Can grocery turn the lights back on? Supermarkets are in the dark with the lighting category. What will it take for them to turn this category around?

For years, retailers have faced the dilemma of whether to pay more attention to the lighting category. This procrastination is hurting sales as supermarket operators continue to lose share in this category to other outlets. The "big box" retailers' strategy of educating consumers, selling them value-added, higher-margin items and dedicating more square footage to the lighting category is proving to be an effective strategy in creating true destination centers for lighting purchases.

Compared to what these outlets are doing, from a price, promotion or assortment standpoint, most supermarkets have not done a good job establishing a unique merchandising position in the lighting category. And without differentiation, supermarkets are not creating a reason for shoppers to buy lighting products in their channel, note observers.

Too often, supermarkets have relied on convenience as a driver, but sources say retailers can no longer afford to play the convenience card. "There are so many trips being made today to other channels that consumers are simply becoming accustomcd to picking up nonfood items in whatever store they happen to be in," says Jim Wisner, president of Wisner Marketing Group, based in Libertyville, Ill. "Clearly, it is becoming easier for consumers to defer their nonfoods purchase in a supermarket because they know they will be in a mass discounter, club or dollar store sometime that week."

When it comes to the lighting category, Wisner says it is obvious that supermarkets are unsure which direction to take. "Right now, consumers tend to only purchase lighting products in the supermarket out of desperation. If supermarkets want to make lighting a core category, they need to reverse this," notes Wisner. His company recently completed a study of nonfoods category dynamics that looked at what variables most affect how and where consumers shop for nonfoods. The results of the research, which was conducted on behalf of GMDC, will be released later this year.

There could not be a better time to be in the lighting business. Innovation in the category during the past couple of years created excitement for consumers and that, in turn, observers say, is helping to drive sales. Michael Walker, brand manager, consumer marketing for Somerset, N.J.-based Philips Lighting, says the lighting category is in a state of transition. He says there have been many developments in the past few years that are helping to drive the category from a commodity-based one to a value-added one. "Lighting products today are taking consumers from a functional approach to lighting and transitioning them to a more emotional look and feel. This, in turn, is generating a new sense of enthusiasm from consumers," says Walker.

Alan Feit, marketing director at Pico Rivera, Calif.-based Feit Electric is among many in the industry who think grocery retailers could improve their sales in the category if they rethought their pricing strategy. He believes supermarket operators could learn a lot from what other channels like big box stores, home centers, hardware stores and mass merchandisers are doing to merchandise and boost lighting sales. "The key issue is that the supermarkets do not price light bulbs competitively compared to other retail industries," says Feit. "Nor have they done a good job keeping up with new product trends."

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Pricing is an issue with supermarkets and a key to overcoming perception issues, says Tracie Kacmarcik, strategic marketing manager for consumer products at Sylvania, based in Danvers, Mass. So, too, is better merchandising execution. "Retailers need to price the category in a way that attracts shoppers. Too many grocers are still attempting to get two dollars for a basic light bulb that the average consumer knows she can purchase at Wal-Mart or Lowe's for around a dollar," she says.

Jack Fisher, category manager of general merchandise at Imperial Distributors, based in Auburn, Mass., says aside from pricing concerns, a challenge for supermarkets is to get the consumer to visit the lighting aisle on a regular basis. "Retailers need to let the consumer know that supermarkets can offer customers the same full variety of lighting products they would find at mass stores and home centers," he says.

SEIZE THE DAY

There is no doubt that the category is chock full of opportunity, but only if retailers are willing to make lighting a priority. That means that retailers and suppliers must provide the proper merchandising and promotional support to drive impulse sales in the category. By devoting more space, adding higher-margin products and adjusting their pricing, sources say retailers will be in a position to capture more sales and ultimately a larger share.

What is the first step for retailers looking to make changes to the category and improve their situation? According to Feit, by partnering with suppliers retailers would put themselves in a better position to stay on top of category developments. "We encourage retailers to work with companies that are willing to help them obtain the newest products at the best prices," notes Feit.

Wisner suggests that instead of having an assortment mix similar to what a shopper can find in a home center, supermarkets might consider focusing on a few items they can promote aggressively. Retailers should at least incorporate those types of items within the regular mix so they can pre-empt shoppers from making a trip to another retailer. There are also opportunities for retailers to start leveraging their store brands and make better use of space, he notes.

"Retailers need to find ways to carve out a niche and be the answer to a question," says Willard Bishop, president of Barrington, Ill.-based Bishop Consulting. "Is your store where people get the best price, the best variety or where the best promotions are?" he asks. "Supermarkets need to either take a different approach and broaden assortment, or find a way to create a superior value proposition. [They need to] create a reason for shoppers to look at the supermarket as a viable place to buy lighting products."

Walker argues supermarkets should pay close attention to what their competitors are doing, particularly home centers. "The one strategy that is consistent among the home centers is the up-selling of consumers to the higher-priced and higher-performing, long-lasting incandescent and halogen products and compact fluorescent light bulb energy saving product lines," he says. According to Walker, Home Depot uses the soft white bulb as an opening price point, but the home improvement chain invests its catalog space and promotional floor space in higher-margin products. Also, he says, the merchandising at Home Depot is geared more toward educating the consumer on what bulb to purchase and simplifying the shopping experience.

Jim Connolly, general manager, consumer sales, for Cleveland-based GE Lighting, the industry leader with an estimated 65% market share, suggests retailers start their category overhaul by committing the proper footage to it. He notes that dedicating 16 feet to 24 feet of space and featuring a mix that reflects changing consumer needs--including reflectors, decorative, outdoor floods and halogen--can be a highly effective merchandising strategy for supermarkets. Second, Connolly says retailers need to take advantage of the impulse nature of light bulbs with freestanding displays, preferably high-volume mixed SKU pallets. "Retailers that are using these additional displays are seeing some great sales and margins," says Connolly, who believes the industry needs to do a better job of store-level execution of floor stands. "Too often, headquarters buys into the program, but it falls short at the store," he says.

The other challenge, adds Connolly, is competitive pricing on what were once called the "all other" types of bulbs. These bulbs, he notes, are becoming more popular than traditional style bulbs. "Retailers need to focus on these emerging types of bulbs and price them competitively to capture sales," he notes.

Looking ahead, what do supermarkets need to do to grow their lighting business? Walker believes supermarkets should continue to focus on pricing and assortment. He says although grocery is currently a convenience destination for light bulbs, retailers need to look at getting their pricing more in line with the rest of the market. "An additional investment in merchandising to educate consumers and promotions to drive traffic and awareness for the category is also needed," says Walker.

More aggressive promotions, agrees Kacmarcik, would help make light bulbs more top of mind with supermarket shoppers. She says a lot of grocers have stepped away from promotional support, something she believes is a mistake. "It is very important, especially on the top four or five items that consumers buy on a regular basis, to put those items into the circular. That shows consumers that from a bread-and-butter perspective supermarkets are competitive," she explains.

Kacmarcik believes that whether promotion is done on an everyday basis with private label or semi-regularly with a branded supplier, there are many options for the retailer to drive awareness in the light bulb category. "Retailers hesitate to put the promotional support behind the category because it doesn't drive the volume they expect for that week. But the true value of promotions is that it keeps the category in front of the consumer and reminds them it is still an option to buy light bulbs in the supermarket," she says.

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Off-shelf displays during the time the product is advertised are also important. So, too, is category management. "Retailers can't do everything, so they need to use data analysis to determine what is working. Some value-added and technology-driven products will do well depending on what part of the country the store is located, but in others those items do not fare as well. It is critical that retailers evaluate how the product is turning after a few months and make adjustments." notes Kacmarcik.

According to Connolly, retailers need to get away from relying heavily on back-side costs to stay in the game. Retailers that are having success in the lighting category, he says, are weaning themselves from this and going toward a dead-net program. "We are asking them to earn their money through the register vs. on the buy," he notes.

Retailers, says Fisher, could also gain a competitive edge by taking better advantage of wholesaler and supplier relationships to craft customized merchandising programs. "Lighting vendors are often willing to work closely with retailers to tailor promotional programs specifically for their market area," he says. "This is an opportunity supermarkets should jump on."

SHINING A LIGHT ON BRANDS

Lightbulb sales--Top 10 Brands

BRAND                   UNIT SALES  % CHANGE  UNIT SHARE  % CHANGE

CATEGORY--LIGHT BULBS     245.4       -5.8%     100.0        0.0%
GE                        124.3       -8.3       50.7       -1.4
PRIVATE LABEL              50.8       -7.2       20.7       -0.3
SYLVANIA                   18.5       -2.2        7.5        0.3
GE REVEAL                  11.1       18.1        4.5        0.9
GE LONG LIFE                8.4       -6.4        3.4       -0.0
PHILIPS DURAMAX             4.3       90.3        1.8        0.9
PHILIPS                     3.9      -51.4        1.6       -1.5
GE MISER                    3.8      -26.2        1.5       -0.4
GE HOUSE/GARDEN             1.4       -6.3        0.6       -0.0
GE SOFT WHITE               1.3      123.5        0.5        0.3

Source: Information Resources Inc. Sales for mass retailers (excluding
Wal-Mart) for 52 weeks ending Feb. 22, 2004.