More Effective Procurement
The U.S. retail and wholesale establishments make up one of the largest sectors of electricity consumption in the nation. And they’re likely to use even more within the next few years, according to the U.S. Energy Information Administration, whose recent annual report indicates that commercial and industrial entities will lead domestic growth in primary energy usage through 2040.
With consumption — and costs — on the rise for many chain store locations, building an effective energy management strategy today will play a critical role in maintaining productivity and profitability in the future. But is there a way for large retail sector electricity consumers to go beyond traditional procurement approaches to reduce expenses and consumption, while generating an entirely new revenue stream?
Good news. There is. And it’s a win-win for the retail store industry and the energy sector alike.
Through a unique approach that leverages load management strategies, retailers can earn profits while decreasing demands on the electric grid, reducing prices and consumption, and saving on charges that are typically passed from the utility to the supplier to the consumer.
Let’s start with the most appealing part of the equation — generating profits. Changes in electric utility regulation have empowered retailers in many markets to purchase their power from suppliers other than the traditional utility. Chain stores now have a wider range of products to choose from and more opportunities to tailor energy contracts to meet unique operating requirements.
Many retailers have responded by selecting product structures with a fixed price for all or part of the electricity spend. These structures are appealing because they add some certainty to the overall monthly cost. But that certainty comes at a price.
To enhance pricing and supply flexibility, consumers could benefit from the revenue-generating potential of load management programs.
The premise is simple: Utilities in most markets throughout the United States need consumers to cut back, especially in times of high electricity demand, in order to maintain grid reliability. As a result, various products are available that actually pay consumers to reduce their electricity consumption during such times.
Retailers specifically can benefit by:
1. Selling capacity, which is typically referred to as demand response, where consumers commit to reducing their load at times chosen by the grid operator, typically for a matter of hours during emergency conditions. The compensation earned for providing this service is generally fixed months or even years in advance.
2. Selling energy, where consumers reduce their consumption at times of its own choosing. Through these transactions, a certain amount of energy is sold at a predetermined price during a defined hour or block of hours. If the market price is at least as high as the price specified by the consumer, the offer is accepted and the consumer is paid the market price for providing the promised amount of electricity.
3. Selling synchronized reserves, where the consumer provides energy by curtailing consumption for a brief period on a relatively short notice by the grid operator.
Aside from generating revenues, retailers that participate in these programs benefit by avoiding spikes in wholesale electricity prices and by reducing risk premiums.
Another cost-savings opportunity retailers can leverage through load management strategies is by reducing certain charges known as “pass-through costs,” which originate with the utility or the system operator and are passed to the supplier and then to the customer. These price components vary from region to region and typically include the grid operator’s cost to ensure capacity, transmission and distribution infrastructure maintenance and upgrades, and ratepayer-supported energy-efficiency and renewable energy programs.
The key to reducing these charges is to understand exactly how they are calculated, which varies by market. For example, a charge may be based on the customer’s demand during certain peak hours on the regional power grid or during certain peak hours on the local utility’s distribution grid. By working with your retail electricity provider to understand exactly how these charges are set, retailers can use the load management strategies to reduce those costs or prevent increases.
Retailers that participate in load management programs benefit not only by generating revenue, but by avoiding spikes in wholesale electricity prices and by reducing risk premiums.
Victor Wulc is the sustainability marketing director for GDF Suez Energy Resources, one of the country’s largest competitive retail electricity providers to commercial, industrial and institutional customers.
Reboot: Familiar Brands, New Looks
It could be a smaller-store footprint. Or a design makeover. Or a totally new format. But there comes a time when even the largest and most successful retailers need to freshen up or rethink their store identities. Here’s a look at four brands that are trying on new looks.
Sport Chalet: Sporting goods retailer Sport Chalet has gone urban. The company has unveiled a sleek, streamlined format in downtown Los Angeles, at the renovated FIGat7th center. At 27,000 sq. ft., the new store is considerably smaller than Sport Chalet’s existing concept (42,000 sq. ft.) and carries a targeted selection of goods. But customers can access the chain’s full offering via iPad systems located throughout the space.
The interior design, by Gensler, puts the emphasis on education and training, with a learning and information hub, called the "Expert Center," at the heart of the space.
"The store design emphasizes both aesthetics and function," said Joshua Breeden, project architect, Gensler. "We wanted to create a space that highlights what Sport Chalet offers above any other specialty sporting goods retailer: expert positioning and knowledge."
The Expert Center was designed to facilitate customer interaction with store staffers, and with audio-visual capabilities, reconfigurable seating and display elements that allow for instructional and hands-on events.
RadioShack: RadioShack Corp. has opened the doors of a new concept store that showcases many of the features that will be part of the chain’s new generation of stores to be rolled out in locations over the next several months.
The store, on the Upper West Side of Manhattan, aims to attract — and make the iconic brand more relevant to — tech-hungry shoppers by offering a new level of products, service and excitement that makes the buying experience fun. Touchscreens and apps designed to help shoppers understand the benefit of products are located throughout the space, while newly configured displays highlight in-demand brands.
Other features include stores fixtures that enable shoppers to find and compare products, such as a Speaker Wall allowing customers to compare speakers by playing music from their own Bluetooth-enabled mobile devices.
Pep Boys: It’s not your father’s Pep Boys … not by a long shot. The auto parts and service retailer is testing a new store concept, in Tampa, Fla., designed to extend its appeal beyond its core DIY-car enthusiasts audience to more service-oriented, or "do-it-for-me" drivers, which include many female customers.
Pep Boys worked with EWI Worldwide, Detroit, to execute an entirely new, more appealing environment, on both the exterior and interior. The design plays to the 92-year-old brand’s rich heritage. It has a handsome, modern look, with clean lines, clear signage and good sightlines.
From the new, intuitive navigation to the dealership-like atmosphere of the service lounge, the overall feel is warm and inviting — and adds up to a welcoming brand experience for traditional and new customers alike.
Stride Rite: The venerable children’s footwear brand is kicking up its heels with its "Milestones" store design, which was done in partnership with FRCH Design Worldwide. The new environment is designed to appeal to kids and adults like. The look is clean, modern and bright, with extensive use of white mixed with splashes of color. Rainbow carpeting mirrors the colors in Stride Rite’s logo.
The layout includes a more open store plan so kids and strollers can move around more freely. The shelves are placed at varying heights so the small fry can easily see all of the styles available.
There’s also a new fun fitting area for kids, with a dedicated Fit Station where children can get their feet measured and find out how tall they are by standing against the Fit Totem Pole.
To date, Stride Rite has rolled out the new design in Burlington Mall, Burlington, Mass., and in the new kid-centric section of Easton Town Center, Columbus, Ohio.
In retail, as in life, experience is everything. Whether it’s online, on a smartphone or in the store, it really doesn’t make a difference. A bad experience will turn off customers, while a good one will build brand advocates. It’s always been like that, of course. But today’s technology-enabled shoppers have changed the rules of the game by upping the stakes considerably.
The important role experience plays in today’s retail environment is brought home in our annual State of the Industry Report. It’s the centerpiece of this issue, and it couldn’t be more relevant. Or interesting.
Prepared by Interbrand Design Forum, the report is entitled “Experience is Everything,” and it’s focused on the innovative experiences that are redefining retail. I’m happy to say that a good deal of the innovation is occurring on a brick-and-mortar level. It’s not that I have anything against digital retail — I appreciate the convenience and vast inventories of online as much as anyone. But for me, the physical store remains the heart and soul of a brand. It’s where the brand comes to life. And it’s satisfying to see that savvy retailers — both online and traditional — are once again embracing the promise of brick-and-mortar.
What’s so interesting is that e-commerce deserves much of the credit for waking retailers up to the promise of the store experience. The report details both online retailers, including Warby Parker and BaubleBar, that have made the leap to physical retail, and several traditional retailers (Johnny Cupcakes is my fave) that are all, in their own way, challenging the conventional way of doing business. And delighting customers in the process.
And for retailers that are still catching up, the report offers some timely advice, starting with “Forget the Gondolas.” Thinking outside the gondola energizes the brand. Looking at the accompanying photo of a Camper store, it’s hard to disagree.
The State of the Industry Report is full of insights, photos and commentary. It’s a must-read for anyone interested in where retail is heading.
So is the CSA Top 100, our annual listing of the nation’s largest retailers, which is part of the report. The ranking is based on total annual net sales for each company’s most recently completed fiscal year.
The retailers that make up the Top 100 reflect the evolving nature of an industry in which the search for omnichannel integration has become the Holy Grail.
From Walmart with its Scan & Go pilot to Macy’s and its commitment to RFID, retailers are investing in an array of new solutions that allow for more fluid experiences across digital and physical channels. At the same time, they are exploring new formats, new markets and new concepts.
There’s a lot going on in the retail space. And don’t expect things to settle down anytime soon.