Get ready to say goodbye to the incandescent light bulb. If all goes according to plan, the phasing out of Thomas Edison's invention will begin next year and continue through 2014. By that time, light bulb makers hope we'll have adopted LED bulbs as our new favorite light source.

That said, manufactures have to overcome a few obstacles before consumers will be ready to make the switch.

Watt's the Big Deal?

Some people may wonder why we can't just stick with incandescent bulbs if reinventing the light bulb is such a challenge. It's a matter of efficiency.

Less than 10% of the energy running through an incandescent gets converted to light -- the rest is lost as heat. If we switch over to more efficient bulbs, we could save billions of dollars, decrease our thirst for oil, and reduce greenhouse gas emissions.

Unfortunately, the first alternatives to hit the market were compact fluorescent lamps, or CFLs. The early CFLs used less energy, but that's about the only good thing you can say about them:

• Many wouldn't fit in old fixtures.
• They produced a flicker laden, dim, gray light.
• They didn't work with dimmer switches.
• And, to top it all off, they contain mercury, so you can't throw them away in the trash -- at least not with a clear conscience.

The latest generation of CFLs can produce light of the same quality as incandescents, but they haven't solved the other issues. And even if they had fixed everything, I don't think it would have mattered. With the possible exception of people who grew up watching Captain Planet, the public has generally rejected CFLs -- so much so that the Tea Party attempted to have Congress repeal the ban on incandescent bulbs.

The Next Bright Idea

Thanks to the market failure of CFLs, LEDs will have to be so good that they make consumers already inoculated against new lighting technology forget about their previous disappointments. The engineering problems alone make this a difficult task.
White LEDs give off a blue-tinted light, which isn't as pleasant as the warm incandescent light we're used to. And to burn as brightly as standard 60-watt bulbs, LEDs have to remain relatively cool.

Philips' (PHG) AMBIENT LED seems to have solved both of these problems. I picked one up recently and installed it in my living room. The thing doesn't look like a light bulb. Instead of the familiar globe shape -- which CFLs mimic to a certain degree -- the LED bulb is a fluted aluminum tube with orange plastic panels at the top. I honestly doubted it would work, but it produces warm light on par with a 60-watt bulb while only drawing 12.5 watts.

Here's the catch: The bulbs cost $25.

This hefty price tag stands as the biggest obstacle to LED adoption. General Electric (GE) expects the price to drop to $10 in the next three years, but they'll still remain the most expensive option. A four-pack of 60-watt incandescent bulbs costs $1.47, while four CFLs go for $6.47 and a halogen bulb can be had for about $4.

Granted, LED bulbs should last significantly longer -- Philips claims mine will last two decades -- and use less power than the competition, but getting consumers to overlook the higher price still poses a challenge. Philips' strategy is to convince consumers to think of light bulbs as durable goods. Its LED bulbs are packed more like gadgets rather than light bulbs. The packaging for the AMBIENT is shaped like a miniature display case. A picture of a pleasantly lit living room and boxes touting the potential energy savings frame the blister-packed bulb.

How Many Accountants Does It Take to Change a Light Bulb?

In spite of the challenges, the industry remains optimistic about LEDs. Home Depot (HD) believes the bulbs will account for 25% by 2014. In the meantime, commercial sales have begun to gain traction.

Many companies have begun switching to LEDs after realizing the can reduce energy costs over time. According to The Washington Post, GNC (GNC) installed LED lights in 2,000 stores, while Starbucks (SBUX) put them in 8,000 locations. This could help bring more residential customers on board by allowing them to see the quality of LED light without having to open their wallets.

The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of The Home Depot and Starbucks. Motley Fool contributor Patrick Martin owns no shares of any of the companies mentioned here. You can follow him on Twitter, where he goes by @TMFpcmart03.

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The holiday shopping season is looking pretty bleak for retailers. Best Buy (BBY) recently announced that it plans to hire fewer holiday workers this year, and now new data from the consumer research group NPD suggests that Best Buy won't be the only retailer stuck in a holiday sales rut.

How Bad Are We Talking Here?

According to NPD's Holiday Retail Outlook, the total amount consumers spend on gifts won't change much from last year. The study found that 9% of consumers plan to spend more during this holiday than they did last year, while 64% plan to spend about the same, and 27% say they will spend less (compared with 30% that intended to cut their shopping budget last year).

It's not just how much consumers plan to spend that should worry retailers, but also where they plan to do their holiday shopping.

Shopping preferences are favoring online retailers: The share of consumers planning on doing their shopping online increased 3% to 38%, while the share of those planning on visiting discounters like Wal-Mart (WMT) and Target (TGT) decreased by 3% to 51%.

Santa's Not Shopping for Many Electronics

What will those who brave the big-box stores' parking lots pick up? Not high-margin television sets, it turns out. The number of shoppers planning on buying electronics decreased slightly, down to 15%.

That's bad news for electronics chain hhgregg (HGG), which already suffers from cascading same-store sales and relies on selling the newest and shiniest of television sets to drive profits. The company needs a blowout holiday season to reverse its losing streak, but it's most likely going to report another disappointing season.

Other specialty retailers, like Barnes & Noble (BKS) and GameStop (GME), should also brace for disappointing holiday sales. According to the NPD study, fewer consumers are planning on purchasing the items that keep these retailers afloat.

Gift Item	Consumers Intending to Purchase, 2011	Consumers Intending to Purchase, 2010
Books	20%	23%
Movies/DVDs	19%	24%
Music	13%	14%
Video Games/Game Systems	13%	15%

Source: The NPD Group, Annual Holiday Survey.

GameStop in particular is suffering a double-whammy: The store really needs a demand for hardware to drive sales. Unfortunately, Sony (SNE) delayed the release of the PlayStation Vita -- which was the only new console this season -- until next year. Unless Nintendo's 3DS suddenly becomes popular, or the potential to control your TV using voice commands drastically increases demand for Microsoft's Xbox 360 and Kinect controller, I don't see GameStop's sales making the high-score list.

Where's the Holiday Cheer?

Despite the glum outlook on the retail landscape, there will be a few bright spots. Citigroup's Consumer Hour Glass Theory -- which states that the consumer market is further splitting into an upper and lower class while the middle erodes -- appears to still be in effect. As a result, it's likely that high-end stores like Saks (SKS), Tiffany (TIF), and Coach (COH) will repeat their stellar sales performances from last year.

At the other end of the hourglass, I'd look to Costco (COST) and the other warehouse clubs -- which have been posting respectable gains in same-store sales recently, and deep discount retailers like Dollar General (DG). The NPD study also found that the number of consumers planning on shopping in the warehouses increased 1% this year.

Outside these small patches of the retail space, I wouldn't expect anything more than very modest sales growth.

Motley Fool contributor Patrick Martin owns no shares of any of the companies mentioned here. You can follow him on Twitter, where he goes by @TMFpcmart03. The Motley Fool owns shares of Wal-Mart Stores, Costco Wholesale, Microsoft, Best Buy, Coach, Citigroup, and GameStop. Motley Fool newsletter services have recommended buying shares of Wal-Mart Stores, Amazon.com, Nintendo, hhgregg, Coach, Costco Wholesale, and Microsoft. Motley Fool newsletter services have recommended writing covered calls in GameStop, creating a bull call spread position in Microsoft, and creating a diagonal call position in Wal-Mart Stores.

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