ESLS: FROM PRICING TO PROFITS

COLE CORBIN

While most retailers agree there is a payback in accuracy and labor savings associated with electronic shelf labels, the technology will really take off when ESLs expand to areas such as inventory tracking and marketing.

"There are so many things it can do that retailers haven't looked into yet," said Scott Yeager, vice president of retail marketing at Fleming Cos., Oklahoma City.

Some of these expanded uses include improving strategic pricing, planograms and a potential inventory count.

The labels can tell store employees how many items should be on the shelf and how many items should be facing the aisle, and from that employees can determine when they need to reorder a certain item.

"The [ESLs] have the ability to automatically flash frequent-shopper prices and savings those shoppers receive, display new item announcements, prompt promotions or advertising and even monitor our inventory levels," said Tom Hembree, senior vice president at K-VA-T Food Stores, Abingdon, Va. "If the results remain positive, we will try to get the most value from the system as possible."

According to Yeager, so far ESLs have been low on most retailers' priority lists, but that should change soon. "Retailers have updated their POS and put in a frequent-shopper program -- and this year it's Y2K. Next year, I see ESLs really taking off," he said.

High costs associated with implementing such technology have been the main hurdles for retailers in the past. But even as prices have come down, retailers are looking at ways to get more use out of the ESLs.

"Retailers have been waiting for the price of ESLs to come down," said Yeager.

ESL implementation has seen almost all its progress in states that require grocery retailers to item price. In Connecticut, for example, state law mandates that while food retailers must item-price products they sell, the use of ESLs eliminates the need to item price.

"We would like to see the Massachusetts law essentially mirror the Connecticut law," said David Brunelle, vice president of operations for Big Y Foods, Springfield, Mass. Big Y already uses ESLs in its Connecticut store locations. Big Y has been involved in a year-long test of ESLs at a store in Amherst, Mass., since September 1998.

"We've been using ESLs as a test to enlighten the consumers and lawmakers," Brunelle said.

A&P, Montvale, N.J., is also using ESLs in 25 stores in Connecticut, and A&P is among a group of retailers participating in the Massachusetts' test of ESLs. A&P has been using ESLs since 1996 and it has seen general customer acceptance due to the price integrity.

On May 19, the Massachusetts Commerce and Industry Committee planned to hold a hearing to determine if it will eliminate the law on item pricing in favor of the ESLs.

"The state has been coming in to our stores two times a month checking price accuracy and talking to customers," said Andy Carrano, spokesman for A&P. "Our accuracy has been 100%. So far, the customer feed-back has been very positive."

Currently, A&P has approximately 4,000 ESLs in two test locations in Massachusetts, according to Carrano. "It has been working well for us," Carrano said. "We would look to expand the ESL use in Massachusetts if the law allowed it."

Shaw's Supermarkets, East Bridgewater, Mass., has also been testing ESLs in two Massachusetts stores. Shaw's uses ESLs in all of its 21 stores in Connecticut.

"At this point, implementing ESLs at stores in states that do not have a law on item pricing is not something we would consider," said Bernie Rogan, director of public relations at Shaw's.

Although he said the current cost of ESLs may be keeping them from coming to retailers' shelves, Rogan said competition among retailers to provide the best service to their customers could spark ESL sales in regions where item-pricing laws are not in effect.

"The competitive nature of the business would have some operators thinking there is enough reason to put this technology in place in states where there are no laws on item pricing, since it can be perceived by some retailers to be a real advantage," said Rogan.

"With our present system in Massachusetts, the real focus has been on price accuracy for our customers," Brunelle said. K-VA-T's Hembree said pricing accuracy has been one of the benefits of ESLs.

K-VA-T began testing ESLs in one of its stores last summer and plans on rolling the technology out to more of its 79 stores this year. K-VA-T will install additional ESLs in a second store in Knoxville, Tenn., this month, according to Hembree. K-VA-T uses the technology to automatically display frequent-shopper prices, as well as prompt promotions.

K-VA-T uses approximately 15,200 ESL units for its dry-grocery, packaged-meat, frozen-food and dairy items.

"Our operating expenses are lower because we no longer have costs for the generation of labels at headquarters and the shipping of labels to the store," Hembree said. "The manpower we are saving by not manually changing [paper] labels can be redirected into customer service."