Lighting: A Bright Spot for Brick-and-Mortar Retail

With rising inflation and supply chain challenges, brick-and-mortar retailers not only need to control costs, but also deliver an improved shopper experience to remain relevant. The good news, a well-designed LED luminaire can help you do both. Although many retailers have already successfully converted to LED solutions to meet sustainability goals, as well as to reduce energy and maintenance costs, those that have not now find themselves at a significant competitive disadvantage

Today’s retailers are faced with stark realities:

• Short-term survival requires cutting costs.
• Long-term survival requires creating a great in-store customer experience as efficiently as possible.
• Public and corporate policy require sustainable and energy-efficient operations.

Finding retail solutions to satisfy all of these priorities will be a challenge, with one remarkable exception: LED lighting.

In January 2020, McKinsey & Co published a report called Future of Retail Operations: Winning in a Digital Era.  In the report, the analysts confirmed what everyone already knew: physical retail stores faced a challenging future. They observed that making money in brick-and-mortar retail was becoming harder each year, and that online shopping had grabbed 40% of the growth since 2016.

What the authors couldn’t know was that even as their report was being released, the country was on the cusp of a global pandemic that would, in mere months, bring about changes previously expected to take several years. In 2019, penetration of e-commerce in the U.S. market was forecast to reach 24 percent of total retail sales by 2024. Yet by July 2020, it hit 33 percent. In other words, in the first half of 2020, e-commerce increased as much as it had in the previous ten years.^[1]

In the two-and-a-half years since, COVID has battered many brick-and-mortar retailers and driven some entirely out of business. But physical stores remain a critical part of the retail equation. Deloitte’s most recent analysis shows that on average, three-quarters of shopping still takes place in person at retail stores. Meanwhile, Bureau of Labor Statistics data shows that the number of store locations in the United States in Q4 2020 increased by 4,700 from the previous year, the highest quarterly store count number on record.

For national chain retailers in particular, trends indicate continued new construction, with the associated corporate priorities and pressures to minimize building costs and deliver on time and within budget.  And many retailers who are not expanding are considering how to renovate – or reinvent – their physical space to meet the needs of the 21^st century shopper.

Not surprisingly, short-term construction priorities often seem to directly conflict with critical longer-term priorities such as reducing future building energy and maintenance costs and creating environmentally sustainable retail spaces. Added to this push-pull is another essential mandate: the need to provide an exceptional in-store customer experience seamlessly integrated to digital shopping spaces and social media environments.

The Best Solution to Satisfy Construction Requirements …

First consider the needs of retail construction departments. They’re looking for lighting solutions with a low initial unit cost and assured availability from the distributor or manufacturer. They also value quick and easy installation, and solutions that simplify compliance with codes and regulations.

Harsh lighting and glare typically drive people away. This could be a strategy to prevent loitering. But if chasing away customers is not the goal, a retail brand that chooses LED lighting based on initial unit cost and energy savings alone may pay dearly when it comes to customer experience, employee satisfaction and brand reputation. Finally, poorly lit stores are often perceived to be less safe – and even more significant in today’s market, less clean.

Is there a better strategy than seeking the lowest unit cost? Definitely, and it’s called total cost of ownership (TCO), which factors a lighting solution’s installation costs, useful lifetime, maintenance costs and energy efficiency. The cheapest units are rarely the most energy efficient. When you consider lifetime energy savings, a unit with a higher purchase price can be the real cost-savings winner in the long run – and that’s not even considering useful life, light quality and maintenance costs.

Meanwhile, geopolitics, chip shortages and trade disputes continue to wreak havoc in some industries.  When materials and fixtures are delayed during construction, a costly domino effect ensues: installers must be rescheduled, subcontractors must make multiple truck rolls, inspections get bumped and store openings are delayed – all with additional costs and lost time.

For lighting, at least, the solution is simple: work with a reputable U.S. lighting company with domestic manufacturing facilities, short, direct supply lines and a commitment to sourcing components and materials locally. Working with a domestic manufacturer does more than streamline logistics and help ensure on-time delivery. U.S. lighting manufacturers are familiar with the unique needs of American retailers and design their solutions to simplify compliance with building codes, energy codes and special cases such as Title 24, as well as to satisfy valuable certifications such as Design Lights Consortium (DLC) rebate eligibility. As one of those manufacturers, we can also tell you that Cree Lighting is in continuous dialog with lighting designers, electrical contractors and energy service companies to ensure that our fixtures streamline specifying and ordering, simplify installation and minimize maintenance.

… Is Also the Best Solution To Satisfy Longer-Term Goals …

Imagine being delighted to buy a new vehicle at a rock-bottom price – only to realize after you’ve driven it off the lot that it has no airbags, no Bluetooth, GPS or digital connectivity, no smart assists, no back-up camera… and 1990-level gas mileage.

The Department of Consumer and Regulatory Affairs estimates that lighting represents about 40% of all energy costs in a commercial establishment, and that the light bill in a 10,000-square-foot retail building typically ranges between $4,500 to $8,500 a year. In fact, when McKinsey reviewed energy consumption across one large retail chain in 2015, it found differences of up to 40 percent between otherwise similar stores.

“When retailers conduct energy audits on their stores,” McKinsey wrote, “they typically identify opportunities to reduce energy consumption by 20 to 30 percent, and sometimes by up to 50 percent.”

But energy savings is only part of the story. While legacy products may require re-lamping every year or two, a well-designed and manufactured LED luminaire can eliminate routine maintenance for a decade or longer, saving significant dollars and eliminating disruption to the retail space.

… and the Best Solution To Create a Great In-Store Customer Experience.

As the lighting market has matured, LED lighting has transitioned from being a simple energy-saving measure to being a smart and affordable investment in a retailer’s brand identity. Properly designed LED lighting creates more engaging customer experiences and better showcases merchandise.  Smart lighting controls also give retailers the ability to dim or shift lighting to create dynamic visual scenes for promotions or branded experiences, while also driving energy bills down.

Likewise, the lighting industry’s growing focus on creating “human centric” lighting solutions offers additional ways retailers can create and enhance branded customer experiences.  These technologies enable lighting solutions that align with our natural circadian rhythm or imitate natural daylight, increasing visual comfort and helping foster positive emotions and behaviors in the store environment

So, short-term construction goals for cost and speed? Or long-term goals for optimal energy savings and better customer shopping experiences? The right LED lighting solution gives you the perfect balance of both – no matter which way you look at it.

^[1] Source: BRIEF: Nearly all the top e-commerce companies grew revenue by double digits in 2020: GlobalData, July 9, 2021; Ben Unglesbee, Senior Reporter; RetailDive.com