PLAYING SHELF TAG

Mina Williams

Retailers that are reaping the greatest benefits from electronic shelf labels seem to be those operating in states that have item-pricing laws. However, others may begin adorning shelves with the electronic labels when their advantages become more mainstream.

Most retailers that use the electronic units do so for the price integrity and labor saving that the units provide. However, the units' less touted merchandising and marketing applications could be key to inducing more retailers to test the technology.

"We have so much ability with these labels dealing with [linking our] front-end systems and database" to synchronize pricing, said Scott Yeager, marketing director of retail technology services for Fleming Cos., Oklahoma City. "Moving further, retailers can link ESLs into their inventory management system to display back-room inventory and planogram information."

Though industry experts estimate ESLs can run between $5 and $10 each, based upon an order of 15,000 to 40,000 units, retailers that have taken the financial plunge are gaining value from the systems, specifically through more accurate pricing.

"ESL systems could be considered a consumer advantage," said Bernie Rogan, spokesman for Shaw's Supermarkets, East Bridgewater, Mass. "Any retailer in markets where ESLs have been installed has been shown that the units can help run the store smoothly, with excellent price accuracy on the shelf and at the front end."

A&P, Montvale, N.J., is using ESLs in its Connecticut stores, and one A&P Super Foodmart store is among six New England retailers participating in a year-long evaluation of the units in Massachusetts. Since its leap into ESLs two years ago, A&P said it felt the price integrity provided by the units had prompted customers to accept them.

"They give a very positive customer impression," said Francis Clark, vice president of in-store systems at A&P. "A customer entering the store believes the prices will be accurate. We are very pleased with our customers' acceptance, and experiences in Connecticut.

"We are looking at [using them in] other markets, depending on what the opportunities might be," he added.

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 wires, or with the use of a radio chip, wireless technology.

Price data usually is input to a main computer at the retailer's or wholesaler's headquarters, then disseminated to stores. Once the data is transmitted to the store level, it is filed in a database and filtered to the POS systems and plastic labels simultaneously.

"Supermarkets today need to be perfect," said Yeager. "When a company installs [an ESL system in] 30 stores within a market area, for example, it knows that it can change prices within one hour.

'Not only is the price change effective, but it can be done without any mistakes. That's control," he added. "We're all about supermarket solutions that work. ESLs are just one way to win."

Organizations using ESLs also value labor savings they realize by using the units. "There are approximately 2,000 to 4,000 price changes a week that can be changed via a wireless network, saving about 40 hours per week in manpower," said Steve Brown, owner of Brown's Thriftway, Philadelphia, which installed more than 15,000 labels in one of its stores there.

"[Paper] label costs that run from $400 to $500 a month are now eliminated," he added, noting the store also saves the costs of printing, generating and shipping labels to stores.

Based upon positive results, Brown's has ordered another 3,000 units. Brown's supplier, Fleming, is planning to install at least two systems by the end of the year, and more are to come on-line next year.

To spread the units beyond areas with item-marking laws, retailers need to explore the other functions the units can provide, such as merchandising, marketing and store operations applications.

"There are benefits to be had through accuracy and labor savings," said Fleming's Yeager. "But the main benefit is in merchandising. In today's competitive market, retailers need to react quickly to compete. They need to offer hot specials within one hour and the price changes need to be implemented flawlessly."

Brown's is using the units' marketing applications to display prices, sale information and frequent-shopper savings directly on the ESL.

Retailers are also exploring managing planogram information with ESLs. The units enable retailers to transfer electronically and store planogram information within the electronic tag. Out-of-stocks may be reduced by using ESLs to track electronically the facings available on a shelf, according to industry sources.

Despite these benefits, many retailers are taking a "wait-and-see" approach when it comes to installing the units.

"We're waiting for the results of the Massachusetts test," said Bill Homa, chief information officer for Hannaford Bros., Scarborough, Maine. "And we want to see a positive return on investment. It seems so far down on the horizon."

Supervalu, Minneapolis, has no ESLs installed -- and none even on the drawing board. "It's a case of no one showing us the definitive payback. You still have to print the overlay, so that step isn't removed," said Don Abbott, general director of retail systems. Return-on-investment is not an issue for retailers operating in states where item pricing has become law. Shaw's has units with ESLs in Rhode Island, Massachusetts and Connecticut. "We wouldn't have the same fervor in those states where individual pricing is not required," said Rogan. Shaw's units in New Hampshire, Maine and Vermont do not have ESLs.

According to Fleming's Yeager, the wholesaler works with its retailers to analyze the ROI based on that retailer's particular labor pool, and the number of price changes executed each week. He noted systems usually take two to three years to produce a return.

As more states enact item-pricing laws and regulations, retailers are starting to question whether national standards might be in order, particularly for operators whose marketing areas cross state boundaries. The National Office of Weights and Measures in Gaithersburg, Md., is considering this issue.

"We see this ESL technology as one way to improving pricing," said Ken Butcher, weights and measures coordinator. "The key to getting it to work is to get the price low and keep it low, so operators can get into it." This group will take up the national standards issue at its national conference at the end of January.

Despite state mandates, industry experts are quick to point out that this is the only use of ESL technology that has a direct effect on consumers -- the lifeline for supermarkets.

"Our Connecticut experiences have been nothing but positive," said Rogan. "As far as we're concerned, the price accuracy issue is invisible in Connecticut. "ESL systems are like waving a magic wand," he added. "They help retailers remove the thread of human error."