A few years ago, a national retailer found they could save more than $2.5 million annually by making some simple operational changes.
Well-meaning staff kept the exterior doors open almost the entire time, making the heating and cooling (HVAC) systems work much harder than they should. Employees were also found not to adhere to the schedules for switching the lighting on and off. Through better monitoring and control, including remote control of HVAC schedules, the retailer has dramatically reduced in-store costs.
As other retailers re-emerge from COVID-19, similar strategies can also help them improve their bottom line.
Reduce energy costs
Retailers are facing headwinds. The summer heat forces them to crank up the air conditioning. Supply chain issues can affect their inventory and the struggle to hire staff forces them to do more with less.
Research into energy consumption and what can be done about it is a good place to identify sources of savings. Traditionally, energy has been the fourth largest operating cost for retailers and there are ways to reduce these costs by as much as 20% while delivering other savings and benefits.
But specialty stores, supermarket chains and other large operators of smaller facilities face a different challenge. Unlike large building companies with a dedicated facilities manager in each location, retail chains may have one person per region in a facilities role, possibly with 100 or more stores to supervise.
It’s hard for these professionals to stay ahead of the myriad of minor issues and issues that can drive costs up, lead to HVAC equipment failures, or force temporary facility closures if the air conditioning or a freezer goes down.
That’s where automation – and especially automation based on the Internet of Things (IoT) – is giving many retailers a boost.
New IoT technologies offer these brands an easy way to control and monitor their HVAC, irrigation, lighting, signage and other equipment, all from their mobile devices. Ensuring that equipment is on only when needed and that HVAC settings are properly maintained can have a significant impact on bottom line. Larger facilities have had equipment control systems for years, but only relatively recently have technologies optimized for smaller facilities become available.
Find HVAC Defects
Control is essential to deliver energy savings, but the ability to monitor the equipment can also have a significant impact. For example, a national clothing retailer took to new IoT technologies and immediately discovered that the money was bleeding. Jammed switches in brand new HVAC equipment caused it to waste thousands of dollars in energy costs in one location. This turned out to be a defect in the new equipment discovered by the new IoT system.
Researchers at Connex (formerly PRSM) have found that the average cost of proactive service calls is one-third the typical cost of reactive repair due to sudden outages. So being warned about equipment problems before they get serious can pay off.
However, those costs are just the beginning. If the air conditioning goes down, a C-store that differentiates itself through 24/7 sales might have to temporarily send shoppers home — or a clothing store that just brought back customers might have to lock up for the day — resulting in losses.
IoT technologies help brands eliminate these issues as they migrate from a run-to-fail strategy to a planned maintenance strategy. And IoT systems are now moving beyond sensors and controls for equipment monitoring.
Newer technologies connect directly to the digital controls on the equipment, allowing retailers to “listen and talk” to the machines and hardware. This improves the ability to discover, diagnose and fix problems in real time, and optimize more “tasks” for greater savings – and to do it all remotely.
Reduce demand costs
Utilities charge their customers additional fees based on the maximum amount of power required during a 15-30 minute interval during the most recent billing period. These fees are called “demand fees”. Depending on the region and time of year, the asking cost can make up 20%-50% of an invoice.
IoT technologies include new intelligence capabilities and controls to mitigate this bite by preventing energy-guzzling refrigeration units from running all at the same time. Using real-time algorithms and queuing, these systems can synchronize the operation of the cooling units to mitigate peak demand and ensure customers remain comfortable.
The typical c-store has four walk-in freezers/coolers, which consume an enormous amount of energy. Accurate monitoring/control of temperature settings – and defrost cycles – can prevent loss of perishables and ensure sales revenue is unaffected by product loss, while also reducing energy costs.
Retailers who have irrigation systems can use IoT technology to integrate with the systems and identify and warn leaks – before a very expensive quarterly water bill comes. These systems can also monitor water consumption in stores that do not have an irrigation system.
Because many brands differentiate themselves – and attract new customers – by committing to sustainability, IoT can offer a solution. For example, a 2019 analysis of 5,000 retail and restaurant locations that implemented IoT systems to manage energy consumption showed that they had achieved a reduction of 161 million kilowatt hours, which equated to 80 million tons less CO2.
As retail chains reinvent and rebuild themselves, a strong focus on energy costs and usage can help them adopt more sustainable energy management practices, while fueling major financial improvements.
Martin Flusberg is chairman of Powerhouse Dynamics powerhousedynamics.com.