Opportunity shines in bulb aisle
Federal efficiency regulations have spurred change in the light bulb industry, and that is good news for hardware dealers whose expertise can set them apart and help grow market share.
Nate Jones, store manager at Yoder's Shipshewana Hardware, Shipshewana, Ind., is seeing that firsthand. Since a Do it Best reset in February, the 36-ft. lighting aisle at Yoder's has illuminated in more ways than one. "I don't have exact sales numbers yet since the reset, but we have done really well with the assortment," he said. "It makes it look like we are in the business of selling light bulbs. The reset was fabulous."
The category is no longer as simple as buying a package of 60- or 100-watt incandescents off the shelf. What's forcing widespread changes in lighting is the Energy Independence and Security Act of 2007. The law leaves three alternate technologies for most residential lighting: halogen incandescents, CFLs and LEDs — all of which are more efficient than old-style bulbs while lasting up to 50 times longer.
Because of the influx of CFLs and now LEDs, the light bulb category is no longer a commodity, said Do it Best CEO Bob Taylor. "This gives the independents a great chance to remerchandise the category, educate your staff and capture a bigger segment of that business. And I think it's going to be a more profitable business, too."
Following his store's reset, Jones marked down his remaining incandescents by 50%, "just to get it out of here," he said. His lighting aisle consists mainly of CFLs and halogens, with about 2 ft. of LED bulbs.
Jones said the trend of energy-efficient, longer-lasting, albeit more expensive, light bulbs has changed the conversation in his store and given his salespeople a chance to educate the shoppers. "It's not just about attractive displays that we put up — it's about understanding the new language," he said. "You can't talk about watts anymore; it's lumens that we talk about. Kelvins is another conversation piece, because we are talking about color temperature. There's a whole new way of thinking."
And shopping, as customers accustomed to choosing 60- and 100-watt bulbs now look for "equivalent" bulbs that determine similar light outputs for incandescent, CFL and LED bulbs. This smorgasbord of shapes, styles, output, color temperature and energy dovetails perfectly for the smart hardware store. "It's definitely an opportunity for the hardware store, provided the [associates] are properly trained," said David Bigham, Orgill's merchandise manager, electrical.
LEDs: No one disputes that LEDs are destined to become the leading bulb. Exactly when it supplants CFLs is conjecture. At Home Depot, LEDs are the fastest-growing segment of its light bulb business, according to Mark Voykovic, light bulb merchant, who said that during 2011, the LED category doubled in sales volume and is now more than 14% of all light bulb sales. "We have seen over a 500% increase in the sales of LEDs (2010 to 2012). These numbers clearly demonstrate that customers are gravitating toward the high-quality, energy-efficient lighting product despite its higher-than-average price point," he said.
While price is currently an impediment to LEDs reaching critical mass, Voykovic said that as demand increases and technology advances, prices will come down. Home Depot is marketing a new Cree brand LED and Eco Smart 40W equivalent for $9.97 (compared with $20 a few years ago), and a Cree LED 60W equivalent for as low as $12.97. "Combine that with local rebates, and the Cree LED can be the same price as an incandescent light bulb," Voykovic said.
In most cases, though, the price delta between CFLs and LEDs is significant. Bigham said LEDs "are sure not going to take over anytime soon — there is still a pretty significant difference from a cost stand-point from CFLs to LEDs."
Bigham sees LEDs and CFLs coexisting in the marketplace based on the need for different applications. "That's where asking the right questions with the customer in your store is important," he said.
Voykovic sees a parallel between the adoption rate of new-age LED light bulbs and some consumer electronics products. "Just like flat-screen TVs, LED bulbs started selling at a higher price and are now dropping as technology and manufacturing become more efficient," he said. "Competitive pricing and new innovations in light bulb technology will be essential for survival in the lighting industry moving forward."
Tom Boyle, chief innovation manager, GE Lighting, said that based on consumer research, the size and shape of the LED bulb is important to shoppers. "As LED technology continues to evolve, producing the same quality of light with smaller bulbs will allow consumers to be more creative with lighting," he said. "LEDs can change the way we light our homes."
Short term, Boyle predicts that prices will continue to drop as efficiencies are realized in drivers and chips, thereby leading to wider adoption.
["It's definitely an opportunity for the hardware store, provided the [associates] are properly trained."]
— David Bigham, Orgill's merchandise manager, electrical