Amazon's Solar Secret

The green new deal is the roof over retail's head

by Burt P. Flickinger III

The retail juggernaut otherwise known as Amazon is loved, feared and unbowed for well-known reasons. It is the category killer that’s winning with technology, marketing, merchandising, delivery, service and price, that hires the best and brightest people, that borrows and builds on its competitors’ advantages and then checkmates them. Above all, Amazon is relentlessly focused on both making and saving money six ways from Sunday, which sits at the very foundation of its astonishing success.

Almost completely overlooked, however, is one of Amazon’s most powerful competitive advantages: its nearly obsessive drive to convert every square mile of its expansive rooftop real estate into dollars and cents. A just-published report places Amazon #2 on a list of corporations using solar power, generating some 330MW of power in 2018, up 36MW from the year before. Just in front of Amazon, at #1, is Apple, with 393MW, and just behind it is Target with 242MW, followed by Walmart with about 209MW, according to the report issued by the Solar Energy Industries Association.

Amazon certainly is not alone in its understanding of solar power’s potential to make and save money. Aldi, BJs, Costco and even IKEA, are also big into solar. Yet Amazon has pursued a solar strategy with an intensity that should be a wakeup call to other retailers and their suppliers. To the extent that they are not asleep, the retail world’s response to Amazon has been myopically limited to buying and selling shelf and display space inside their stores, completely missing the Amazon money machine humming away outside, up on the roof.

Even more advantageous to Amazon, and damning for nearly everyone else, is that its commitment to solar is giving it a peremptory competitive advantage where it counts most: consumer loyalty. Strategic Resource Group recently completed a survey of 663 shoppers in key New England markets, which found that more than 90% want food retailers and consumer companies to use solar power. Nearly one-third said they would spend more with retailers and consumer companies with strong solar programs. Followup studies in other regions confirmed similar shopper sentiments across the United States.

So, while most of the rest of retail is boring shoppers to tears with the same old price promotions and predictable holiday merchandising events, Amazon is wowing them with its array of solar panels glistening in the sun, which many consumers know about but never even see. Ironically, the typical retailer, be it a supermarket, chain drug store, mass merchandiser, home improvement or convenience store, located in a high-traffic area, literally has an opportunity to shout its commitment to sustainability from its rooftops. A solar display, visible like a lighthouse to passersby from a half mile or more away, is arguably the most effective advertising and merchandising they could ever do.

The question is, why aren’t they doing it? It’s not at all complicated or even costly to initiate a solar strategy. Several pathways are available, from direct purchase to leasing. The path of least resistance is a Power Purchase Agreement (PPA), which requires no capital outlay while generating a return of 8-10%.

Tax incentives are also available at the federal level, although the Trump Administration is stepping down incentives for solar from 30% currently to 26% in 2020, 22% in 2021 and 10% in 2022. A smorgasbord of state incentives vary widely and change constantly, with the best incentives concentrated largely in the Northeast and other “blue” states.

Most important, these federal and state incentives are finite, so first-movers get the advantage. For example, in California, an initial pool of $400 million is now down to less than $100 million. New Jersey has already run out of money, just like Connecticut, Massachusetts, Rhode Island, Illinois and other key solar states have periodically.

The window on solar is open, but is closing fast for just about everyone except Amazon and a few others. In fact, the window effectively never closes on Amazon because it moves so quickly to take advantage of the incentives while others sit by and just get burned.

Amazon’s solar secret it that it is saving energy costs in the short-term, while locking in energy prices and building consumer loyalty over the long-term.

The green new frontier is the roof over retail’s head.

About Burt P. Flickinger III

Widely known, recognized and quoted as a leading expert on all aspects of the retailing industry, Burt P. Flickinger III has worked as a consultant for top retail chains around the globe. His family has been in the wholesale, vertically and horizontally integrated private label production, manufacturing, and branding businesses for four generations since his great grandfather founded S.M. Flickinger Company – the largest supermarket wholesaler/retailer headquartered in the eastern U.S. prior to its acquisition by Metro Group Europe. The Flickingers and FMI, National Association of Wholesale Grocers (NAWGA), and Food Distribution Institute (FDI) had a partnership across four generations in the horizontal and vertical development of Federated Foods (which the Flickinger family founded) full line private label brands. Burt, his father, grandfather, and great grandfather worked in partnership with the Hannaford, Nash, Finch, Albertsons, and other regional co-op families and corporations.

Prior to founding SRG Consulting, Burt’s extensive career included working for S.M. Flickinger in buying, merchandising, marketing, operations, warehousing, transportation, private label development, and real estate, Procter & Gamble, Glendinning Associates, Interpublic, and serving as Director of Price Waterhouse Coopers/Management Horizons Marketing: Wholesaling, and Retailing Consulting Practice. For years, Burt was a contributing editor and featured monthly “Flickinger File” columnist for Progressive Grocer. Also, he was contributing industry editor of both Global Retail Insights and Supermarket Insights. Burt and the Flickinger family, along with Cornell’s Food Industry Management program and Private Label Magazine, co-published The Future of Private Label in North America with Phil Fitzell, Editor at Exclusive Brands.

Burt can be reached at [email protected] or 212-496-5100.