Real Estate Investor Magazine South Africa November 2014 | Page 44

STRATEGIES

BY MONIQUE TERRAZAS

Efficient Retail Business

How to add 5% to the bottom line...

A

ccording to the Bureau for Economic Research
(BER) retail survey, retail sales growth
remained fairly weak during the second
quarter of 2014, with an average annual rate of only
2.8% year-on-year growth between January 2013
and March 2014. As such, South Africa’s retail sector
remains under constant pressure to minimise costs,
improve profits and stay ahead in a highly competitive
marketplace.
Out-of-the-box strategy
Given the dismal economic outlook and, consequently,
little hope that retail sales growth will recover
significantly in the near future, retail businesses need to
think outside the box to cut costs and increase profits.
“Becoming more energy efficient is one of the
simplest ways to cut costs and increase profits. In retail
businesses, reducing energy consumption can directly
increase margins without the need to increase sales.
In fact, a 20% cut in energy costs through energy
efficiency measures represents the same bottom line
benefit as a 5% increase in sales. A 5% growth in the
bottom line through the adoption of simple energy
efficiency measures would be a welcome relief for the
retail sector,” says Dr Peter Mukoma, Head of the
Private Sector Energy Efficiency (PSEE) programme
at the National Business Institute (NBI).
Beyond economic benefits
“Apart from economic benefits, achieving optimal
levels of energy efficiency in a retail environment has
other benefits that extend to social and environmental
advantages of reducing energy consumption, reducing
reliance on fossil fuel supply and minimising the
effect of climate change. Increasingly, consumers
are also becoming highly sensitised to the issues of
climate change and energy security, and they expect
their suppliers to behave in a responsible manner.
Consumers are actively choosing to spend their money
with retailers who are taking positive steps towards
environmental protection. In the same manner,
many retailers are actively seeking out and favouring
business partners and suppliers who share their values
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November 2014 SA Real Estate Investor

and ethical commitments. For any supplier to the
retail industry, implementing energy efficiency as a
fundamental business strategy is increasingly going
to mean the difference of whether your business is on
the preferred procurement partner list or not,” adds Dr
Mukoma.
Low and no-cost tactics
Focusing on low and no-cost measures and actions
which will have the quickest payback is a good starting
point. For example, in one PSEE client case study, a
leading retail store launched an energy awareness
programme focused on changing employee behaviour,
and achieved a 20% reduction in energy costs within
the first year. Since then, energy consumption has been
included as part of the store management performance
indicators as well as a regular item on the staff training
agenda. A key point made under the PSEE programme
is that many low hanging fruits, which will have no or
low cost implications, can deliver immediate benefits,
but are not necessarily being leveraged – for example
staff training and behavioural change in terms of energy
usage are not addressed strongly or often enough.
Leverage quick wins
In the retail environment, the best energy saving
opportunities exists in lighting, heating, ventilation,
air-conditioning and refrigeration. Proportions of
energy use will vary according to the type and size
of the store, for example, food retailers tend to have
higher refrigeration costs, while a clothing retailer may
have greater air-conditioning and heating costs.
“Regardless of energy spend make-up, the key
opportunities to save energy and reduce costs lie in
switching off all energy consuming equipment when not
in use, performing regular and scheduled maintenance
to ensure that all equipment works at optimum levels
and also to implement energy saving measures as part
of maintenance operations, ensuring that any planned
store refurbishment takes into account relevant energy
saving measures at the same time, and finally, changing
human behaviour for the better through training and
education,” explains Dr Mukoma.
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