February 26, 2010
Changing prices of products on a continuous basis is a necessity in a retail environment, and is particularly time consuming in a grocery environment with thousands of different items stocked on the shelves, and thousands of potential price savings every week. Canadian retailers also have a code of practice where retailers pay reparation to consumers in the case of mislabeled items, so retailers have a tremendous incentive to ensure that prices are up to date and synchronized with the in store database.
Given the hours of labour involved in keeping all of these prices up to date and accurate, it’s not surprising that retailers and vendors alike look to technology in an attempt to reduce the burden of labour and cost.
Electronic Shelf Labels (ESLs) are one of the solutions that have come in and out of favour over the past decade or so. Given the continuous reduction in the cost of electronic components and computing power, re-visiting the potential of ESLs today is a credible exercise.
In order to assess the potential value, let’s consider a few points around the potential value of this technology in a retail environment.
Reduction in Store Labour - Using an electronic system avoids the necessity of store staff walking the aisles and changing the labels on store shelves. Retailers I’ve dealt with have the labels sent to the store from a central location, and walk the aisles to change the labels – I know some have 1-2 people doing this for 1-2 days per week. Assuming the system is working correctly, a very significant labour effort is removed from the store. A very large potential savings to be sure, but the entire effort is not removed from the mix, as displays are changed often, and the product to be displayed on the label must still be changed.
Accuracy - Assuming the price database in the store is accurate, the potential exists for improvements in price accuracy, as the necessity of placing labels on shelves each week is removed. Assuming that no changes are made to the store layout, the potential for error is reduced. The reality is that in many environments, displays, end caps, and various shelf planograms change relatively often as products are added and removed from a store database. While the tag can be directly linked to the price database at the back end of the store, the tag can be moved in front of the incorrect product, or the battery could die, leaving no display at all. In order for this solution to operate correctly, it is very important that the processes are carefully established, and that the tags provide for two-way communication, to ensure that the tag can communicate back to dashboard in the back office indicating that the pricing that shows in the database matches the price on the tag for a certain UPC. In implementing a system such as this, it will also be important to ensure operational systems are in place to ensure someone takes a sober second look at pricing. While placing labels can be time intensive, it also provides a sober second look that may not occur via an electronic refresh. It may seem obvious to someone placing a label on a shelf that grapes should be $10.99 and not $1.09, but the system may not notice.
Time Sensitive Offers – One of the potential benefits of using these tags is being able to provide time sensitive pricing. Special pricing can be available during certain days or hours of the week. While technically this is possible, it can bring about some unforeseen logistical challenges in a retail environment – particularly grocery. Imagine that a customer picks up an item identified at a price of $1.99 at 10.45 am, and the price changes to $2.99 at 11.00 am. The customer checks out at 11.15 am. Instead of being charged an expected $1.99, they will be charged $2.99. Even if we get by the law that says tags have to match the price displayed, the customers are likely to respond badly, and store staff are left in an awkward position which will discourage them from using such pricing schemes.
Sustainability - Everyone is doing their best to reduce their environmental footprint in today’s world. The potential of ESLs is to remove the ongoing replacement of paper labels throughout the store, which is very positive. The upside of this remains to be seen however, given the thousands of electronic devices (tags) that would need to be put in place in a retail environment. Each of these has a battery and electronic components that are more difficult to recycle than the paper tags currently used, and it may also use more electricity as a whole. While this would have to be assessed individually, it would seem that paper has the leg up here, though all of the printing that takes place may offset this.
Initial and Ongoing Costs - One of the greatest challenges of these implementations is the cost. Many of them are not obvious until an on-site testing scenario takes place. While the cost of tags has inevitably decreased over the years, given improvements in battery technology and economies of scale, there is still a significant startup cost with thousands of tags required at the outset. There will also be an effort to get all of the tags programmed with the correct UPCs, and the installation costs, which may also require changes to shelving and tag mounts in the stores. There is also the cost and effort of validating that all tags are working with the wireless network, and interfacing with the program to validate prices correctly required at every store. From an ongoing perspective, the costs appear very low at first glance, but it is important to consider that there will be replacement costs for tags that are stolen or damaged, or just quit working. The percentage of failed tags can vary, and technology has improved the life and durability of the tags, but the reality of the retail environment is such that a percentage of tags will need to be replaced every year. These costs will have to be carefully compared to the cost of current practices.
Technical Issues - Once again, wireless and display technology have improved from a technical and cost perspective since these systems were first released, but problems can still occur. Dead spots in the store may exist if wireless coverage is not wide enough, allowing updates to be missed by some tags and at least requiring intervention from store staff. Tags that are placed in challenging environmental conditions such as freezers will be more expensive or fail more often, requiring staff attention. While tags can now be much larger, it is likely that not all signage will be replaced by the digital solution, meaning staff will have to manage two platforms. Extra tags will need to be kept on site to accommodate failed tags. If there is a failure of the wireless system, or the software program to update the tags, the tags will be frozen at one price, and not updatable. All of these issues can be overcome, but require processes, and costs to be considered.
I’ve seen fewer of these solutions in recent years than in the past, but perhaps ESL’s will be revived with updated technology. In the interim, I wouldn’t be surprised to see other potential solutions considered. Why not a handheld unit with a portable printer that provides a list of UPCs to be changed? The user walks the store in order, scans the UPC in question to show they are there, and a tag is printed on the spot.
Every retail environment is different, and while technically the solution is feasible, like any technical solution, there are quite a number of logistical and operational issues that need to be overcome. There is certainly opportunity for savings.
