Strive for simplicity

By Carolyn Schierhorn

Per the Energy Independence and Security Act of 2007, all but specialty incandescent lightbulbs disappeared from store aisles by the end of 2014, yet consumers remain confused about energy-efficient options. It’s not unusual to see customers pacing back and forth in the lightbulb aisle, dead bulbs in hand, randomly pulling out packaged bulbs and straining to make sense of U.S. Federal Trade Commission-mandated “Lighting Facts” labels, observes Chris Rockwell, the founder and president of Lextant, a Columbus, Ohio-based market research and product design firm.

With more manufacturers entering the market, light-emitting diode (LED) bulbs have come down substantially in price and are seizing market share from compact fluorescent (CFL) bulbs, notes Tripp Smith, president of EarthTronics, a Muskegon, Mich.-headquartered vendor of energy-efficient lighting solutions. However, shoppers have become perplexed by all of the bulb variations on store shelves today.

Consumers might have more confidence when buying household batteries, but that could be because the choices are more limited. Mass-market and other large retailers often carry just two national brands of batteries, forgoing a store brand.

“In fact, the largest retailer in the world sells private label everything else but does not sell private label batteries,” emphasizes Jesse Otazo, vice president of sales for Hengwei Battery USA in Clearwater, Fla. Retailers receive rebates from name-brand battery manufacturers for reaching aggressive sales targets, which discourages the launch or promotion of own brands, he explains.

IRI, a Chicago-based market research firm, reports that U.S. retail sales of private brand batteries decreased by nearly 2 percent to $344 million in the 52 weeks ending June 12, while the category as a whole decreased by less than 1 percent to $2.7 billion. Store brand batteries constitute 12.5 percent of retail dollar sales, down slightly from a year ago.

“Batteries are a mature category,” points out Sandy Fung, sales manager for Golden Power Corp., a Hong Kong-based manufacturer of private label batteries. Remote-controlled and other battery-operated toys used to be a robust market for household batteries, but that market has been shrinking over the past several years, she says.

“Kids aren’t playing with toys as much,” Fung explains. “They have their own tablets and smartphones and apps, so this market is much tougher than before.”

She notes that television remote controls remain a strong application for AA and AAA batteries, but one that is diminishing because people have started to use iPhone apps to operate their TVs. 

Pockets of opportunity

Some battery subcategories are performing much better than others, however, according to a June 2016 report from Rockville, Md.-based Packaged Facts. Between 2015 and 2020, retail sales of alkaline disposable batteries are expected to decline by 4.7 percent, but sales of alkaline rechargeable batteries are expected to rise 4.8 percent, the report, “Household Batteries: Consumer Market Trends in the U.S.,” states. Lithium ion rechargeable batteries will likely see the biggest gain in that period — 11.8 percent, the market research firm says. Environmental concerns are driving consumers away from disposable batteries and toward rechargeable batteries.

Two other fairly strong subcategories include zinc air batteries, expected to grow by 5.6 percent, and silver oxide batteries, predicted to increase by 6.7 percent. These micro-batteries, also known as button cells, have traditionally been used in watches and in medical devices such as hearing aids and glucose monitors. But they have the potential to be used more widely, Fung believes.

“As devices become increasingly smaller in design to be trendier and more stylish, the need for button cell batteries will grow,” she says.

In addition, aging baby boomers are purchasing more medical devices powered by micro-batteries. To leverage this trend, retailers should develop their own brands of micro-batteries and market them at lower price points than the national brands, Fung suggests. 

But store brands so far have failed to gain traction in the better-performing battery segments. For example, in the zinc air battery subcategory, private label sales declined 2.1 percent in the period ending June 12, while total sales increased by 2.5 percent, IRI reports.

While Fung thinks micro-batteries will grow in importance, disposable alkaline batteries are not a dead subcategory, she maintains. She advocates more creative packaging and merchandising of this segment.

Fung also recommends that retailers sell large packs of assorted private brand batteries, economically priced at around $20. These can be marketed as “disaster packs” or “garage packs,” she says.

Natural disasters such as tornadoes, floods and wildfires occur more frequently today, Fung notes. During such times, power outages are commonplace. Safely stored on high garage shelving, a pack of AA, AAA, C-cell and D-cell batteries, alongside flashlights and a radio, could be a godsend during an emergency.  

Bright outlook

Overall, the outlook appears brighter for store brand lightbulbs. For the reporting period ending June 12, U.S. retail sales of store brand bulbs grew 18 percent to $340 million, while the entire lightbulb category increased by less than 5 percent to $1.4 billion, according to IRI. Store brand bulbs now account for 25 percent of dollar share, up nearly 3 percent compared to a year ago.

“Private label is alive and well in the lightbulb business,” Smith says. He recommends that retailers focus their store brand lineup on LED bulbs, favoring those that are Energy Star-certified. Given new Energy Star specifications enacted this year, it will be almost impossible for CFL bulbs to meet the latest standards. Smith predicts that CFL bulbs will be phased out during the next two years.

But retailers could do a better job of merchandising LED bulbs, Rockwell says. All too often, stores erect detailed technical signage that turns the lightbulb aisle into a science museum, intimidating the average consumer.

“When shopping for lightbulbs, an overwhelming number of consumers engage the shelf at the package level, ignoring overt signage and displays,” Rockwell says. “Instead, they look for visual cues such as a similar shape to the bulb they want to replace.”

Lextant helped Lowe’s, a major client, transform the lightbulb aisle at its stores.

“We applied simple color coding to shelves to create a distinction between different types of bulbs,” Rockwell shares. “And we used the importance of bulb shape to create a quick visual focus to narrow appropriate selections for the consumer.”

For store brands, packaging plays an important role in explaining the ease of use and benefits of LED technology and in connecting consumers to the right bulb for their needs.

“Lightbulb merchandising and packaging should enhance clarity, communicate differentiation and create consumer engagement,” Rockwell says. “Store brands can compete well throughout the LED category by providing resonant packaging that matches how consumers shop for replacement bulbs and how they will use them.”

Do market value packs of assorted private brand batteries in "disaster pack" or "garage pack" formats.

Don't miss out on the growing micro-battery and rechargeable battery segments.

Do consider using color coding to differentiate various types of own-brand lightbulbs.

Don't discount the role of packaging in explaining the ease of use and benefits of LED technology.