A few years ago, a national retailer discovered they could save more than $2.5 million annually by making some simple operational changes.
Well-meaning staff had been keeping outside doors open almost all the time, causing the heating and cooling (HVAC) systems to work much harder than they should have. Staff members also appeared to not be adhering to lighting on/off schedules. Through better monitoring and controls, including remote control of HVAC schedules, the retailer dramatically reduced in-store costs.
As other retailers re-emerge from COVID-19, similar strategies can help them improve their bottom lines as well.
Reducing energy costs
Retailers are facing headwinds. The summer heat is forcing them to crank up the air conditioning. Supply chain issues may be affecting their inventory and struggles to hire staff are forcing them to do more with less.
Investigating energy consumption, and what can be done about it, is a great place to start identifying sources of savings. Traditionally, energy has been retailers’ fourth-largest operating cost, and there are ways to bring these expenses down as much as 20% while also delivering other savings and benefits.
But specialty retailers, convenience store chains, and other large operators of smaller facilities face another challenge. Unlike businesses with large buildings with a dedicated facilities manager in each location, chain stores may have one person per region in a facilities role, possibly with 100 or more stores to monitor.
It is difficult for these professionals to stay ahead of the myriad of small issues and problems that may ratchet up costs, lead to HVAC equipment breakdowns, or force temporary site closures if the air conditioning or a freezer goes out of service.
That’s where automation—and particularly automation based on the Internet of Things (IoT)—are giving many retailers a boost.
New IoT technologies are providing these brands with an easy way to control and monitor their HVAC, irrigation, lighting, signage and other equipment—all from their mobile devices. Ensuring equipment is only on when it needs to be and that HVAC settings are properly maintained can have a meaningful impact on the bottom line. Larger facilities have had equipment control systems for years, but only relatively recently have technologies optimized for smaller facilities been available.
Spotting HVAC defects
Controls are key to delivering energy savings, but the ability to monitor the equipment can also have a significant impact. As an example, one national clothing store chain adopted new IoT technologies, and immediately discovered that it was bleeding money. Stuck switches inside brand new HVAC equipment were causing it to waste thousands of dollars in energy costs at one location alone. This turned out to be a defect in the new equipment, uncovered by the new IoT system.
Connex (previously PRSM) researchers have found that the average costs of proactive service calls are one-third of the typical cost of reactive repair due to sudden failures. So, being warned about equipment problems before they become serious can pay dividends.
Those expenses, though, are just the beginning. If the air conditioning goes down, a C-store that differentiates itself through 24/7 sales may have to temporarily send shoppers home—or a clothing retailer that’s just brought customers back may have to lock up for the day—compounding resulting losses.
IoT technologies are helping brands eliminate these problems as they migrate from a run-to-fail to a planned-maintenance strategy. And, IoT systems now go beyond sensors and controls for equipment monitoring.
Newer technologies connect directly to the digital controls on the equipment, letting retailers “listen and talk to” the machines and hardware. This further 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.
Reducing demand charges
Utilities charge their customers additional fees based on the maximum amount of power needed during a 15-30-minute interval over the most recent billing period. These fees are called “demand charges.” Demand charges may account for 20%-50% of any bill, depending on region and time of year.
IoT technologies include new intelligence capabilities and controls to reduce this bite by preventing power-hungry cooling units from all running simultaneously. Harnessing real-time algorithms and queuing, these systems can synchronize the operation of the cooling units to temper peak demand while ensuring that customers remain comfortable.
The typical c-store has four walk-in freezers/coolers, which consume huge amounts of energy. Diligent monitoring/control of temperature settings - and defrost cycles - can prevent loss of perishables, and ensure sales revenues are not affected by a loss of product – while at the same time reducing energy costs.
Retailers that have irrigation systems can use IoT technology to integrate with the systems and identify and alert about leaks – before a very expensive quarterly water bill arrives. These systems can also monitor water usage in stores that do not have irrigation systems.
As many brands differentiate themselves—and attract new customers—through a commitment to sustainability, IoT can deliver. For example, a 2019 analysis of 5,000 retail and restaurant locations that implemented IoT systems to manage energy usage showed that they had achieved a reduction of 161 million kilowatt-hours, translating to 80 million fewer tons of CO2.
As chain stores remake and rebuild themselves, a strong focus on energy costs and usage can help them adopt more sustainable energy management practices, while fueling large financial improvements.
Martin Flusberg is president of Powerhouse Dynamics powerhousedynamics.com.