Saks: How we rang up $500,000 in energy savings
Not that long ago, “sustainability” was a dirty word for retailers who were on a ceaseless mission to keep fixed costs as low as possible in order to make a profit on items that already carry a small margin. The idea of making operations “more sustainable” filled the minds of retail executives around the world with nightmares of endless spending with nebulous returns.
However, over the past 10 years, public demand for change combined with government incentives and energy efficient technology slowly have led to profitable operations also becoming sustainable ones.
Retailers that combat low profit margins with high sales volumes were the first to get on board. Energy-efficient lights became the norm in virtually every showroom, because the cost savings alone justified the switch. Federal and local rebate money convinced even the most risk-averse finance departments at general retailers.
Luxury retailers have been slower to see the light. They tend to make money on singular purchases rather than high volumes, and they value their brand above all. Their goal is to create a unique shopping experience so customers feel that purchasing nonessential luxury items is a joy and not a chore. Lighting, comfort and image are vitally important to this recipe for success and profitability.
Saks Fifth Avenue, which operates more than 110 luxury fashion retail stores in the U.S., is such a brand. Our store is a destination for high-fashion shoppers, and to create an unparalleled experience, no expense is spared in making each store, including Off Fifth Outlet shops, feel unique and distinctive.
Nevertheless, for the past few years, the company has focused on becoming an outstanding corporate citizen, and a major aspect of this initiative has been the push for sustainability. Because of our image as a spare-no-expense luxury retailer, reducing energy and promoting sustainable business operations have been a complex and challenging undertaking.
But even before convincing the marketing, visual and store design folks at Saks that we could reduce energy consumption while retaining our brand vision, we had to demonstrate the savings — beyond any level of doubt — to the finance team.
Data was the first and most important ingredient. For insights into our current energy usage, Saks partnered with Ecova, an energy and sustainability management company that uses data from over 700,000 commercial and industrial sites to help customers track and manage consumption and quantify savings. First we looked at historic utility data to explain how minor changes in consumption, demand and price could cause massive annual expense shifts in different operational regions.
Once this baseline was established, a granular project breakdown form was added to the standard Saks Fifth Avenue Proforma to illustrate precisely how every piece of an energy efficiency project would affect energy cost. Each light was itemized, each VFD’s efficiency improvement was explained and each piece of equipment being swapped for a more efficient counterpart was documented. This net savings then was compared to the baseline energy data already established with Ecova. Once this kind of granularity was proven, the finance team was completely behind us for conservation projects. The dollar benefits of becoming more energy efficient were obvious.
Since 2011, participating stores have reduced their annual energy consumption by 23 percent.
Next we approached the marketing and design team. Like other retailers, Saks wanted to begin with lighting. The creative team immediately was engaged with various tests and surveys so we could understand what type of lighting they envisioned inside our stores.
One prevalent misconception was that LED lights did not resemble the warm natural glow of halogen; the lamps themselves did not resemble the flat-lensed Parabolic Aluminized Reflector (PAR or PARCAN) lamp counterparts because of the visible diodes. We tested every commercial lighting product we could find, took trips to manufacturing facilities to understand how lamps were made and tested and finally found a small handful of products created specifically for this type of application, matching halogen par lamps as much as possible. A full-store mock-up confirmed for everyone that the Saks Fifth Avenue brand’s exclusivity would remain untouched.
Once the manufacturer was chosen and the finances were approved, Saks Fifth Avenue became one of the first luxury retailers to do a companywide LED retrofit project. We again partnered with Ecova to analyze energy usage data to quantify actual savings (and we still use that data today to monitor continued expenses). The project has provided energy savings of more than $1 million to date. Since 2011, on average, our participating stores have reduced their annual energy consumption by 23 percent. We are very proud of this accomplishment and continue to strive to make our operation more energy efficient.
These results are not unique to Saks or any other high-end retail operation. Similar results have been observed at general retailers for the past decade. The key to driving these initiatives in any business is first to understand what each business owner and manager is looking for. Next, you must break down each energy project into detailed items that the head of each business unit can understand.
Energy is one of the largest fixed expenses for any company (typically one of the top three expenses), and the savings that sustainability projects can deliver ultimately will speak for themselves, as long as you take the time to outline every aspect of your project.
Finally, I cannot overemphasize the importance of data. Use it to establish baselines and illustrate how minor changes can affect the bottom line. Then provide breakdowns of how each component of a project directly affects this baseline. Finally, use data to quantify savings and create more equity with the decision makers of your company.
There never has been a better time to strive for a more sustainable business model. The access to data, federal and utility incentives, and price and availability of proper technology are at the perfect confluence for creating an energy-efficient and environmentally friendly business operation.