The Project Began with a Thorough Review of the Market for Lightbulbs

As part of the overall strategy development process conducted in 1998, Philips completed a thorough review of the overall lightbulb market. By this time the company had become very fact-based and had an excellent market research department. The research department provided a review of all of the available data on the lightbulb market, as well as data from several custom studies. Store checks and interviews with retailers were also conducted to provide a hands-on view of the current marketplace .

The consumer market for incandescent lightbulbs has five retail distribution segments: grocery stores, hardware and home center stores, mass merchandisers, drugstores, and a category labeled ˜˜other. Grocery chains had previously been the dominant source of lightbulbs, but by 1998, this dominance had shifted dramatically to the home centers and mass merchandisers. The grocery segment was declining, and the mass merchandiser and home center segments were increasing.

Consumers saw that stores like Home Depot carried one hundred feet of lightbulbs, including every type of lightbulb they might need for the home. In comparison, a grocery store would carry maybe twelve to sixteen feet of lightbulbs and certainly did not have every type of lightbulb. Home Depot alone sold one out of every five lightbulbs. Purchases in grocery stores now tended to be those where the consumer was shopping in the store and remembered that one of his lightbulbs had burned out, so he bought a fourpack just to make sure. However, if the consumer was doing a lighting project and was buying fifteen or twenty lightbulbs at one time, she would do this at a home center.

GE was the dominant player in the grocery chains and mass merchandisers. Philips was the dominant player in home centers because Philips was the primary supplier of lightbulbs to Home Depot, which sold 20 percent of all the lightbulbs sold in the United States. Sylvania was number three among the major brands. The other factor was private label. Some retailers were selling lightbulbs imported from the Far East under their own private label. Some imported lightbulbs were also being sold under the Westinghouse brand name , which was licensed from Viacom (the current owner of the trademark).