At the recent Retail Industry Leadership Association (RILA) Sustainability Conference, attendees organized into brainstorming sessions came to a consensus on these future trends:
- Retail will continue to evolve over omni channel platforms
- Supply chains will need be more transparent through a sustainability lens
- Sustainability will be built into leases for brick and mortar stores
Opportunity NOW – Renovating Sustainably
I presented a panel entitled Construct, Refresh & Renovate Sustainably with colleagues from Kimco, Family Dollar and Front Street Facility Solutions.
They agreed there is an inherent disconnect between the short cycle of retail real estate and sustainability. The typical five-year retail lease drives a cycle of store refreshes and renovations that result in significant waste generation across the industry. Our panel focused on turning this issue into an opportunity, by exploring how and when to factor sustainability decision making into the renovation process.
Will Teichman, Director of Sustainability for Kimco, recommended that tenants start coordinating with the landlord at lease negotiation (including lease renewal) to structure a contract that mutually incents sustainability. When designing a lease, a landlord could offer green alternative to the typical “white box” tenant improvement by investing capital in higher performance alternatives that is recouped through the lease over time.
Lease structures such as fixed CAM that get closer to a full service model offer the landlord increased incentive to deliver and operate sustainable retail space. Both RILA and ICSC have extensive green leasing resources.
Bob Jensen, Director of Construction at Family Dollar, highlighted the need to set internal goals for projects and share them so that all stakeholders involved understand WHY decisions are being made. They could potentially offer solutions once they understand the goals to be achieved.
Bob provided examples of how changing energy codes across the country are driving them to innovate their stores, particularly around lighting design. He recommended exploring multiple financing alternatives for high efficiency lighting such as LEDs, including the leasing option as well as purchase.
Marc Lash, Director of Business Development at Front Street, explained that retailers are increasingly linking their energy management systems (EMS) to operational savings beyond just energy savings — for example, increased productivity from higher performing retail environments such as day-lit sales floors, more efficient space planning and air filtration.
A significant portion of energy management system integration is in cabling and labor, so this should be included in store renovations even if the EMS is not being deployed at the same time so you are data ready.
The panel identified these key benefits of planning for sustainable store refreshes:
The renovation produces engagement opportunities.
- Within the process, vendors and corporate partners have a shared focus on the store, presenting an opportunity to lift current performance.
- Roll-up of impacts for external sustainability reporting that may include third-party validation (awards and green building certifications).
The renovation has the potential to identify cost savings.
- Changes to entitlement, permitting and code compliance can result in continuous improvement opportunities related to the store prototype. The renovation process can be used to evaluate how the prototype can be tweaked to produce higher performance and less waste.
- Collaboration between Design and Construction and Facilities often peaks during store renovations. This coordination can be leveraged to confirm that the green store is adding operational value.
Refreshes and prototypical design can align real estate activities with an organization’s corporate sustainability goals…or detract from them.
- Family Dollar uses the opportunity presented during renovations to design for reduced utility costs resulting in higher retail store margins to provide “the products you and your family need the most at the lowest prices.”
First, we explored the world 15 years from now through four different scenarios that described social and geopolitical factors affecting retail. Groups of participants used brainstorming techniques to tie these scenarios back to today and to identify the issues we should plan for now that that will shape our future businesses.
Surprisingly, even though more than 60 participants split over about 10 groups were all working independently, when we regrouped to review our ideas several very clear trends surfaced.
Retail will continue to evolve over omni channel platforms, some of which have not yet been proven (Amazon drones?!) or even invented. These new platforms will serve the customer faster and more accurately than ever.
Retailers and landlords should consider how this evolution of the industry will increase efficiency of putting product in the hands of the end users.
Global and local will intersect
Large brands will be ever more present, vying for your trust and providing expansive product lines. However, to remain authentic and earn your trust, retailers must have an authentic brand that connects to things you and your community care about.
Conference participants said this trend implies radical transparency throughout the supply chain and using sustainability reports as a tool to identify how to improve operations and speak to customers more meaningfully.
Retailers need to plan now and begin to benchmark performance to uncover the data that is material to a brand, how to obtain it, and how to share it with stakeholders.
Brick & Mortar
The radically different scenarios in the Retail Horizons sessions all had a place for brick and mortar stores. Some envisioned a continued move to the shopping mall as a distribution hub servicing the retail channels that will evolve over time, rather than its original purpose as the sole point of transaction.
Others saw the need for a community footprint to allow customers to interact with the brands they are buying. In all of the scenarios, it was clear that the sustainable elements of a store help to connect with customers and B2B stakeholders, and that change (increased efficiency over time) is a reality that is a necessary element of all future planning.
Click here to learn more about the Retail Horizons Toolkit.
Patrick Leonard is a Director, PMP®, LEED® AP with Paladino Seattle