Mid-scale solutions providers are the future, not solely solar retailers
The solar industry is heading towards convergence that will reshape solar retailers.
Why consolidation hasn’t happened, but that’s about to change.
For a long time, people have predicted the consolidation of the solar industry.
While there’s been some noteworthy buyouts and attempted roll-ups, the top solar retailers still hold a tiny market share. Some consolidation has come from small retailers exiting the industry during a downturn… but many more re-enter the industry when the good times return.
The reason for this industry structure is the low barrier to entry, combined with the low overheads of small installers.
Practically speaking, it is very easy for an electrician to do the odd job here and there. That same electrician can switch back to installing air conditioners or other general electric work.
And whereas medium and large solar retailers have considerable overheads, most sparkies who sell & install solar power systems trade their time for a day’s wage.
Because of this, our industry is characterized by a long tail. In fact, one-third of solar retailers do 5 jobs or fewer each year.
This shapes the industry into three segments:
- large solar retailers, who typically have a high-volume low-margin approach and tend to compete on price;
- medium-scale retailers who have existed for many years and who typically concentrate on service and upselling to higher-quality equipment;
- micro-retailers which largely consists of electricians who sell their own jobs, and whom typically compete on price. Though they have reduced purchasing power, they remain profitable on account of their small overheads. (This makes it difficult for micro-retailers to grow into medium-scale retailers, who are now reasonably entrenched).
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