2010.09 | Electronic Shelf Labels

 

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.

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Comments

  1. Great article Tim.
    Electronic Shelf Label technology has come leaps and bounds in the last year with the introduction of RF Communications as a wireless platform. However, one point which you should consider is that additional benefits that ESLs give retailers is the ability to be dynamic in their pricing stratgies. They can lead the market, react immediately to a competitor or even use dynamic pricing in conjunction with shopper insights such as buying patterns and behaviour.
    Also with new epaper labels displaying rich images and segmented dot martix labels with flashing and scrolling text retailers are now able to have a higher influence at the point-of-purchase where the majority of purchasing decisions are made.
    Visit http://www.ilid.com.au for more info

    • Your point on dynamacism of pricing strategies has some truth however in my experience prices are already changed constantly in retail stores with hundreds or thousands of price changes per week. How much more dynamic do prices need to be? Most retailers don’t wish to get into all out price wars. ESLs can make price changes easier logistically. The technical aspect is only one part of this solution however. If prices are too dynamic it can confuse customers or cause operational issues. For example, if prices automatically change for sales during the day it could occur between the time a customer selects an item and when the customer gets to the point of sale. What price should be charged at that point? The greater challenge in using this point in justifying the implementation of ESLs is connecting a dynamic price change to an increase in business that will increase ROI. Your points are certainly valid and worth full consideration in the evaluation of this technology. I appreciate you taking the time to voice them!

  2. Another solution in search of a problem?
    Too expensive to purchase and maintain in my opinion.
    Simple solutions are usually the best.
    Even if an ESL system automatically changed prices in my store, someone would still be sent to walk the floor to confirm the correct displays on each tag.
    That same person could spend an extra few seconds placing freshly in-store printed paper tags in the proper locations. Labor savings due to ESLs? Not really. Tens of thousands of electronic devices added to the store floor? No thank you.
    There is a reason that ESLs aren’t appearing on store shelves in your neighborhood. They are not needed.

  3. Amey P. says:

    So there are definitely two schools of thought regarding implementing ESL in retail stores.

    I am from University of Pittsburgh and I am doing a research on ESL technology in North American market compared to its European counterpart.
    In my research, I came across 3 types of ESLs that are currently positioned in the market (a. Segmented LCD, b. Active matrix LCD, c. E-paper based.)

    Now I am working on Financial viability of ESL in North American market and following things I am looking for my project.
    1. Key differentiators between European and North American ESL market.
    2. Tentative price range of basic ESL (with or without infrastructure)
    3. Costs associated with ESL and its percentage breakdowns (display, electronic ICs, Battery etc)

    It will be great if anyone can provide me with these details or refer to a link where I can find it.

    • Tim Dickey says:

      Amey,

      ESL is certainly one of those things that has come and gone and come again over the last 20 years. I will send you some information directly with some suggestions on where you may get answers to your questions.

    • Mario B. says:

      Tim and Amey;

      I would love to see Amey final paper. I am also interested in ESL tech and it success in the Americas (includingLatin America)

      • Tim Dickey says:

        I would also love to see the paper from Amey! Let’s hope we see a link in the future to a finished document!

      • Hi Mario and Tim,

        I would certainly send you my final presentation once it is approved.

        And Tim, thank you for your reference. I did get a good info from them.

  4. We’re representing an innovative company launching a very cost-effective electronic shelf tag technology in the United States now. It’s called ZBD Displays, Inc. Bascially, ZBD’s electronic point of purchase (epop) shelf tag attaches wirelessly to a shelf edge, has a battery life of about five years and doesn’t require extensive hardware for installation. ZBD software is installed within the company’s existing IT system and is easily manipulated within a Windows environment. It has fully-graphical LCD displays that come in a variety of shapes and sizes – depicting a combination of promotional copy, images, and barcodes. The best part is that it has an average ROI of 12 months. Any size retail store can use the technology to reduce labor costs, manage stock, reduce shrink and ensure compliance. Retailers can also create micro-marketing campaigns including time-of-day pricing, affinity promotions, and instantly respond to competitor pricing. Finally, it uses a unit called a “BOUNCE” to transmit the changes throughout the store — which means the ZBD system doesn’t require a lot of intrastructure installation.

    • Tim Dickey says:

      Interesting. I’ve seen e-ink coming for a while now. Will be interesting to see if this makes its way into stores.

  5. About Pricer

    Pricer, founded in 1991 in Uppsala, Sweden, offers the most complete and scalable ESL solution. The Pricer electronic price and information systems significantly increases consumer benefit while optimizing operational efficiency and profitability.

    Pricer is the largest ESL company with an installed base greater than its competitors’ combined. Pricer today has over 6,000 installations in over 200 different retailers, and about 80 million ESLs installed in 40 countries. Customers include many of the foremost retail chains. Pricer, in co-operation with qualified partners, offers a totally integrated solution together with peripherals, applications and services.

    http://www.pricer.com

    Pricer has a market share of approximately 55 per cent measured based on the estimated number of installed labels. The primary target group is the retail industry, with a focus on food retailing. The prioritized markets are Japan, Europe and the USA. The Pricer system uses a high bandwidth, interference free and disturbance safe, infrared (IR) technology which ensures rapid and wireless ESL updates with reliable bidirectional acknowledgement. Product development is a strategic competency for Pricer. Manufacturing is outsourced to qualified international subcontractors. At the beginning of 2010 the Pricer Group had ca. 57 employees. The Pricer class B share is quoted on the Small Cap list of NASDAQ OMX Stockholm Exchange. The number of shareholders is 21,000.
    In August 2006, Pricer acquired one of its leading competitors, Eldat Communication Limited.

  6. I would ike to see some of Amy’s research also.
    I have worked in the retail world for over 20 years and am wondering what would be the cost of installing ESL in a retail store?

  7. Let me know if there are retailers out there that already have done the instalation and are successful..

  8. Mario B says:

    Hi Tim..I think it is time to reach out to Amey and ask her if she would let us see her report- presentation, don’t you think? Thanks.

    Jay, there are some large retailers in the US that are moving forward with this tecnology. Just go to a Kolh’s store and you will see it there. Thanks

Trackbacks

  1. […] working for NCR Canada–one of the larger vendors trying to sell ESLs–recently posted a wonderful blog item on some of the technology’s very real hurdles, especially cost.“There is still a […]

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