Home Depot's (NYSE: HD ) annual holiday-light trade-in always generates buzz among eco-conscious and thrifty consumers looking to get the greenest deals on energy-efficient LED lights. Whether you're eco-minded or not, trading in old or broken incandescent lights for a discount on something shiny and new has its appeal.
And this year, the economics of switching to LED Christmas lights is finally starting to make sense for homeowners — good news for LED wholesalers and manufacturers, as well as for utilities that are pushing for conservation.
Businesses and cities have been switching to LED holiday lights for years now. Since 2007, General Electric (NYSE: GE ) has festooned the national Christmas tree in Washington with LEDs. That's also the year Rockefeller Center made the changeover, cutting its annual tree-lighting power use by two-thirds. Cities from Houston to Los Angeles use LEDs now as well, to save power up front and replacement costs over the long haul.
Coming to a home near you
Municipalities and event producers are high-profile customers who buy lights by the thousands and tout their eco-credentials in press releases at holiday time. But since their introduction, LEDs have cost quite a bit more than comparable incandescent lights, which is one reason homeowners have been slow to adopt them. After all, a few strands of lights burning for a few weeks a year doesn't seem like that big a deal.
On a large scale, though, home holiday lights use enough electricity each year to power half a million homes for a solid month. And the market for holiday decorations runs some $6 billion annually, according to a 2011 estimate by the National Retail Federation, with the average holiday shopper spending about $47 on decorations, including lights.
Those holiday dollars wouldn't buy much LED sparkle in years past — maybe a couple of strands. This year LED prices are coming down, with many options under $10 per strand, still higher than most incandescents but more affordable. And in some cases, LEDs beat their old-school analogs: Right now Target (NYSE: TGT ) is selling multicolored C9 LED string lights for 50 cents less than the incandescent version.
Lights for the long run
When you compare LED and incandescent holiday lights' power use, longevity, and ease of use, LED wins hands-down. As an illuminating infographic by online retailer Christmas Lights Etc. shows, LED mini lights cost up to 90% less to operate, meaning a strand can nearly pay for itself in the first year of use. They last up to 66 times longer than incandescents. Even better, LED bulbs are made of unbreakable plastic that never loses its color, and hardcore holiday light fans can connect more than 40 strands in series, compared to just five incandescent strands.
With benefits like that plus new lower prices, it's easy for consumers to see LEDs in the same favorable light that manufacturers and wholesalers do. According to The Kansas City Star, GE (which supplies Home Depot) estimates that LEDs will have 40% of holiday light market share this season. Lighting wholesaler Vickerman, a supplier to Wal-Mart and Lowes, as well as commercial and city clients, offers more than twice as many LED products as incandescent ones.
There are still plenty of incandescent options for consumers, although the numbers vary widely by retailer. Target's online shop has more than five times more LED than incandescent holiday products, while Amazon, Lowes, and Home Depot online are closer to a 60-40 split between LEDs and old-school lights.
But if LED prices continue to drop and consumers discover the seasonal joys of lower electric bills and fewer hassles with broken bulbs, it may not be long before incandescent holiday light sales burn out entirely.
Investing in the sellers
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.