With energy costs at historic highs, retailers are struggling to find ways to trim the cost of lighting, heating and cooling
their stores and other facilities. The process of wringing out savings can be long, difficult and complex.
However, the rewards are too substantial to ignore. The math is as simple as it is irrefutable.
"If Wal-Mart saves a dollar [on energy costs], it goes directly to the profit line," said Richard Feinberg, professor of retail management at Purdue University. "If they increase sales by a dollar, only 3 cents of that goes to the profit line. Every million dollars of energy savings is a million dollars of additional profit."
While no locally based retailers operate on Wal-Mart's level, the simple will to survive and prosper has turned many into passionate energy conservationists. Not that they don't face special problems when figuring out exactly how to trim their electric bills.
For instance, Kittle's Furniture spent more than six months earlier this year finding just the right lighting for its 14 stores. The new system saves about 41 percent over the old one. But executives had to consider factors besides price.
"Our managers and our designers have stood and looked at lights more than anyone would ever want to," said Jim Kittle Jr., Kittle's chairman.
The problem was that energy-saving forms of lighting tend to give off less-natural-looking illumination--a real problem in a product showroom, where customers must see true colors.
"They might look at a sofa and think it's green," Kittle said. "Then when it's delivered, it turns out to be tan."
The company jiggered the lights to mitigate the problem. And in a classic case of every little bit helping, it also replaced the bulbs in the lamps on its showroom floors with energy-saving, low-heat models.
"If you count all our floors, that's a lot of bulbs," Kittle said. "They create no heat, which is also a savings because it doesn't cost as much to air-condition."
Kittle's also has placed energy-saving bulbs in its warehouses. Even more important, it installed movement sensors in the 30-foot-high "racks" where furniture is stored. The lights come on only when a mechanized "picker" is in the area, plucking something from a particular rack.
"When a picker is not in a rack, which is probably 90 percent of the time, the lights aren't on," Kittle said. "This is a gigantic savings."
Lots of little things
When it comes to saving money on energy, few understand the economics of scale better than Simon Property Group Inc. The U.S. Environmental Protection Agency named the company a 2008 Energy Star Partner of the Year for "outstanding energy management and reductions in greenhouse gas emissions" at its approximately 320 U.S. properties.
According to Simon, the company reduced its energy use 9.7 percent between 2003 and 2006, saving $11 million in annual operating costs.
The effort continues apace.
"So far this year, we've been able to shave, as of August, almost 80 million kilowatt hours out of our system," said Edward Sayers, Simon's assistant vice president for energy services. "And we think we're going to do more than that."
Besides adding to Simon's bottom line, the aggressive conservation program helps tenants keep their expenses down, since in most cases they pay a portion of the mall's lighting, heating and cooling expenses.
"At any time, the individual tenants can have a question answered or get advice, or we can even refer them to consultants to help them lower their own costs," Sayers said. "We work with them quite often. It's a team effort to help each other out."
That effort is far more sophisticated than, say, converting lighting to a more miserly system, or turning up the AC a few degrees in summer and turning down the heat in winter. Heating and air-conditioning systems are either upgraded to more efficient models, or existing equipment is optimized to increase efficiency.
But there's also another way to cut those costs--a technique that could be called the simplest form of solar power.
"We're getting back to 'day lighting,'" Sayers said. "Putting more skylights into the malls to take advantage of natural lighting."
Simon is also toying with the idea of using alternative energy on a larger scale. Like putting solar panels on the roofs of some of its properties.
"We've been looking at solar," Sayers said. "We've been looking at fuel cells. To help the environment and at the same time keep lowering our costs. It's a good hedge against energy costs rising."
But that's in the future. A lot depends on what sorts of technology--and government subsidies--become available in the next few years. For now, future cost reductions will come from constantly whittling away at inefficiencies.
"There's no silver bullet," Sayers said. "It's just a combination of things: A lot of education, a lot of working with consultants and other folks to help us and guide us along."
Greening a grocer
When it comes to energy consumption, few human endeavors create as many opportunities for waste--and as many for savings--as the grocery business. And few such opportunities are as obvious as the produce section, where fruits and vegetables sit in open, refrigerated cases.
This section received special attention when Marsh Supermarkets recently remodeled its store at 146th Street and East Greyhound Pass, in Westfield.
"This is what we're calling our gold standard," Susan Thomas, Marsh's director of design and construction, said of the location. "We tried to do everything with an eye on energy-efficiency."
The company's first order of business was to improve operations on the "fresh side" of the store, where the produce resides. The cold cases were replaced with more energy-efficient models--ones that didn't include self-contained compressors and cooling apparatus, which generated a lot of heat and noise. Now all that compressing and cooling is done at a central location elsewhere in the store.
Another change: The produce is illuminated using an innovative, penny-pinching technique. Instead of placing heat-producing lamps directly above the green beans and carrots, energy-efficient fixtures illuminate everything indirectly.
"The light shoots up to reflectors on the ceiling and then drops down into the space," Thomas said. "It gives you more of a 'moonlight in the garden' look than in-your-face brightness. It's adequate to light the space, it gives a comfortable feeling, and we're using highly efficient fixtures. So we've reduced the energy costs and improved the atmosphere.
"We may be the only grocery store in the world--we're definitely the only one in the state--that's done this."
Marsh officials have done other things to bring in more illumination, including installing more skylights and painting the store--especially the ceiling--in a lighter-than-usual color scheme.
Heating and air came in for some renovation work, as well. The store uses a product called the "duct sock." It's basically fabric ductwork that replaces the more-familiar steel model. Holes along its length make the distribution of heated and cooled air more efficient--and less jarring.
"If you've ever sat under an air diffuser in a restaurant, you're either freezing or too warm," Thomas said. "Well, this makes the environment continuously comfortable because it lets the air out in many places. It isn't all dumped on you in one location."
Other locations in the 100-grocery chain will be retrofitted in the same way.
"It would be too soon for us to generate anything we can back up with figures at this point," Thomas said. "But it's obviously more energy-efficient. We're going to utilize less electricity and less natural gas."
If energy costs continue to rise--and, perhaps, even if they don't--expect such cost-saving measures to continue.
The money at stake is too big for any retailer to ignore. A company operating a 100,000-square-foot store might spend roughly $200,000 a year on energy just for that location, Feinberg said.
"Certainly, there's a significant amount to be saved just by doing comparatively simple things, such as changing temperature settings," he said.
"We're seeing stores get a little warmer in summer and a little cooler in winter. One degree can make a significant difference in annual costs. And if you have a thousand stores, it's even greater."