As you and your fellow grocers face rising costs and falling prices throughout the supermarket industry, it’s likely that you may sometimes feel at your wit’s end. Maintenance and operating costs are regularly increasing while customers continue to demand lower prices.
However, if you look up (and around), you may find the answer to your problem.
That’s right: high-efficiency lighting upgrades are one of the easiest ways to reduce operating expenses. Choosing to update old supermarket lighting systems and upgrade LED fixtures can offer a big return in an industry characterized by low profit margins. These new lighting kits offer the opportunity to improve the efficiency of your existing equipment, and have demonstrated a fast return on investment.
Falling Food Prices Have Created Lower Profit Margins, Higher Pressure
Supermarkets operate on high volumes with razor-thin margins. According to CSIMarket, the net pretax operating margin of an average grocery store in the United States during Q4 2016 was only 1.19 percent. Bloomberg notes that while grocery expenses are rising for things like labor, marketing and utilities, food prices are simultaneously falling due to lower grain prices and strong competition from discounters. While this is great for consumers, it’s only adding more pressure to the low profit margins at grocery stores.
In response, many grocers are trying to boost their margins by using software and technology to better optimize things like labor and prices, but reducing utility expenses can have a major impact on the bottom line. Energy Star notes that the average supermarket in the U.S. uses 50 kilowatt-hours of electricity and 50 cubic feet of natural gas per square foot per year, adding up to more than $200,000 in annual utility costs for the average grocery store. Energy Star estimates that every dollar in energy savings can have the same impact as increasing sales by $59.
Upgrade LED Lighting for a Clear Path to Cost Savings
Data from the U.S. Energy Information Administration shows that refrigeration and lighting comprise 80 percent of electricity use for a typical grocery store. Research shows that LED lights use up to 90 percent less energy than incandescent lights, and LEDs are up to 50 percent more efficient than fluorescent T8 tubes.
“With the grocery industry margins so tight, LED lighting is a no-brainer to lower fixed costs while improving your customer’s experience,” Robert Schmidt, president and CEO of New Orleans-based Joule Energy, told Grocery Headquarters.
LEDs can reduce costs in more areas than just lighting. Since they don’t run as hot as fluorescent or incandescent bulbs (and can disperse heat outside of the case), LEDs also help reduce refrigeration and cooling needs. A report by Touchstone Energy Cooperatives found that for every watt in reducing lighting energy consumption, there’s an additional .48-watt savings from reduced refrigeration.
Lighting system updates can take different forms, ranging from strategic retrofitting to a fixture replacement overhaul. Retailers can choose the best approach for their business, depending on available resources and the condition of their current lighting infrastructure. Many manufacturers now make “retrofit kits” that make it relatively easy for grocers to shift to LED lighting without having to coordinate a full replacement. You can work with electrical contractors to upgrade overhead, exterior and refrigerated lighting equipment.
Get Ready for Solid ROI
Retailers and grocers such as Walmart, Walgreen’s, Publix and Albertson’s have initiated supermarket lighting upgrade projects in recent years. Incentives from utility companies in many areas help grocers obtain an even faster return on investment for LED upgrades. In one example from Energy Retrofit Co., a grocer used a 90 percent utility incentive and was able to upgrade to new LED Troffer Fixtures with a two-month payback and 55 percent energy savings. Whole Foods also completed an LED lighting renovation in a Nevada store, and reduced its lighting-related energy consumption by more than 60 percent, LEDs Magazine reports.
A white paper by the Retail Industry Leaders Association (RILA) confirms that converting existing light bulbs to more efficient lighting technologies is a strategic method to reduce lighting loads and energy consumption in retail and grocery stores alike. LED lighting upgrades can offer a return on investment in as little as two years, and RILA notes that LED upgrades are being pursued by large- and small-format retailers due to their ability to enhance productivity as well as the customer experience.
LED lighting upgrades can also be integrated with smart controls that not only save money but also enhance store presentation. Another article from Grocery Headquarters notes that LED technology can be harnessed to improve a store’s image and create a better shopping experience simply by adjusting color temperature throughout the day and around the store.
You can’t always control labor costs and market prices of food — but you can control the efficiency and effectiveness of your lighting systems. LED is a surefire way to reduce costs while keeping your store looking as modern as possible.