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PostedTuesday, March 14, 2023 at 2:40 AM
Retailers have been trying to channelize energy as an avenue for cost savings for a long time now. Yet failed projects are everywhere — poor choice of tools, expensive system integration etc. hinder value realisation. Real gains can be achieved only when retailers can uncover and automate energy savings measures remotely and seamlessly across thousands of sites.
A Deloitte study recently found that, among 100+ public retail companies, EBITDA had declined 300 basis points between 2012 and 2019. “Discretionary categories — especially department stores, apparel and specialty retailers — experienced the greatest swing,” the authors say. The median return on assets decreased by 340 basis points. During and following the pandemic, 7 out of 10 retail executives said cost restructuring was a top investment priority.
Energy is the fourth highest in-store operating cost for US retailers, with annual bills going as far up as $500,000 per year. Of this, about 60% goes into running refrigeration, heating, ventilation and air conditioning; and 30% into lighting. Optimization not just saves costs and improves operating margins but also contributes towards achieving net zero, which is becoming increasingly crucial for brands, their investors and customers.
To be fair, retailers have been trying to channelize energy as an avenue for cost savings for a while. Especially among food retail chains, for whom refrigeration systems are big energy guzzlers, energy efficiency projects have grown. However, these efforts often fail owing to poor choice of tools for execution today, which affect value realization. Retailers are constrained by site level tools, expensive system integration efforts etc. For a retail portfolio with thousands of stores, identifying, automating and optimizing energy savings at scale remains a huge challenge.
Real gains can be achieved only when retailers can uncover and automate energy savings measures remotely and seamlessly across thousands...
Real gains can be achieved only when retailers can uncover and automate energy savings measures remotely and seamlessly across thousands of sites. With a clear strategy and consistent efforts, this is now achievable. Here’s a simple roadmap to get started.
#1 Begin with an audit
To optimize, retailers must know what’s inefficient, where the potential lies, and what are the opportunity costs of making those changes. So, the best place to begin is by conducting a thorough energy efficiency audit, covering every store, section and system. It is also helpful to set up energy monitoring software to collect accurate utility and performance information over time to understand seasonal trends.
#2 Implement energy-efficient technologies
It is not uncommon to find that retail stores continue to use old systems and equipment, which are energy guzzlers. Based on the audit, identify such equipment and consider adjustments. The most commonly considered options are to change all lighting to LED lighting, replace with smart HVAC systems, modern energy-efficient appliances etc. These absorb high capital investments, which can be prohibitive for retailers.
With modern cloud-based software, a better alternative exists, which can enable system-level performance improvements based on current data, without added capital or new projects. Irrespective of the maturity and stage of ECMs, this approach serves as a low hanging fruit — or a starting point — to further the decarbonization journey.
At this point, it is also essential to evaluate the business costs of such adjustments. For example, the open refrigerator used in the store's dairy section might consume the most energy. However, replacing that with one with a door might negatively impact customer experience. So, evaluate every alternative carefully from all dimensions.
#3 Set yourself up for sustained success with cloud-based solutions
Achieving energy efficiency is an ongoing activity that needs close attention. For instance, you might have the most energy-efficient LED lighting, but if it’s running all night unnecessarily, that is still wastage you can avoid. Today, several cloud-based energy management systems and IoT devices capture real-time consumption data, help identify opportunities and suggest optimizations.
#4 Automate energy management
Every leader knows that if optimization depended on a store attendant manually turning on/off switches, it’s unlikely to happen. At best, it will involve additional labor/management costs to ensure it happens. To sustain energy efficiency, you must automate optimizations.
Fortunately, with cloud-based solutions, this is both easy and can be done intelligently. Retailers can significantly reduce equipment downtime by setting up remote performance monitoring. For example, a refrigeration system can be tuned to different performance configurations depending on weather conditions, environment, duration of store operations etc. With flexible automation, here's how a cloud-based refrigeration optimization solution can help:
Instant alerts to the store team to address concerns before customers spot them
Fault detection and diagnosis (FDD) to identify root-cause
Creation of work orders for equipment manufacturers to send technicians
Validation of warranty status to prevent overpaying for repairs
Recommendations to move the stock in the malfunctioning refrigerator to another location to avoid wastage
Even tiny optimizations like turning off lights automatically based on occupancy, monitoring air quality metrics to measure customer comfort, screening alarms from building management systems (BMS) for criticality etc., can add considerable savings over time.
Futuristic global food retailers are achieving upto 15% cost savings through digital-led energy management, often without much change to their equipment at all. To say nothing of ongoing optimizations, investor value and customer credibility built through their sustainability measures.
The future belongs to retailers who can make the most of the investments they’ve already made in their assets. That journey begins with digital-led sustainability.