In the previous article, we said that increase in prices for electricity, as well as for imported metal halide and fluorescent lamps, inevitably lead to increase in the costs for a store maintaining. In Russia, the jump in the exchange rate after 2014 was reflected in the cost of MHL and fluorescent lamps. And since replacement of these lamps is required regularly (every 3000-7000 hours), the cost of relamping is very considerable for the brand.
It is obvious that transition to LED technology will reduce both energy consumption and the costs for relamping. Here are the benefits that are plain to see:
- electricity saving more than double;
- saving due to lamps and installation and replacement operations (relamping).
But there are still unevident benefits such as:
- environmental friendliness;
- reduced air conditioning costs as LED lamps emit less heat energy;
- reduce the costs for the payroll as the number of employees to maintain the store is reduced.
With all these benefits, the question may arise – what about the costs for modernization? At the end of the article, the case is presented where the example of our client’s store shows modernization ROI analysis.
When should you think about modernization?
- When a store belongs to category A, you should especially think about modernization first, and here’s why. A category A store creates and maintains the brand image so it is extremely important to pay attention to the visual appearance of the retail space.
- A store that, for various reasons, falls under the definition of a “lamp eater”. When the costs for energy consumption at the point in comparison with other stores in the network is significantly higher.
- A store is equipped with obsolete types of lamps that have been discontinued.
- When a retailer has the opportunity to agree with a lessor a separate payment for electricity. This means that a tenant enters into a service contract directly with an electricity supplier.
Case: modernization of 700m2 store
In 2019, we received the request from the client who began to notice that one of his stores located in a large Moscow shopping centre began to visually lose to competitors.
The client was concerned that the dim light inside gave the impression of failure and moral fatigue of the store.
When we went to the facility, we saw that indeed, the store next door looked better, brighter, more attractive… It was necessary to do something because the appearance and atmosphere of the store are among the key factors affecting sales. Together with the client, we made calculations and proposed the modernization project which in addition to aesthetic (general illumination, placement of accents) will solve problems with unnecessary costs. The fact is that this store, like the others, was equipped with old MHL lamps which, in addition to dim lighting, gave significant burden on the budget due to electricity consumption and maintenance costs.
We decided to start with two of the brand’s category A stores.
Brand country: Spain
Number of stores in Russia: 89
Store area: 700 m2
Annual savings resulting from replacement of the lamps amounted to 38% or EUR 8,505. Let’s explain where this amount came from.
Firstly, the old lamps required energy and air conditioning costs totalling EUR 7,500 per year (on this area of 700m2). In turn, LED lamps consume almost 3 times less electricity that is, only EUR 2,750.
Secondly, the costs for works to replace MHL lamps which, given the service life of the lamps, is approximately once a year. It will require involvement of at least two employees which is about EUR 350 per year. Replacement of LED lamps is required at least once every five years (subject to purchase of high-quality components). And of course, the cost of the lamps. In the previous article, we wrote that the cost of MHL light sources is growing due to import duties, the rising exchange rate, gradual modification of production, etc. The cost of MHL lamps purchasing per year will be EUR 3,500 despite the fact that LED lamps are gradually becoming more affordable.
|Item||Budget Euro** per year for MHL store||Budget Euro per year for LED store||Profit for per year of maintenance, Euro|
|Energy consumption for luminaries and conditioning system||7,500.00||2,745.00||8,505.00|
|MHL bulb and driver costs||3,400.00||0|
|Work to replace the bulbs and drivers||350.00||0|
Cumulative profit by 5 years is 45,000.00 €. Profit in percent is 38%.
As a result, when we submitted the calculations made to the energy efficiency services of the brand’s headquarters in Spain, the management decided to carry out consistent modernization of all 89 stores of the brand.
We have extensive experience in modernization of illumination systems, we received various requests from clients, but always the result was impressive.