By Steve Rowen, Managing Partner
6/16/2009
The summer months have become the time for retailers to focus on environmental sustainability. As fuel prices rise, retailers become more concerned about cost savings in their stores and throughout their supply chains. At the same time, consumers become increasingly savvy about dollars going out, and smart retailers recognize a PR opportunity to establish their brand as a responsible and caring member of the community. No one has been as successful or proactive in either department as Walmart. But with so many options for “green” practices available, where can others make some headway?
I had the chance this week to talk with Michael Heffler, Industry Solution Manager Retail Marketing/CMO from Cisco Systems. Michael has been an active voice in the dialogue surrounding the retail industry’s need for more ecologically responsible behavior for years. In his view, “There are issues surrounding the supply chain, water management, building materials, alternative power source – and these are all very important - but right now, energy management of the equipment retailers have in their stores, distribution centers and data centers offers the most cost savings. There isn’t as much customer-facing ‘dazzle’, but when you take into account the store-multiplier factor, the savings can add up quickly.”
Of course, as an executive at a company whose primary green solutions are focused on energy management in-stores, this point-of-view isn’t surprising, but some of the examples that Michael was kind enough to share were surprising nonetheless.
“Retailers have systems that consume enormous amounts of energy – lighting and HVAC (heating, ventilation and air conditioning) – are the biggest, and they can consume upwards of 70-80% of a store or DC’s energy costs. They also have smaller sources of energy such as computers, refrigeration units, trash compactors - the list can be very long. But as we know, you can’t manage what you can’t measure. Further, you can’t measure what you can’t access. So for example, a store in Texas has an enthusiastic associate, who decides that even though it’s really hot outside, the store is maybe too cool inside. With the best ‘green’ intentions, this employee raises the internal thermostat 2 degrees, thinking it will reduce the air conditioning being consumed. But when he does that, it actually impacts the refrigeration units and forces them to work even harder: the net result is that more energy ends up being consumed. And this is where measurement and access are vital to effective management: No one would know this unless statistical correlations are available.”
When I asked Michael what was standing in the way of greater progress, his answer reflected a notion we see in much of our research – that unrealistic expectations from previous implementations have left retailers feeling “burned.” This is troubling, when one considers how relatively new the field of green technologies is in retail. Says Heffler, “Sustainability is really a continuous improvement process. Unfortunately, many of the larger retailers out there have become very cynical. There have been a lot of promises by technologists in recent times that they can improve a retailer’s energy management costs by 10-20%, which haven’t necessarily been feasible numbers – particularly since some retailers have an HVAC system that is more than 30 years old. There’s very little room for improvement when a new controller is brought in for an arcane and inefficient system. What any interested retailer needs to do is pilot – prove the thing works. The next step after that is to understand the IT team’s issues, preventing them from feeling ‘piled on,’ and more like part of the process.”
The technologist continues, “Right now, retailers are worried about survival, not necessarily their energy consumption. A down economy is certainly where leaders make moves for success down the line, so now is the time to be preparing for the turnaround. But what we’re trying to evangelize is that, particularly for a low-margin business like retail, if retailers can squeeze another half or full point from cost to profitability, that’s huge.” When asked about reasonable expectations from an energy management solution, Heffler says that it varies wildly by an organization’s existing equipment, but that for a retailer whose largest energy consuming systems are in decent shape and not too old, a 20-30% reduction in energy costs is reasonable for a new management system. But he also points to practices – and compliance to standards – as well. “We’ve been in stores that have had so many cobwebs around the energy-consuming equipment pieces that it has literally been a fire hazard. So the spectrum isn’t just wide for equipment, but for maintenance as well.”
Finally, as he agreed that the rising cost of fuel would bring enhanced customer interest in retailers’ branded issues around green commitments, I asked Mr. Heffler to discuss how his company, in particular, is addressing the customer-facing aspect. In his view, visibility is a cornerstone to sustainability. “We have a partner company called Noveeda, and their founder worked with a team of road and bridge designers to completely remodel an existing office building in New Jersey, creating a new, net-zero building that actually produces more energy than it uses. It incorporates multiple leading edge technologies (including solar power), and in the front lobby, there are large digital signage screens that show what the energy savings mean to the occupants of the building: before and after for the building’s carbon footprint, how that translates to reduction in trees required to absorb carbon, what percentage of energy is being delivered by solar power in real time, etc. This has essentially trained the occupants of the building to be more individually responsible – they turn off their lights as they leave their offices, everyone turns off their laptops each night, no one uses the elevator, the cafeteria operates each day using only half of the overhead lights - little things that add up. The net of this is that you can’t get energy sustainability without visibility. If you could bring that type of visibility into a store environment, it would let customers know that the retailer not only cares, but is making a difference. You’ll see much more of this in the near future.”
We can’t wait!
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