Serving up Savings
Arby’s Restaurant Group has taken an aggressive stance with regard to its third largest and most controllable expense: energy. Faced with rising costs, the chain developed a strategic energy management plan that identified more than $5.5 million in potential annual savings.
Arby’s worked with Ecova, a Spokane, Wash.-based energy and sustainability management company, to develop a short- and long-term road map for actionable energy savings and measurement. (Arby’s has a history with Ecova, using its expense and data management solution.) The chain’s leadership team met regularly with Ecova to develop a plan that would ensure energy management becomes a norm of Arby’s culture and standard operating procedures.
"Ecova’s unique approach to strategic planning engaged Arby’s leaders across different functional groups to help us develop an energy strategy that was truly built for our success — considering the unique strengths, needs, concerns and constraints of our organization," said Scott Boatwright, senior VP operations, Arby’s Restaurant Group, Atlanta, which has more than 3,400 restaurants system-wide.
The planning process resulted in a clear, data-driven, actionable plan, one that made a strong business case for energy reduction. The plan emphasizes brick-and-mortar investment opportunities and initiative management recommendations. Regarding infrastructure investments, Ecova supported Arby’s finance team in prioritizing opportunities and developing a multi-million dollar capital expense proposal that generated an internal rate of return of 97%.
The proposal was approved by Arby’s board, and the project was started in the first quarter of 2013. It’s now in the install phase, which will continue through the end of the year.
"We will be analyzing results of the project well into 2014," Boatwright said.
The program involves mostly those locations owned by Arby’s, with varying levels of participation. Some are getting new equipment, but all are being asked to participate in the new behaviors emphasized by Ecova, according to Boatwright.
As part of the process, Ecova conducted energy and water audits in a sampling of Arby’s units. The audits identified a target list of 11 low-cost energy-efficiency measures and capital investment opportunities with an annual energy savings of more than $1 million. The measures include behavior modifications to on/off schedules, including water (average water use per restaurant), kitchen equipment, HVAC and lighting.
Other changes and equipment modifications highlighted by Boatwright include:
- Reducing water heater thermostats to supply 135-degree water to meet dishwashing and hand-washing needs;
- Installing low-flow faucet aerators on hand sinks and vegetable sinks and programmable thermostats and low-flow spray valves at the dish sink;
- Adding more energy-efficient refrigeration and lighting solutions; and
- Changing out electronically commutated motors in the walk-in freezer and coolers.
"Additional work will take place in 2014 to include items like additional lighting upgrades and irrigation controls, which will yield incremental savings," Boatwright added.
Employee buy-in to the plan, particularly with regard to behavior change, has been critical.
"We’ve modified our on-boarding materials, as well as employee training materials to drive the ‘efficiency matters’ philosophy through the organization," Boatwright said.
Arby’s has set an initial goal of reducing overall energy intensity by at least 6% (from 2011 baseline) for 2013 and 15% by 2015, the VP added.
Crafting a New Experience
Framing and arts supplies retailer Aaron Brothers is reinventing its stores with a new design that celebrates artistic expression and the creative process. The space, which has an urban, modern look, recalls an artist’s loft and is set up to provide shoppers with all the tools they need to make better-informed decisions.
The store features three distinct zones that call out the brand’s core categories: do-it-yourself framing, custom framing and art supplies. The Frame Workshop offers a hands-on experience: Customers can bring in their photos and artwork, choose a frame, a mat and then assemble everything on-site. The ready-made frames are arranged by finish and size and displayed on a sliding panel system. A "Use Our Wall" section allows shoppers to compose frame groupings that can be recreated at home.
The Custom Framing area offers private consultation areas for custom jobs. It also has a window into the professional frame shop.
A Southern California-inspired, colorful wall mural draws customers back into the space, where art supplies are housed in the new Art District, which houses everything artists might need. The space includes a Brush Bar, where brushes are organized by paint medium.
Aaron Brothers worked closely with Chute Gerdeman, Columbus, Ohio, in developing its new store experience. The chain applied a new quantitative research tool developed by Chute Gerdeman, called CG Fusion, that combines customer and financial data, resulting in a clearer picture of how a retailer can most effectively respond to changing customer needs.
Aaron Brothers applied the tool to identify what categories offered the best growth potential from existing customers — and who the most vulnerable competitors were in those categories. The resulting data led the chain to expand two strong categories, including art supplies, which were also given a more prominent position in the store. Gifts, which had previously been made up of mostly impulse items at the cashwrap, were also given a dedicated area with upgraded fixtures for jewelry and accessories. The data also led Aaron to maintain core categories and edit assortments in categories that offered less opportunity.
According to Chute Gerdeman, looking only at sales data would have pointed the chain in the wrong direction. Instead, CG Fusion helped Aaron Brothers determine where its core customers wanted the retailer to go. And it supported the recommendations with monetized options.
To date, Aaron Brothers has rolled out the new design in West Hollywood, Woodland Hills, Irvine, and Hermosa Beach (all in California), with more on the way.
"The new stores have far exceeded our financial expectations," said Jim King, CEO, Aaron Brothers, which is owned by Michaels Stores.
Getting Aggressive with Traffic Counting
The quickest, surest and most cost-effective way to increase store sales is to improve each store’s conversion rate.
It’s estimated that more than 50% of North American specialty retailers have installed traffic monitoring/counting systems in some or all of their stores. But many retailers have failed to take advantage of the fact that the data these increasingly sophisticated devices generate can help them improve performance and capitalize on sales.
"Most retailers have not used traffic counting data very aggressively. Even the people who are successful using it often only tap into a fraction of its potential to impact sales," said Michael Bunyar of SMS Store Traffic, Chambly, Quebec City, which provides traffic-counting equipment, software and services to stores around the globe.
Traditional wisdom says that the quickest, surest and most cost-effective way to increase store sales is to improve each store’s conversion rate, and that is still true, according to Bunyar.
"Retailers often focus on increasing the volume of shoppers they bring into stores, when they should be paying more attention to the results obtained from shoppers already in the store," he explained. "If you currently sell 20% of your traffic, increasing the conversion rate by 1% can increase sales by 5%. It’s not a stretch to say a store could increase sales by 20% by maximizing how they use the traffic data to drive up conversation rates."
Experts agree that how a retailer applies the data gleaned from a traffic-counting device is key to fully tapping into its potential.
"The selling point is not the traffic-counting device. It’s the solution," said Eric Champagne, VP IT and logistics at Liz Claiborne/Mexx Canada from 1997 to 2011.
Champagne was an early adopter of traffic-counting technology. During his time with Mexx (and later Liz Claiborne after it acquired Mexx), he succeeded in doubling his chain’s conversion rate over a three-year period using a traffic-counting solution from SMS.
"By working with SMS, we developed much more knowledge about how to use the system and how to use the key performance indicators to really drive sales up to a new level," Champagne said. Initially, some store managers felt wary about the system, worrying that it had "Big Brother" overtones.
Champagne, however, was convinced the new tool could help double sales.
Introducing store managers to the benefits of the system began with a discussion about what they could change, and what was out of their hands as it related to increasing store sales. Ultimately, according to Champagne, the managers came to understand that they could directly affect their closing ratio and average dollar per transaction using information provided by the system, which provides combined traffic and sales information they can use to guide their sales efforts.
The SMS program identifies key traffic patterns at each store on a daily basis. The patterns, according to Champagne, vary from store to store, but are very consistent on a week-to-week basis.
"Within a few weeks of collecting data, you can forecast how many people will come into your store on a Wednesday afternoon at 2:00," he said.
Once the patterns are identified, managing the stores to increase sales becomes much easier and more effective. In most cases, the answer lies in providing more effective customer service during the key traffic periods identified by the software.
"When we are able to forecast incoming traffic, we can get the store ready and staff it accordingly. That’s how we were able to increase sales dramatically using the numbers," Champagne said.
This can occur in a number of ways, from altering staffing to providing more consistent customer service, to training, to setting more specific performance targets and standards. Another example is to ensure the top-selling associates are scheduled during the peak traffic periods.
By presenting the data generated from the traffic-counting devices, "You can show your top salespeople that if they work these specific 16 hours each week, they are going to make more commission for working the same amount of time," SMS’ Bunyar explained.
At Liz Claiborne, this translated into an increase in closing ratio from 8% to 16%, despite the same amount of traffic.
The quickest, surest and most cost-effective method to increase store sales significantly remains improving each store’s conversion rate.