14577 Thu, 05/29/2008 - 3:37pm
By Nancy Meyer
Lighting retailers across the channels are being affected by today’s tough economy.
The two lighting market-share leaders, Home Depot and Lowe’s, have cut back on store growth and are focusing on managing inventories, according to vendors. Extreme sales weakness in lighting is reflected in much smaller orders, they said. Sources estimate a double-digit sales decline in lighting for Home Depot, and a high-single-digit decline at Lowe’s in 2007, compared with the prior year. The outlook for 2008 is even bleaker, sources told HFN.
Home Depot has been undergoing an overhaul in its lighting, under the direction of a new merchandise manager, which is expected in coming months. Meanwhile, Lowe’s continues to pursue lighting showroom brands and designs to gain an advantage.
The mass merchants and discounters fared slightly better last year, as their product mix is more skewed to portable lamps, which is more of an impulse purchase than fixed-wire lighting and can be seen as an easy way to freshen a home’s decor.
But strategic differences are also playing out.
“When times get tough, there are always two strategies,” said one big-box vendor. “[Retailers] either cut back on inventory, cut projections and buy that way, or they decide they’re going to invest in inventory and stay in stock and not be out of stock on anything. Well, Wal-Mart has said it’s going to be in stock while Target is managing its inventory, and by God, Wal-Mart’s winning that game. Their sales are great and they’re outperforming,” the vendor said.
Wal-Mart may also be picking up some upper-end customers as well, but the in-stock position is an advantage, this executive said.
Similarly, TJX Cos, an off-price leader, saw growth in its lighting business of between 5 and 6 percent, according to HFN estimates.
While not a big player in lighting, Linens ’n Things nonetheless hurt some of its lighting and home decor vendors with its financial difficulties and eventual bankruptcy filing. There are other “shaky” retailers that lighting vendors said they are watching very closely, including Cost Plus World Market and Kirkland’s, executives said.
Meanwhile, the lighting showroom channel, which still commands a significant portion of market share, has also suffered tremendously.
Most of them depend far too much on builders, and are getting nudged by vendors to go after more retail, decorator and designer trade.
The difficulty for some such showrooms is their less-than-ideal locations, sources pointed out.
One shining exception is that of Lamps Plus, a privately held chain of well-merchandised lighting stores located in high-traffic shopping areas in key markets in the West. Lamps Plus, which does not release sales figures, is praised by vendors and competitors alike for its dominance in its markets and its strategic, multichannel retailing, which has propelled the retailer to a major national presence.
The second-largest independently owned showroom on the list is Progressive Lighting/Lee Lighting, which operates 13 showrooms—seven in Georgia, three in Texas and three in North Carolina. Also privately held by the Lee family, these showrooms have a strong franchise with a high-end builder and design community, particularly the newest stores in the metropolitan Atlanta region.
While lighting retailers are struggling with lower foot traffic and lagging sales, tight-wad consumers continue to get a real bargain for the lamps and fixtures they buy. Big-box retailers continue to resist price increases, so vendors are forced to discontinue in-line goods that are no longer profitable to sell at such prices.
For their part, vendors contend that price increases they’ve passed along—twice already this year for some—don’t even come close to covering their higher costs to produce the goods.
All of these economic pressures are playing into the hand of buying cooperative Lighting One, owned by CCA Global Partners, which offers exclusive private-label goods with wide margins and discounts on all manner of merchandising, marketing, advertising and back-office functions. Lighting One’s showroom membership grew to 153 locations in 2007.