figures are perhaps the clearest sign that clean energy has turned the corner, no longer just a boutique industry, with small, experimental companies, but rather a rapidly maturing sector that is going big time, fast."
The Wal-Mart Effect
Sooner or later, you’ll hear that SolarCity (or a similar company, such as Vivint or Sunrun) announce that they are going to enter your market (or maybe it has already happened). Market consolidation is happening and it is happening quickly. According to PV Magazine, “the growth of the U.S. residential solar sector is being increasingly nurtured by just five leading installers, with SolarCity out in front, supplying 34% of the market in the first half of the year.”
It's a story that has been repeated over and over. Large brands come into a market and utilize their strengths to overwhelm existing smaller companies. There are many examples of this: think of the local lumber yard/hardware store losing out to Lowes and Home Depot, the independent insurance agent competing against GEICO and Progressive, or Jiffy Lube and Midas Muffler franchises competing against the local auto mechanic.
This process is often referred to as the Wal-Mart Effect. This is the term used to describe the effect that a Wal-Mart store has on the economic life of a market by lowering prices, increasing consumer savings and eventually driving uncompetitive retailers out of the area.
These large companies have several big advantages. First, they have the capital and financing to invest in marketing their brand and product. They have a big presence and can generate a great deal of interest. The second big advantage is that they have refined their product to make it highly efficient and very competitively priced. They also tend to offer good value for the price.
Thriving in a Competitive Solar Market
Although taking on the big guys can seem daunting, it's important to keep in mind that in every instance, and in every market, there are small businesses that survive, and in many cases even thrive, in the face of competition from large national brands and retailers. What is it about these companies that allows them to succeed where many fail? How can you prepare your business to be one of these success stories? What is your plan to compete in a market where there are large, well-financed companies trying to steal your customers?
In looking at this phenomenon and what it means for your business, there are a few key points to remember:
Don't Put Your Head in the Sand
These large businesses have profound impacts on the markets they enter. They cannot be ignored or dismissed.
Assess, Adapt, and EVolve
You have to adapt and change your business model to respond to the new challenges and opportunities created by the entry of a large competitor into your market.
Understand the Competition's Strengths...
Large national brands have some true advantages. The power of their brand marketing and the resources they can employ give them real strength in the marketplace.
...And Their Weaknesses
By the very nature of their size and scope, large businesses have inherent weaknesses and faults and can present real opportunity for a savvy business.
Find Your Niche
There are many niches and market segments that present opportunities for small businesses to survive or even thrive in this competitive environment.
There is room for the specialty business, but it will require a real commitment to changing the way you do business and how you allocate your resources. In short, ”for solar companies, changing their business model is the only way to stay competitive.”