Lighting-as-a-Service Market Analysis

Lighting-as-a-Service Market Deep Dive – PESTLE, Porter, SWOT

Lighting as a Service (LaaS) is a rapidly developing market, prompted by the growing demand for energy-efficient lighting and the increasing focus on sustainability in many industries. LaaS offers a flexible alternative to traditional lighting systems, with flexible, subscription-based models that include installation, maintenance and renewals. The advantages of this new approach are twofold: it not only reduces the capital outlay associated with lighting systems, but also enables companies to benefit from smart lighting and IoT integration. These factors are changing the commercial and industrial lighting market and making LaaS an attractive option for a wide range of end users, from retail to manufacturing. In the process, the market is developing in a highly competitive way, resulting in innovation and improved services.

PESTLE Analysis

• Political:
  In 2023, in many regions, government policies were increasingly favourable to energy efficiency and to the environment. This had an impact on the Lighting-as-a-Service market. For example, the US government earmarked $1.5 billion in grants for the development of energy-efficient technology, including smart lighting solutions. And the European Union set a goal of reducing greenhouse gas emissions by at least 55% by 2030. This encouraged the use of new lighting solutions that were compatible with this aim.
• Economic:
  In 2023, electricity prices have risen sharply, with a national average of 14 cents per kilowatt-hour, and this has led companies to seek cheaper lighting solutions. The energy crisis has also made companies focus more on their operating costs. By switching to Lighting-as-a-Service, companies have reported an average saving of 20 percent on their energy bills. And this economic pressure has prompted a shift to services.
• Social:
  In 2023, public awareness of the importance of sustainable development and energy conservation increased greatly. Surveys showed that a majority of consumers (75 %) prefer companies that show a commitment to the environment. Business leaders have responded to this trend by adopting lighting as a service solutions that not only reduce energy consumption but also enhance the companies’ social responsibility. Moreover, the concept of smart cities has taken hold. Almost 60 % of city planners consider energy-efficient lighting to be a major component of their development strategies.
• Technological:
  IT advancements in smart lighting have increased the Lighting as a Service (LaaS) market in 2023. With the introduction of IoT, smart lighting systems can be remotely controlled and monitored. About 30% of new lighting systems will be equipped with smart technology. Also, the development of energy-saving LED technology has led to a 50% reduction in energy consumption compared to conventional lighting, which makes these solutions more attractive for companies looking to reduce their energy costs.
• Legal:
  In 2023, the law on energy conservation was tightened up and in compliance with the Energy Independence and Security Act, all new buildings had to meet a minimum energy standard. For those who did not comply, the compliance costs increased by 40 per cent. Incentive programmes were set up in some states for companies that used energy-saving lighting, which also contributed to the spread of Lighting as a Service.
• Environmental:
  In 2023, the world's attention is focused on the environment, and the World Health Organization estimates that poor lighting is responsible for 30 per cent of the energy wasted in urban areas. The pressure on companies to adopt sustainable lighting solutions is thus growing, and eighty per cent of companies have already committed themselves to reducing their carbon footprint. The transition to LED lighting, which lasts up to 25,000 hours, is expected to reduce waste and energy consumption significantly and fit in with the world's overall sustainable development goals.

Porters Five Forces

• Threat of New Entrants:
  “The Lighting-as-a-Service market has a moderate barrier to entry, because of the significant capital expenditures in technology and infrastructural investment. However, the increasing demand for energy-efficient solutions and smart lighting systems is attracting new entrants, which is driving competition in the market. Brand loyalty and customer recognition may be an advantage for established players, but disruptive innovation can disrupt the market, as well.
• Bargaining Power of Suppliers:
  The supplier power in the L-a-a-s market is relatively low, as there are many suppliers of lighting components and technology. The standardization of many components and the availability of several suppliers limit the influence of a single supplier. Further, the companies can change their supplier without any significant costs.
• Bargaining Power of Buyers:
  The buyers of the lighting-as-a-service market have high bargaining power, because of the many service suppliers and the low switching costs. In particular, the buyers can easily compare offers and negotiate terms, especially in the commercial sector where large contracts are involved. Suppliers are forced to offer lower prices and better services in order to retain customers.
• Threat of Substitutes:
  The threat of substitution in the Lighting as a Service market is moderate. The threat is moderate, since there are already many other energy-efficient lighting solutions. But the unique value proposition of Lighting as a Service, such as reduced initial costs and maintenance services, makes it a compelling choice. The only threat would come from advances in other technologies that could provide similar benefits at a lower cost.
• Competitive Rivalry:
  Competition is intense in the Lighting-as-a-Service market, where numerous players are vying for market share. To stay ahead of the competition, companies are constantly launching new and improved services. The fast-growing market attracts both established players and new entrants, resulting in intensified competition. Price wars and aggressive marketing are common as companies compete for customers.

SWOT Analysis

• Strengths:
  • Cost-effective solution for businesses by reducing upfront capital expenditure.
  • Flexibility in service offerings, allowing customization based on client needs.
  • The emphasis on sustainability fits in with the worldwide trend towards energy efficiency and a reduction in carbon emissions.
  • Access to the latest lighting technology without the need for continuous investment.
• Weaknesses:
  • Dependence on long-term contracts may deter some potential customers.
  • Complexity in service agreements can lead to misunderstandings and dissatisfaction.
  • Limited market awareness and understanding of the Lighting-as-a-Service model.
  • Potential for higher long-term costs compared to traditional purchasing models.
• Opportunities:
  • Growing demand for smart lighting solutions in commercial and residential sectors.
  • Expansion into emerging markets with increasing urbanization and infrastructure development.
  • Partnerships with technology providers to enhance service offerings and customer experience.
  • Government incentives and regulations promoting energy-efficient solutions can drive market growth.
• Threats:
  • Intense competition from traditional lighting manufacturers and new entrants in the market.
  • Economic downturns may lead to reduced spending on non-essential services.
  • Rapid technological advancements could render existing solutions obsolete.
  • Regulatory changes affecting energy efficiency standards may impact service viability.

In 2023, the Lighting-as-a-Service market will have a unique combination of strengths and opportunities, mainly in terms of cost-effectiveness and its alignment with the sustainable trend. However, it will also face a number of weaknesses, including a lack of market awareness and complexities in the contract. The market potential is high, especially with the development of smart lighting and government support, but companies must also be able to cope with competition and technological changes to maintain their market position.