OM in the News: How Walmart Brought About the Light Bulb Revolution

It was the 1990s, the era of Al Gore’s Inconvenient Truth, and consumers were dubious about the new CFLs light bulbs. Why did they cost so much more than incandescents? What was their quality? As a result, nearly three decades after being introduced in the U.S., CFLs were used in only about 6% of homes. In November 2006, Walmart nearly single-handedly changed that. Walmart’s then–CEO, H. Lee Scott Jr., announced an ambitious initiative: The company would sell 100 million CFLs by the end of the following year. These bulbs would save consumers $3 billion in electricity costs and cut U.S. power needs by the equivalent of 450,000 homes.

Lighting manufacturers balked, and Walmart’s critics leveled charges of “greenwashing,” writes Fast Company (Dec. 2015/Jan. 2016). But the retailer went all-in, redesigning displays, increasing selection, educating consumers, and launching an affordable private-label brand. The campaign worked: In 2007, it sold 162 million CFLs.  Shipments of the bulbs surged across the U.S., surpassing 400 million. Walmart’s massive purchase of CFLs allowed it to dictate specs to its suppliers: It required Energy Star–rated bulbs that met strict performance standards and got manufacturers to reduce the amount of mercury in CFLs. Walmart’s actions also helped secure passage of the Energy Independence and Security Act of 2007, which ordered the phase out of inefficient incandescent bulbs by 2015.

In the second quarter of 2014, shipments of CFLs surpassed traditional incandescents for the first time. Prices dropped and quality rose. But most experts believe the future belongs to LED bulbs, which are even more efficient than CFLs—and increasingly affordable. Today, a CFL, LED, or next-generation incandescent fills 1 in 3 U.S. light sockets, helping to keep millions of tons of CO2 from entering the atmosphere. A case study of how a company can use its size for good.

Classroom discussion questions:
1. What was the genesis of Lee Scott’s decision? (See our blog of 2011 on the book about Scott).

2. Why was Walmart able to change people’s view?