Retailers have more choices regarding electronic shelf label systems, and seem more willing to test the units now that their prices are coming down somewhat.
Among the benefits ESLs provide are improvements in price accuracy, reduction in the labor needed to change prices on the paper shelf tags as well as the marked prices on items themselves.
While these two factors remain the top motives when retailers consider ESL installation, sources told SN they are interested in future deployment of other applications that are available through the shelf tags, including better order management and out-of-stock alerts. Some retailers are seeking more marketing-related functions from the tags, such as advertising of sale items or frequent-shopper specials.
Based on these expectations and their potential results, 36% of supermarket companies plan to launch an ESL system in their stores this year. This is an increase from 10% in 1997, according to SN's fourth annual Technology State of the Industry Report.
While many retailers still find it difficult to cost-justify using ESL systems, the units are quickly gaining more attention, and testing, among retailers with stores located in states that have a law in place stating that automated units can replace marking a product's price.
Big Y Foods, Springfield, Mass., currently uses ESLs in 15 of its Connecticut-based stores. The retailer could add ESLs to an additional 25 stores if a law is passed in Massachusetts, similar to the existing legislation in Connecticut, which states that while food retailers must item-price products they sell, the use of ESLs eliminates the need to item-price.
"The units provide 99.5% accuracy," said David Brunelle, vice president of operations for Big Y. "By using the ESLs, rather than marking items on the shelf, the units are definitely helping to ease our customers' concerns about price accuracy."
Connecticut's legislation has made it an ESL-friendly state, with chains including Shaw's Supermarkets, East Bridgewater, Mass., and Stop & Shop Cos., Quincy, Mass., a division of Ahold USA, Atlanta, equipping their stores there with the electronic tags.
Harding's Friendly Markets, Plainwell, Mich., a retailer that is not using ESLs, does not expect to seriously explore the technology unless the state lobbies for a pilot to explore the possible results of the technology. Harding's is intrigued by the systems' potential, however.
"As far as accuracy goes, you cannot do any better than point-of-sale and shelf prices being synchronized when changed," said Curt DeVries, director of information systems for Harding's.
"Currently in Michigan, there is no pricing law, so that is a factor why the systems are not in widespread use here," he said. "If we knew we did not have to use our labor to price product, we would probably look at the unit much more seriously."
Though retailers using the technology would not give specific numbers, a source familiar with ESL technology estimated that, depending on the number of weekly price changes at a store, labor could be decreased by at least 40 man-hours per week with ESL use. "That is at least one full-time associate that can maintain price auditing and still work in other areas, including customer service," said the source.
Typically, ESL systems draw pricing data from the same computer file used to update a store's point-of-sale system. The plastic tags display item prices via a liquid crystal display, using either wired, or through the use of a radio chip, wireless technology.
Price data is typically input to a main computer at the retailer's or wholesaler's headquarters, then disseminated to stores. Once the price information is electronically transferred to store level, the data is filed in a database at the store level, and transmitted to the POS systems and plastic labels simultaneously.
Final preparations are being made for a pilot test, to be conducted this fall in Massachusetts, that will allow certain food retailers to use electronic shelf labels for a limited number of products that are usually pricing exempt.
While the test will be monitored to analyze the reliability and accuracy of the units, consumers will also be able to evaluate the effectiveness of the units.
"The biggest frustration is when [a customer] picks up an item and it is priced differently at the front end," said Chris Flynn, president of the Massachusetts Food Association, Boston. "Due to multiple price changes and the number of consumer items that supermarkets deal with on a daily basis, it is impossible to keep up with manual price changes. This current system is set up for failure.
"We want to get ESLs on those item shelves in order to show the units' credibility, and that the accuracy is much more reliable than individual item pricing," he said. "We want to be able to address the concerns of consumers and educate them, so the technology can grow.
"We have heard consumers say that stores using ESLs will change item prices while they are shopping in the store," he explained. "They need to understand supermarkets are in the business of keeping customers and earning new ones, not scaring them away. We hope this test will provide some real data and evidence to give ESLs a push forward."
Big Y is excited about the upcoming year-long test, and expects the results to prove that the units are consumer-friendly and an asset for both the retailer and consumer.
"The state will pick which locations will use the electronic tags, which will identify prices on products like gelatin, baby food, some ice creams, milk, and other items that are not currently required to be individually marked in Massachusetts," Brunelle said.
The test, which will be evaluated by the Commonwealth Of Massachusetts Division Of Standards, needs to produce "better than a 98% accuracy rate on items," he added. "Other factors that the test needs to prove are how consumer friendly they can be. Consumers need to realize the accuracy level they provide, and be comfortable seeing them on the shelf."
While strides are being made, the technology's acceptance is still considered to be at the early stages of its evolution, mostly due to the price point of the units. "We still see the technology as difficult to justify, though the systems have come a great deal closer to the right price point," said Bob Drury, vice president of management information systems for Schnuck Markets, St. Louis.
While prices have decreased in the last few years, "in the supermarket industry, pricing needs to be at a level that equals a return on investment criteria," said the source familiar with ESL.
"There are options out there," said Drury. "For example, you do not have to buy the systems outright; some systems offer leases, rather than requiring retailers to make a large capital investment. Nevertheless, retailers still need to invest a huge amount [of money] to use the technology."
If ESL usage increases, retailers may begin to see the tags as providing a competitive advantage. "Once the price point is lowered even further, and more large chains begin rolling out the technology to a number of stores, we will get closer to critical mass," added the source. "And that day is coming; I'd say we are on the cusp."
Another factor that could swing the pendulum, and see ESLs begin to blanket the market, is the addition of more functionality and applications through the units.
"We like something a bit more artistic on the shelf, and these [tags] tend to be plain from a marketing sense," said Schnuck's Drury. "These units are not just about price accuracy and labor savings. There also need to be marketing considerations that make the units different, and to become something to get excited about putting on your shelves."
The addition of color LCDs, or larger, split screens could possibly spark more interest from retailers. However, these additions will not decrease the units' price.
Retailers are awaiting further education on a variety of applications that are possible through the units, including aiding in order management and providing out-of-stock information.
"The units are interactive," said Schnuck's Drury. "The shelf facing can project inventory that is on hand, and the idea of using the units for more order management is useful. However, until this becomes another focus to using the systems, they will remain hard to cost-justify."
"Some of these features are available now through the units, but retailers still do not fully understand the capabilities and have yet to use them," said Big Y's Brunelle. "While the retailer does not understand the power the technology has, the vendors need to develop these applications more fully and educate the retailer on the proper way to utilize the tags beyond price accuracy and labor savings."
