Electricals and Lighting - Brief Article - Industry Overview

Home Channel News, May 21, 2001

Last summer, David Heerensperger, the former chairman and brains behind Eagle Hardware & Garden and Pay 'N Pak, launched a new concept called World Lighting, with stores that are 25,000 square feet and stock more than 7,500 lighting and electricals items.

He said he came out of self-imposed retirement to get into a new retailing venture because he had observed that customers were "disappointed" by what other dealers were offering in this category, and that they were tired of having to wait several weeks to receive products they were forced to special order.

Heerensperger wants to open 40 World Lighting stores over the next five years. His timing is impeccable, given the volatility that persists within this industry sector, to say nothing of the urgency created by recent developments on the West Coast, where skyrocketing energy costs have brought to the fore not only the threat of rising demand but also the reluctance among consumers to embrace energy efficiency in electrical products until they are faced with a crisis.

Companies attempted to exploit that volatility through consolidation, from Cooper Lighting's purchase of Regent Lighting and Eagle Electric in early 2000 (and the subsequent realignment of its lighting businesses to address specific supply channels), to last month's $13 million investment by the merchant bank Sun Capital Partners into the financially fragile. importer and distributor Catalina Lighting.

Bestroute.com, the New York-based e-distributor that was backed financially by Hughes Supply, struck supply deals with 20 manufacturers -- including Cooper, Pass & Seymour/Legrand, Thomas & Betts and Siemens Energy & Automation -- in preparation for the launch of its online "store." But the demand for what bestroute.com offered never materialized, and it decided to shut down its site on March 9 of this year.

Demand in general for electricals and lighting products is expected to spurt in the aftermath of California's energy snafus, especially for those products that can demonstrate their cost-saving features. The "Energy Star" label, which indicates that a product meets energy-saving specifications mandated by the U.S. Department of Energy, found its way onto more products last year, from light bulbs to refrigerators. And several bulb suppliers such as Philips and GE have used their advertising to play up the longer-lasting qualities that have been engineered into their compact fluorescent and halogen products.

Schneider Electric, which markets its electricals products under the Square D brand, last year assigned its Advanced Technology and Analytics division to develop new lines that would help meet future demand for energy, which Schneider projected would be 60 percent higher than in 1997.

However, companies like Schneider may also need to assign their marketing departments with the task of figuring out how to convince consumers to pay more for energy-saving electricals and lighting, something they have been wont to do.

Despite technological advances that make energy-devouring major appliances far more efficient, energy demand continues to rise because there are so many more consumer electronic devices being used in the home. Consequently, suppliers such as Belkin, Leviton and Gemini have cashed in with home-office and lighting-and appliance-control products, even as computer sales have receded of late.

Another potential boon for electricals and lighting suppliers could be the proliferation of large-format home decor-oriented retail outlets in which these products form one of their core departments. That's certainly the case inside Sears' Great Indoors and Home Depot's Expo Design Centers.

Across the industry one could find an upgrading in stores' presentation and assortment, which may explain the appearance of Mission lamps of various quality levels and price points that illuminated the stores of dealers large and small last year.

For example, Lamps Plus, the 38-store specialty dealer in the western United States that touts itself as "America's Largest Lighting Superstore," last year broadened its selection of Mission lamps because "people are asking for it," said Maher Shaheen, the manager of the chain's store in Beaverton, Ore.

Electricals and Lighting: 6.0%

% of total Top 500 sales

Top 500 sales: $7.26 billion