Mark Faithfull

Getting lighting on the bottom line

How do you get a store manager to turn the lights off? It's a tricky one. On the one hand we have all the technologically-advanced ways of reducing the energy impact of in-store lighting and with it some of the simple staff good practice which could further reduce consumption; on the other we have a seeming indifference to energy loads in those stores.

The simple fact is that – despite the eminent logic that cost reduction equals better store profitability - few store managers are incentivised by their head office to bring running costs down, instead it's all about sales. And for the majority of store managers the way they believe lighting can help sales is by shining as brightly and for as long as possible on their merchandise.

It doesn't help that leases are getting shorter. A couple of decades back retail tenants used to sign up for whopping 25-year-term leases, often with upward-only rent reviews. In the past decade that duration has been coming steadily down, typically now sitting in the seven-to-ten year range. It's likely it will reduce further still, to around five years, which would bring the UK in line with the rest of Europe (our continental counterparts have long been aghast at our British practices).

Shorter leases means payback periods for new lighting have to be shorter for head offices to be convinced that the capital expenditure and trading disruption are worthwhile. It's no use quoting a five-year payback if the shopfit is stripped out every three years, or if a retailer is half way through a five-year lease.

There are glimmers of hope. The first is the economic reality that we are living in price sensitive, deflationary times and broadly the only way to maintain margin is to hammer costs. There is not much fat to cut from processes and suppliers that has not already been trimmed since 2008 but there is still plenty of scope to bring down energy bills, which by contrast have increased dramatically over the same period.

The second is that as consumer-facing businesses a number of retailers are making it part of their brand proposition to be good global citizens. The most obvious example is Marks & Spencer with its Plan A, but there are plenty of others, including the major supermarket groups.

In a former life as editor of Retail Week's design magazine Retail Interiors, I chaired a conference where an audience member from Tesco stood up and said he “couldn't care less about lighting”. That is certainly not the case now but for store managers to follow their overseer's mantra, retailers need to join the dots. Improving store performance means improving the operational efficiency of that store and that's the message the lighting industry needs to convince upon the retailers.

Financial incentives for the store manager might finally turn the (energy efficient) light on.

Mark Faithfull, editor, Retail Property Analyst


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Mark Faithfull

Mark Faithfull

Mark Faithfull is editor of Retail Property Analyst, covering the global retail real estate investment sector. He is also a regular contributor to a variety of business and retail specialist titles including Lux, The Economist, FTSE Global Markets and Retail Week and is editor of MAPIC's publications and those for the World Retail Congress. He is also a specialist judge for the World Retail Awards.

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