Wholesale costs of goods (63%), business rates (38%), and energy costs (30%) are the three biggest concerns for UK retailers ahead of an uncertain 2020.
According to new research by E.ON, more than half (56%) of UK retailers expect their energy costs to rise next year, but two-fifths (38%) have not yet implemented energy management solutions to improve efficiency, cut their consumption and reduce operating costs.
A third (30%) of retail leaders went as far as saying that energy costs affected their business competitiveness, more so than paying rent (29%) or insurance (20%). To combat this, many retailers are implementing lower cost measures to help reduce their energy usage. In the last year alone, almost half (46%) have installed LED lighting and more than a third (35%) have asked staff to be more energy efficient.
Iain Walker, director of Energy Sales at E.ON, said: “With financial pressures from increased wholesale costs and business rates – not to mention the uncertainty caused by Brexit and the recent election – energy efficiency is not at the top of many retailers’ to-do lists.
“Yet, at a time of unprecedented disruption, energy technologies and efficiency measures offer retailers not only a genuine opportunity to help protect their margins, but also help in meeting carbon reduction targets and in improving the air we breathe.
“Our research shows that small and important steps are being taken, but that retailers need to be much bolder and recognise that improving energy efficiency is an investment in the future of our businesses and our planet – not just another cost.”
Retailers have a number of measures available to improve the sustainability of their operations, including on-site energy generation through rooftop solar or heat pumps, purchasing electricity from 100% renewable sources , or installing a building energy management system (BEMS).
Despite these options, E.ON’s survey of 100 senior retailers reported a continued hesitancy to invest in more impactful measures: only 10% have upgraded their buildings energy management system or implemented building control strategies. Meanwhile, only 3% have invested in on-site energy generation with the help of their energy supplier.
More than a third (38%) of retailers say perceptions of the upfront cost of these technologies had put them off from introducing them, while a fifth (21%) said they do not believe they would make a return on such an investment. This is despite the Carbon Trust estimating that a 20% decrease in energy costs has the same impact as a 5% increase in sales.
The research also highlighted that a majority of retailers plan to alter their stores over the next five years in ways that could put further pressure on their energy bills. Three fifths (59%) of respondents said that they would be making their stores less focused on products and more on delivering an engaging experience for the consumer that helps to build a connection between the customer and the brand. However, more than half (54%) say they believe doing so will actually increase their energy usage – making energy efficiency or on-site generation even more crucial.
E.ON supports companies across the retail sector to provide smart and sustainable energy solutions that deliver life-time cost savings as well as lasting reductions in energy consumption and CO2 emissions. This includes tailored solutions in energy efficiency, on-site generation, virtual power plants, flexibility and battery storage.