Tighten Up Your Energy Spend

Some retail technology vendors have it at least a little bit easier than others right now. Before the economic slowdown-turned-correction-turned-downturn-turned-recession hit, a company called Novar was riding the interest in chic sustainability into the corporate offices of U.S. tier-one retail. Novar is a purveyor of multisite retail energy management solutions. Once in the door, the company was closing down lots of business with the promise of big-time savings and a great PR campaign to boot. Today, it's the big-time savings message that's opening doors for the company, and the 'green' part is merely a nice peripheral benefit.

The company's portfolio is diverse, but its core offerings include energy procurement, monitoring, analysis, HVAC and lighting service dispatch, and consulting. Long held in high regard by CFOs for its reputation as a manager of major utility costs, Novar's position is only strengthening as our industry hones its cost containment efforts in the face of recession. The company's president, Dean Lindstrom, recently took time out of his schedule at the ASHRAE (American Society of Heating, Refrigerating, and Air-Conditioning Engineers) conference in Chicago to talk with Integrated Solutions For Retailers. As you might have imagined, the conversation never strayed far from the economy.

How has the downturn impacted the market from your perspective?
Lindstrom: The questions retailers are asking themselves today are how long will this last, and how do we last through it? In turn, we're seeing much more effort and attention put into the management of cash. The single exception is food retailing, because as restaurant dining declines, supermarkets are doing well. But for most of the industry, the 'build as much as you can' days have come to an abrupt end.

That's led us to focus on educating retailers that their effort should now be spent getting better at effective management of the enterprise. Instead of focusing on growth and square footage, retail executives have to make a dramatic shift to aggressively managing the cost of operating their existing portfolio. Energy management is a wise approach to that, especially given the volatility of the energy market. Consider the price of oil, which has bounced between $140 and $30 per barrel in recent months. In the long term, energy costs will rise, but we'll see continued volatility along the ride. We're helping retailers efficiently manage their energy spend in a turbulent market.

We're also improving retail operations from a labor and equipment standpoint. We're using business intelligence to help retailers reduce the costs of their lighting and HVAC maintenance labor, for instance. If you even look at something as mundane as trash pickup, we're helping retailers rethink the way they procure such services. Instead of scheduling trash pickup on a calendar basis, why not deploy a device in the trash containers that interfaces with the trash collection company and lets them know when it needs to be emptied? Instead of averaging two collections per week, maybe you only need two collections every 14 days. We developed technology to enable this 10 years ago, but nobody was interested in it. They wanted to build new stores. Now they're interested in it. Because they want to manage expenses, they're interested in a solution that will, for instance, take their trash removal costs from $5 million to $4.2 million per year.

Have you, in turn, changed your approach to the industry? If so, how?
Lindstrom: Our solutions are a natural fit for a sustainability sell. But in this economy, and what we've been saying all along, is that green only makes sense if it makes financial sense for the business. Very few are going to invest in being green unless they see a very strong financial return. So any of our recommendations need to make financial sense, they need to improve the value of the organization and bring value to shareholders. Prior to these economic issues, people were willing to experiment or explore green concepts without looking at the financial impact. Now, it all needs to make very clear financial sense. The greatest financial returns are going to come from effectively deploying demand-side energy strategies.

Because of the tightness in terms of capital and cash, we've been focused on promoting our services approach. Our value to the retailer is based on a service that doesn't require up-front capital and generates positive cash flow from day one. In terms of winning business, that's been an even more important message than green and sustainability.

What are your customers doing differently this year to save dollars spent on energy?
Lindstrom: Our customers are very interested in taking aggressive action on attacking problem areas related to cost in their existing operations. We're seeing much more interest in any and all savings strategies and concepts, from a high level in the organization. The way it used to be, when we would speak conceptually of a potential cost-saving strategy such as the trash pickup concept I shared earlier, it was interesting but there was no real intent to adopt or deploy. Now people are more open to these discussions, and they're wanting us to be thought leaders with them. I've talked with several CEOs who want to hear our ideas no matter how crazy they sound.  They want us to turn over every rock. An interface to a trash compactor? That was interesting 10 years ago, but not worth the time. Now it is.

Another thing we're hearing a lot of interest in is proactive detection of water leaks. Multisite retailers contend with leaks in sprinkler systems, water lines, and roofs that damage merchandise and require stores to shut down to fix. In this economy, unplanned closures and shrink can lead to big financial trouble. Where pipe corrosion and leak detection technologies were once something retailers could get by without, many are now seriously analyzing them.

We're also increasingly seeing energy and facilities management issues making it to the to-do list of the C-level suite. Many of our solutions don't reside in, or aren't 'owned' by, a single department. They're issues that deal with mechanical, facilities, loss prevention, risk, and energy management staffs. The C-level executives are increasingly the platform pushing these issues.

How can retailers use energy management solutions to help them 'weather the storm?'
Lindstrom: The first thing retailers need to do is the basic data analysis. You have to figure out where you stand today from an operational costs standpoint, both within your own portfolio and where you stand among your peers. By peers, I don't mean competitors exclusively. I mean other facilities of similar size, shape, and operation. That's your starting point for developing a strategy. Is 20% of our portfolio outside the industry norm? This analysis will help you determine where to attack first. Your approach must be data driven. If the data says do this, go do it. Measure before and after, get feedback, and analyze if you did it correctly.