Near the end of his last year with the US Army at Fort Drum in New York, Brandon Russell decided against re-enlisting. Instead, he decided that he wanted to go back to civilian life so that he could work in a growing industry that he was excited about — solar power.
But he wanted to make sure he wound up with a company that had a good future.
“There’s going to be a lot of startups, I thought. But when it comes down to the end, there’s probably only going to be three big companies, and the rest will go bankrupt or get absorbed,” Russell said in a profile in the March/April issue of Sierra magazine.
“I wanted to get with a company that was going to be in it for the long haul.”
That’s why Russell placed his bet on SunPower, which offered him a job getting permits for home solar projects.
Too Many Solar Installers
Russell is not an industry analyst. But he’s thinking the same thing that the experts are saying and that the rest of us are thinking.
Namely, that there are too many companies today doing residential solar installations.
The market is just too crowded. In most cities across the U.S., homeowners can choose from two or three cable companies, a half dozen cell phone providers and perhaps only a single monopoly utility for their grid electricity. Yet, those same homeowners may have a choice of 20 solar installers. Or even more.
As larger solar installers grow in size and the market stabilizes, today’s number of solar installers will probably prove to be unsustainable.
As Russell so aptly puts it, there are two ways for solar companies to disappear as the market consolidates.
- One option is desirable — to be acquired by a larger competitor, which should pay generously to buy you out.
- The other option is bankruptcy, which may provide a valuable learning experience but is, let’s say, somewhat less lucrative.
Three Big Solar Companies…and Yours
After today’s crazy solar boom settles into a more stable market, as has happened in other industries from cars to airlines to personal computers, the companies left standing may be mostly big national installers.
But I disagree with Russell that the only ones left standing will be a handful of big players. There’s also an opportunity for smaller players to survive the coming shakeout if they can offer value to homeowners that the big national companies aren’t offering.
Large national installers do certain things well. They cut costs with simple, standardized products offered at a large scale. They send out armies of salesmen to overwhelm competitors. And perhaps most importantly, big national installers don’t limit their outreach to sales as most smaller solar installers do. Big companies also do marketing.
Bit installers buy TV ads, they get press coverage for their company news and they build expensive websites with lots of optimized content to get to the top of the most common Google search results.
Where Big Solar Installers Stumble
But large national installers do a couple things less effectively:
1. Customer Satisfaction
Overall, many customers of national solar installers may be satisfied. But sheer quantity of customers means that some will never be satisfied even if a big installer generally does good work.
However, there’s good evidence that sometimes national installers take a one-size-fits all approach that slots customers into financing they don’t really want, such as PPAs.
If a national installer thinks they can dominate every market everywhere by becoming the McDonald’s of Solar, then they may find the number of bad reviews on Yelp just keeps growing from customers complaining about deceptive financing or shoddy work.
2. Local Credibility
Big national companies have a hard time building the local knowledge and connections to local communities that they need to establish credibility in all the cities and towns where they do business.
That’s a big deal if you’re a solar installer. Local credibility may not matter if your business is entirely digital, like YouTube. Or if your business is mail-order like Amazon. But if somebody’s going to come to your home and put something expensive on your roof, it doesn’t get anymore local than that.
A national installer with its roots in California may stumble as it tries to expand into the Southeast or the Midwest, for example.
How Local Installers Must Respond
The clunkiness of big national companies is an opportunity for more nimble local installers to quickly pivot in and provide what the big companies can’t.
Last year, I published a post on how you can beat the big boys if you run your local solar company right: “The #1 Way Local Solar Installers Can Beat SolarCity.”
Let me add to that advice here.
Basically, if you’re a local company competing against a big national installer, don’t try to play their game.
You can never afford to buy enough TV ads to get the name recognition of SolarCity. You can never create a big enough web presence to rank above Solar City in a Google search for a broad term like “home solar.” And you can never get the economies of scale big enough to bring your costs down lower than SolarCity.
If you try to play their game, you’ll lose. Instead, what you must do is play your own game:
- Don’t go wide, go deep. Pick a limited service area and commit to become the #1 solar installer in that area.
- Quality not quantity. Focus on customers who appreciate craftsmanship and attentive customer service enough to pay extra for it. Leave the mass market that demands always-low-prices to the national installers. Consider concentrating on a niche market of early adopters by offering better equipment.
- Marketing that’s smart, not loud. Even if you really offer better service and better value in solar, you won’t sell any installations if nobody knows about it. Local solar companies need to do marketing too. But your marketing should be different. Forget about buying ads on TV. Even online, you can’t outspend SolarCity for position on Google searches or visibility on Facebook. Instead, publish good content on your website tailored to your local audience and try to beat the big guys on more specific web searches like “home solar central New York.”
Don’t just be another me-too solar company that does pretty much the same thing as SolarCity or SunPower but that nobody’s ever heard of.
Be different and let your potential customers know why that’s better for them.
— Erik Curren, Curren Media Group