The biggest challenge emerging for the solar industry (and what to do about it)

The biggest challenge emerging for the solar industry (and what to do about it)

The plunging price of solar panels is the biggest challenging emerging for Australian solar industry.
Whereas low price panels benefits consumers and stimulates demand, this plunge will have a wide-felt, mostly negative impact across panel manufacturers, distributors, retailers… and even inverter manufacturers.
Aside from consumers, retailers stand most to gain. Lower prices means easier sales, means more customers. However lower prices also means lower Average Sales Price (unless you upsell on system size), which means lower total margin… which can mean less overall profit despite any uplift in customer numbers. Essentially you need to work harder to net the same amount of money.
Some inverter manufacturers may also benefit. When panel prices were rising, retailers switched to lower-priced inverters in an effort to remain competitive. It could be as panel prices plunge, retailers use more premium inverters. Panel prices are plunging because of market entry attempts by lesser-known panel brands; a strong inverter brand may ‘carry’ the lesser-known panel brand.
Global pressures on panel manufacturers are intense at the moment. The USA has found some manufacturers are circumventing US anti-dumping tariffs, on top of thousands of shipments been blocked by US customs because of the Uyghur Forced Labor Protection Act. Some of that manufacturing capacity must have been diverted to Europe, where a year’s worth of excess stock has built up.  With global manufacturing capacity utilisation below 60% PV panel manufacturers will be happy to get whatever price they can in markets such as our own.
Locally, well-established panel manufacturers stand most to lose. Some have shown long-standing commitment to the Australian market, as reflected in their leading Australian market share for panel manufacturers: Jinko and Trina. They have frequently stared down competition from market entrants, whose market share can evaporate when efforts shift from market share towards sustainable margins. In the meantime, the going will be rough.
Wholesalers, already making no margin on panels, will get squeezed even further.

What to do about it

Closely Monitor Retailer Departure

SunWiz clients should use Luminate Panel Manufacturer to track their levels of retailer departure, and how it compares to other manufacturers. (This chart shows what happened when a manufacturer did the wrong thing).

Focus on your existing retailers

For many retailers, choosing a brand isn’t solely about price.
Your existing retailers will have some degree of loyalty, though you’ll still need to be competitive.
Your job is to keep your existing customers, while attracting new customers to replace ever-churning ones. Without pulling your pants down all the way to the ground.
Some manufacturers have done a great job of winning the loyalty of their retailers. Of SunWiz’s datasets, a limited sample enable us to track the buying behaviour of unidentified individual retailers. This enables us to see which manufacturers have retailers that buy from them each and every month. The image below shows a snapshot comparing panel manufacturers: whereas Jinko Solar (highlighted) has a ‘typical’ customer loyalty, Trina Solar (to its left) has much higher customer loyalty. (See more analysis in this article). So you should certainly be engaging with your loyal customers to keep them with you.
See if you can see which of the bars above is the new entrant.
So, focus on your existing retailers. Check in on those relationships.
If you haven’t got strong relationships with your retailers, it’s not too late. But get cracking.
To identify which retailers use your product (or at least claim to on their website), consult SunWiz’s Register of All Retailers. It’s filterable by area, product, and retailer size, enabling you to best concentrate your efforts.

Double-down on winning new business

Your efforts to win new customers must be doubled down if you are to stem the tide of customers leaving you for new entrants.
There’ll always be customer churn. (In the chart above, Jinko was re-/attracting customers (blue & green) faster than they were losing them (Red & Yellow)).
New market entrants shake things up, and some may leave one brand to try the new entrant, but soon be back looking for a supplier.
The best way to win new business remains the same, whether you’re an incumbent or new entrant:
  1. Identify high-volume retailers.
  2. Identify fast-growing retailers
  3. Identify new retailers
  4. Check out their reputation
  5. Connect with them

SunWiz’s Luminate Retailers enables steps 1-3 for >900 retailers. Our new Register of All Retailers extends this to over 4000 retailers, and also empowers you to  check out their reputation (and see how it compares) AND to connect with their key decision makers.

Take a Local Approach

You could refine your approach to identify regions where you’ve got low market share (SunWiz can tell you where that is), and win business with retailers in that area. Again our Register of All Retailers can help.
Also identify regions of strongest growth amongst the new entrant; you might focus your efforts on regions where they’re not gaining traction. For example, TW Solar has so far had greatest success in QLD & WA, but hasn’t cracked NSW to the same extent (see right pane). We will leave it to your expert judgment to determine why that is.

Price sensibly

If you are an incumbent manufacturer, then obviously, you need to be price competitive. Review SunWiz data showing how market share / volume relates of a manufacturer relates to how much cheaper or dearer they are priced. Use this dataset to optimise your prices: beyond a certain discount you make no further gain in market share.

If you are a market entrant, the same applies. Push prices too low, and everyone else follows, and now its a race to see who can hang on the longest before they bleed out. If you’re chasing long-term market share, then you need to do more than just be the cheapest, and it won’t be long before the next upstart comes along.

For retailers, pricing will be particularly dynamic in the coming months and hence it is important to know what you can charge what is being charged, and what you can charge.
Identifying which regions have the best use of premium products could also assist you in increasing your margins.
If you’re a retailer using OpenSolar, we can quickly show you where you’re best performing, with what products and salespeople.