Though many retailers are sold on the technology behind electronic shelf labels, the cost of the systems and competition from other project priorities is hindering wider acceptance.
Even if a company is willing to spend the $120,000-plus to outfit a store, that capital expenditure has to be weighed against multiple technology initiatives doing battle for the same budget dollar, retailers and wholesalers told SN.
"Electronic shelf labels get pushed to the back because we're looking for a shorter payback period -- a shorter hard payback period," said Al Carville, vice president of information systems at Hannaford Bros., Scarborough, Maine.
Hannaford, which has ordered but not yet installed an electronic label test system, is among about 20 North American supermarket retailers that are testing or plan to test the technology.
"We're interested, but until we see a very significant movement on price, [electronic label systems] will be hard-pressed to break through" and gain wider penetration in supermarkets, Carville added.
When electronic shelf labels were first introduced some 10 years ago, modules cost about $10 apiece. Currently the cost of modules ranges from about $6 to $8, sources estimated.
Over the 10 years the labels have been around the technology has improved and costs have come down, but the systems have not been widely embraced.
Nevertheless, retailers cite several key benefits to using electronic shelf label systems. Price consistency from the aisle to the point of sale is often touted as the primary attribute of electronic labels. Price modules, which receive information from the same data base that feeds the POS, are affixed to the shelf edge and show prices via liquid crystal display.
In addition, the systems can deliver labor savings, communicate promotional messages to shoppers, and play a role in shelf management and reordering.
Edwards Super Food Stores, Windsor Locks, Conn., conducts price checks weekly and claims 100% price accuracy has been achieved in its 33 Connecticut stores installed with electronic labels. The chain spent $4.8 million to put systems in all stores in the state, where an item-pricing law is waived for retailers with electronic labels.
In addition to pricing integrity, retailers contend that electronic shelf labels can deliver labor savings because the price updating process becomes automated.
"There's an interesting dynamic at work" in the evolution of electronic shelf label technology, said Ray Ahlgren, director of retail technology, research and development at Supervalu, Minneapolis.
"At first the tags were $10 and the minimum wage was maybe $3.50 an hour, so the return on investment was kind of questionable," he said. "Now the cost of the labels has come down to $7 or $8 and minimum wage is up to about $4.50. Over time this becomes a no-brainer."
Supervalu is interested in electronic shelf label systems but has no immediate plans to test the technology.
Roundy's, Pewaukee, Wis., which has been testing the technology for about five years, has effectively trimmed labor costs and brought the payback on investment to under one year, said John Granger, vice president of management information systems and electronic data processing.
Last month the retailer installed an 18,000-label system in its fourth store to get the technology.
However, Roundy's is quick to add that other technology projects, such as electronic marketing, are competing for development time and funding.
"We've got so many irons in the fire these days," Granger added. "No matter how good the technology is, you don't just say, 'Let's divert all our resources and do all our stores.' It's a very good system but it's not the kind of thing where you get instant labor savings. It's not a big bang."
H.E. Butt Grocery Co., San Antonio, was to install electronic labels in a sixth store this month and plans to outfit three more stores before the end of the year. The 220-store chain has the largest single-store installation, with 21,000 labels, and is viewed as having one of the most aggressive electronic label test programs.
Looking ahead, H-E-B plans to experiment with electronic labels' merchandising applications by programming the tags to display promotional messages.
Other electronic label-driven merchandising tests have been launched and provided insight to price sensitivity of certain products. One retailer, for example, programmed labels to display competitors' prices at the shopper's command. While customers accessed price comparisons at the push of a button, the retailer tabulated how many times that data was retrieved from a particular product's tag.
Another retailer on the West Coast has programmed electronic labels to display an items' promotional status to assist store-level employees in the hanging and removal of shelf talkers and signs.
These merchandising and shelf management applications deliver "soft" benefits that extend beyond price accuracy and labor savings. Retailers who can maximize the functionality of electronic shelf label systems in this way may have an easier time of justifying the expenditure.
"I don't think labor savings is going to be the driving factor in someone making a decision [to install electronic labels]. It's probably going to be based on other elements, such as how the store's operations fit into cutting-edge technology," said Ty Hitt, chief financial officer at K.V. Mart, Long Beach, Calif.
"If you have [direct-store-delivery] receiving, scanning at the front end and network capability, then that electronic shelf tag system will fit in nicely as part of your overall perpetual inventory," he added. K.V. Mart will test a new, solar-powered electronic label system from Pricer, Norwalk, Conn., next month and intends to roll it out chainwide to 13 stores.
The other electronic shelf label systems with commercial installations in North America include Electronic Retailing Systems, Wilton, Conn., and Telepanel Systems, Markham, Ontario.
Most retailers agree that the labor-saving potential of electronic shelf labels should not be the sole reason for installing the systems. Yet, they also say electronic labels would gain wider acceptance if other states adopted item pricing waivers as Connecticut has done.
For Craig Wright, vice president of support services at Buttrey Food & Drug, Great Falls, Mont., the price of the technology remains the single biggest obstacle. "I've heard people say, 'They have to be under $4 [per tag], they've got to be under $2."
Hannaford's Carville agreed. "If vendors would bring their prices down to say $4 per label, all of a sudden you'd see a lot of people evaluating electronic shelf labels," he told SN. "So the question is, 'Which comes first: the chicken or the egg?' Do you bring pricing down to where you stimulate demand or keep pricing high and get [wider acceptance] in dribbles?"
Following are the retailers who have installed or planned to install electronic shelf label systems as of Aug. 18, 1995. Total # of # of # of Additional Systems Telepanel ERS Systems