Retailers Lead the Way in Energy Management Initiatives
In December 2014, Ecova released the findings of its 2015 Energy and Sustainability Predictions survey to better understand what’s on the minds of those involved in energy and sustainability management. The company then delved deeper into the responses from the nearly 75 retailers who participated in the survey to uncover opportunities and challenges specific to the retail industry for the year ahead, and those results were released in the 2015 Energy Outlook: Findings from Retail Professionals report.
Historically, the retail industry has collectively been perceived as technology laggards. For years, thin margins and large investor expectations combined to force conservative technology and operations budgets on retailers.
Ironically, as it relates to energy management, the exacerbation of those problems during the recession turned that historical perception on its ear, and retailers turned to energy efficiency investments in an effort to reduce costs. As early adopters of energy and sustainability management initiatives, retailers are continuing to enjoy the rewards of reduced operational costs even as the economy improves.
Cost: Cost is the number one driver of energy and sustainability initiatives in the retail industry, followed by regulation and investor/stakeholder concerns. Historically, many retailers have focused on low-cost initiatives that have a quick return on investment, such as lighting. In fact, 44% of retail respondents indicated that lighting was the smartest energy and sustainability investment they made in 2014, which was more than 50% higher than the rest of the industry (only 28%).
Retail also leads other industries in adoption of energy and building management systems, with 57% of retail respondents stating their organizations have implemented some form of energy management system (EMS), or building management system (BMS), to collect real-time energy data.
It’s often said that companies must spend money to make money, and this is true of investments in energy efficiency. The key to securing resources for capital expenditures is using data to create a business case for the investment, which can identify anomalies or outliers in resource expenses across the chain. There are different ways to collect this data, either through paying, recording and analyzing utility invoices to create a baseline, or using EMS/BMS systems to collect real-time energy data and spot anomalies as the are occurring.
Saks Fifth Avenue
One example of using data to create a business case for efficiency investments is Saks Fifth Avenue, which leveraged energy data to ring up $500,000 in energy savings.
The luxury retailer, which operates more than 110 stores in the United States, believes that good lighting and comfortable stores are vitally important to create a unique shopping experience. Creating this experience meant sparing no expense, which ran contrary to the idea of energy efficiency and sustainable business operations. However, customer and stakeholder expectations pushed the retailer to find ways to reduce energy consumption while retaining its brand vision.
To gain insight into its energy usage, Saks partnered with Ecova to look at historical utility data to explain how minor changes in consumption, demand and price could cause massive annual expense shifts in different operational regions. Once this baseline was established, a granular project breakdown form illustrated precisely how every piece of an energy efficiency project would affect energy cost. The net savings then was compared to the baseline energy data already established. Once this kind of granularity was proven, the company’s finance team was completely supportive of the projects.
Undertaking an efficient lighting retrofit was a major decision for Saks, which is very particular about the lighting color in its stores. The marketing and design team participated in various tests and surveys to understand what type of lighting they envisioned inside their stores. One prevalent misconception was that LED lights did not resemble the warm natural glow of halogen, nor did the design resemble the flat-lens parabolic aluminized reflector (PAR or PARCAN) lamp counterparts because of the visible diodes.
After testing various commercial LED lighting products and touring manufacturing facilities to understand how lamps were made and tested, Saks finally found a small handful of LED products created specifically for high-end retail applications, matching halogen par lamps as much as possible. A full-store mock-up confirmed that the Saks Fifth Avenue brand’s exclusivity would remain untouched.
Saks became one of the first luxury retailers to do a companywide LED retrofit project. After the retrofit they again analyzed energy usage data to quantify actual savings (and still use that data to monitor continued expenses). The project has provided energy savings of more than $1 million to date. Since 2011, on average, participating stores have reduced their annual energy consumption by 23%.
“I cannot overemphasize the importance of data,” said Gary Levitan, senior manager of energy and utilities, Saks Fifth Avenue. “Use it to establish baselines and illustrate how minor changes can affect the bottom line. Then provide breakdowns of how each component of a project directly affects this baseline. Finally, use data to quantify savings and create more equity with the decision makers of your company.”
While retailers such as Saks Fifth Avenue are ahead of the curve as early adopters, many have just begun to enjoy the fruits of real-time energy data collection and analysis. Ecova’s survey revealed that retail energy, sustainability, facility, and finance professionals are leveraging their newfound access to detailed energy data to go beyond the early strategic, ad-hoc projects that marked the survival mentality of the recession. As their EMS/BMS implementations mature, they’re developing long-term energy strategies and planning capital investments that will result in a sustained impact.
George Huettel is business solutions director of Ecova, an energy and sustainability management company.
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