Once upon a time, a light bulb was a light bulb, and price competition on the basic bulbs was tough.
But today, the typical home has a variety of different lighting products. When upgrading, consumers have trouble finding light fixtures that take the traditional light bulb, and they are bewildered when they go to the store to find a replacement.
This in turn represents a challenge to retailers to have the right light bulbs in stock, fitting the variety into already tight space, and remaining price competitive on basic bulbs. However, it is also an opportunity because the new bulbs are not as promotional as the old ones and supermarkets can get a better margin, nonfood executives told SN during a recent conference of the General Merchandise Distributors Council, Colorado Springs, Colo.
Meanwhile, retailers across the country find that their customers are following the demand in California for more efficient fluorescent lighting products.
"The decoratives are growing because every house has five kinds of light bulbs in it," said Doug Lowe, director of HBC/GM, K-VA-T Food Stores, Abingdon, Va. "It has caused us to rethink our lighting centers."
"Every light fixture that is sold seems to have a different bulb requirement," said Al Jones, senior vice president, procurement and merchandising, Imperial Distributors, Auburn, Mass. "Nothing is standardized. Most of those specialty bulbs are being sold at a little bit higher price, which affords the opportunity to make a little bit more margin. So that is good news for our business."
But there is a downside: the proliferation of stockkeeping units, and customers who are confused by the vast selection, Jones said. "It's crying out for the manufacturers to come out with a way, perhaps through point-of-purchase material, to explain all those differences and make it easy for the consumer to find the right bulb," he said.
And then there's the question of fitting in all those SKUs. "Our customers have 24 to 36 feet of light bulbs and that's a lot of space in the supermarket," Jones said.
"From a retail point of view, the decorative bulbs have increased sales," said Bob Schwartz, executive vice president, Gristede's Foods, New York. "Retails are up, gross margins are up, but the average sales per item are relatively flat."
Soft white light bulbs are slowing down, noted Larry Schimpf, director of HBC/nonfoods, Clemens Markets, Kulpsville, Pa. And that's a good thing because "you don't have to worry about footballing them quite as much as you used to. You've got to have the variety. You've got to have those specialty lights now more than ever."
While Clemens now has three lines -- two major brands and a private label -- that is hindering the assortment it can carry. "So now I'm looking to switch to one of the major companies on an exclusive basis and carrying the private label as just a secondary brand and for commodity-type items like the soft white bulbs," Schimpf said.
"You need the extra items to get the extra profit," said Dan Spears, director of nonfoods, Ingles Markets, Asheville, N.C. But space constraints keep the retailer from expanding the sets. "It's still a basic 12-foot set of lighting."
"If you don't have the variety, you are going to be a convenience pick," said Charles Yahn, vice president, Non-Foods Division, Associated Wholesalers, York, Pa. "If a person comes to your store and doesn't find the one bulb that they need, then they are going to buy all their other bulbs somewhere else."
The regular light bulbs have become a commodity, he said. "You can go anywhere and buy them for 99 cents. So what you are making your money on is the upscale bulb -- the decorative bulbs, the new home fashion bulbs. New houses don't have fixtures with soft light bulbs. Variety and selection are going to be very important."
As a result, "you are going to see less space for the traditional bulb and more for the upscale bulb. Running light bulbs on sale is not what it used to be, because everybody is on sale with them," Yahn said.
But many retailers are still "stuck in that rut of the 99-cent four-pack of soft white bulbs," said Jeff Manning, managing partner, F&M Merchant Group, Lewisville, Texas. With the proliferation of bulbs, supermarkets are going to lose more share in this category to the home centers and mass merchants because they cannot carry sufficient variety, he said.
"You almost need a 60-foot department now and a lot of stores just aren't big enough. They are in the convenience mode," Manning said. The decorative and specialty bulbs are "more profitable for the manufacturer and more profitable for the retailer if they can take advantage of it."
"The lighting category continues to be a tough one for us because of competition from other classes of trade, be it mass or home improvement," said Larry Ishii, general manager, GM/HBC, Unified Western Grocers, Commerce, Calif. "There's no question that there is still a place for the grocery retailer in the category, but we have to be smart. We have to make sure we are staying up with the trends. We have to keep going back and reinventing our program to be able to maintain a competitive posture and a competitive image in the eyes of our consumer and take advantage of the impulse purchase potential we have because of our in-store traffic."
The diversity of lighting products is challenging retailers in balancing the need for a complete selection in available space, Ishii said. "The more upscale the home becomes, the stranger the lighting requirements become. For the most part, the lamps that are needed in those homes are lamps that have been part of our selections historically. But if a store only has a 4-foot section, then that will be tough. If it has 8-foot or larger sections, then they probably already have those lamps that are required for the new homes today," Ishii said.
Another trend identified by Ishii is value pricing. "The dollar store phenomenon is probably the biggest driver of that," Ishii said. Private-label programs help the supermarkets compete, he said.
"The market for regular light bulbs has almost been ruined by the hardware discounters -- the Home Depots and the Lowes -- because they sell them so cheaply," said George Satterwhite, director of nonfoods, Affiliated Foods, Amarillo, Texas.
Many grocery stores try to compete by offering the soft white four-pack for about $1.99, he said. "The customer doesn't seem to balk at that. But if it goes much over that price, they will balk, and they will go to the hardware center to stock up on light bulbs," Satterwhite said.
Hy-Vee Goes to Private-Label Lighting
WEST DES MOINES, Iowa -- To drive value in lighting products, Hy-Vee here is getting into a private-label program, said Joel Wilson, Hy-Vee's general merchandise coordinator.
There will be more profit and return on investment, "but the bottom line is, you are trying to get a good product to your customers the cheapest way you can. The only way you can do that is to cut costs out of the system, and that's why private label works, and it works incredibly well for us," Wilson said.
The private-label line will feature the best-selling lighting products, he said. "There are two indoor floods, and we will run decorative bulbs and also the globes that go in the bathrooms. We won't run every flavor and we won't run every wattage, but we will have something in every category."
Hy-Vee will expand its sets to accommodate the new program, Wilson said. "The department has to get bigger. We will expand the sections in increments of 4 to 8 feet. We'll allow that because the name brands are not going to go away -- they are still the reason most customers come into your store. But we will then try to trade the customer to a private-label product because of the value," he said.
"For Hy-Vee, and for a lot of grocers, the next step will be to watch what private label does and what it does to your profitability and return on investment. Also, we will see just how deep are we going to get into the fluorescents and, with new homes and all the remodeling going on, just how far do we shift away from what we used to do 10 years ago, which was the soft whites," Wilson said.
Energy Costs Drive Fluorescent Sales
In California, energy costs are forcing the issue of the more efficient fluorescent bulbs. Some of the utility companies are offering special programs, said Steve Urgo, GM buyer/merchandiser, Save Mart Supermarkets, Modesto, Calif., "and we were able to really drive down the cost to the consumer of the fluorescent bulbs."
Prices on fluorescents are going down, he said, and the market is becoming saturated. "I think the category is flat for the most part. The home centers have really taken the bottom out of that market for the retailer," Urgo said.
This trend is starting to spread to other parts of the country. "It's not quite there yet in the Upper Midwest, but eventually those mini-fluorescents are going to be big for us too," said Joel Wilson, general merchandise coordinator, Hy-Vee, West Des Moines, Iowa.
The growth of compact fluorescent lighting is a key trend in the category, said Larry Ishii, general manager, GM/HBC, Unified Western Grocers, Commerce, Calif. "Because of their efficiency, and their long life vs. their cost, they are becoming a bigger and bigger, more important part of our business as electricity costs become a greater concern of our consumers," he said.
The federal government's Energy Star program is also helping to drive interest in compact fluorescent bulbs, Ishii said. "We have been presented four different programs for consideration in the past six months. We are working on one of those programs right now, and that should be very successful for us," he said.
The Future of Soft Whites
While the popularity of specialty bulbs is on the rise, retailers see continued demand for the traditional four-packs of soft white light bulbs. However, supermarkets will sell fewer of them, conceding the price advantage to mass merchants and home improvement centers.
"Those old-fashioned four-packs of soft whites that grocers have sold for years won't become a thing of the past, but they will become less of a big deal," said Joel Wilson, general merchandise coordinator, Hy-Vee, West Des Moines, Iowa.
The traditional light bulb will probably never go away, said Jeff Manning, managing partner, F&M Merchant Group, Lewisville, Texas. "They will be selling 99-cent lamps at the Dollar General and the 99-cent bulbs to go in them."
The soft whites "are just going to be a price football and that's about it," said Doug Lowe, director of HBC/GM, K-VA-T Food Stores, Abingdon, Va. "More and more it is going to the extra softs and all that -- the category has changed a lot."
Al Jones, senior vice president, procurement and merchandising, Imperial Distributors, Auburn, Mass., said, "The four-pack commodity business more and more is being done at Home Depot or Lowes or Wal-Mart because people can get it there for outrageously low prices. Supermarkets still sell a lot of the soft whites, but have to cut the price pretty dramatically to do it." The category will grow with the specialty products, he said. "It's a rapidly changing and evolving business."
So too at Affiliated Foods, Amarillo Texas, "I see us going more into the specialty bulbs," said George Satterwhite, director of nonfoods. "The consumer is more interested in those because of the long life and the convenience of not having to change the bulb as often."
