SAFEWAY TESTS DIGITAL SHELF LABELS IN 2 STORES

PETER PERROTTA

PLEASANTON, Calif. -- Safeway here has begun testing an electronic shelf labeling system in two of its stores designed to improve pricing accuracy and save labor costs.

"We are testing the electronic shelf tags in two of the Bay Area stores that are in close proximity to our company's headquarters," said Debra Lambert, spokeswoman for Safeway.

"We have not made a determination on the system themselves," Lambert explained. "One is provided by NCR [DecisionNet].

"In terms of the future, these decisions have not yet been made in terms of whether or not we will be rolling it out elsewhere and on any results of the particular tests we are undertaking at this time."

Safeway is one of the biggest food retailers in the country, operating 1,726 supermarkets. Last year, the chain did $32 billion in sales.

While Safeway may be in the initial stages of testing the digital shelf tags, Jim Whittaker, director of management support services for the 12-store Binghamton (N.Y) Giant Markets, is already convinced the new technology is well worth the investment.

Whittaker said his chain piloted the NCR DecisionNet electronic shelf labeling system in a Binghamton store for six months.

Whittaker said the digitalized price labels operate on a wireless system that is directly connected to the store's POS system. Transmitters and antennas are installed in the ceiling, Whittaker said.

Price changes are made simply by using the store's computer. As the prices change on the shelf tags, they're also changed in the store's POS system, Whittaker said.

"As far as we were concerned the pilot was a success," Whittaker said. "Right now we are entertaining a proposal for rolling out the ESL [electronic shelf labeling] system in all of our stores."

Whittaker anticipates that sometime within the next 12 months, Binghamton Giant Markets will have the ESL systems in all of its stores.

"We found the [pricing] accuracy is greatly improved," Whittaker said. "The customer reaction to the [digital] tags has been extremely positive."

But, according to Whittaker, perhaps the biggest savings, is the amount of man-hours saved by not having to send an employee around to manually adjust prices.

Whittaker projects that the ESL system will save 15-to-20 man-hours per week in labor costs in each store it is installed in. That translates into a man-hour savings of anywhere between 780 to 1,040 hours a year per store.

For a large supermarket chain like Safeway, with 1,726 stores, the man-hour savings per year could range from 25,890 to 34,520 hours per year. That translates into savings of hundreds of thousands of dollars in labor costs.

Charles Cerankosky, managing director of McDonald Investments, Cleveland, said with the average per hour labor costs for supermarkets ranges from $10 to $20 per hour (depending on benefits).

At that rate, the savings for a chain like Safeway could be staggering.

"It [ESL] is a great idea" Cerankosky said. "But the installation costs have always been the big hurdle preventing chains from really getting into this."

However, one industry insider said that even though ESL systems have been around for almost a decade, a recent drop in their cost, coupled with improvements in the technology, have made them more attractive.

An industry source said it costs about $120,000 to set up an electronic shelf tagging system in the average grocery store.

However, Cerankosky said that if Whittaker's labor savings projections are correct, more and more retailers may start taking a look at ESL.

Whittaker thinks that without a doubt, the ESL systems will proliferate.

"Eventually, everybody is going to have them [ESL]."