NEW STORE SEES ROI FROM ESLS IN ONE YEAR

Julie Gallagher

HOGANSVILLE, N.Y. -- First American, a new one-store independent that held its grand opening here Saturday on an American Indian reservation, has equipped the 55,000-square-foot store with 30,000 wireless electronic shelf labels (ESLs) to facilitate price changes and shelf stocking.

Despite questions about return on investment that surround ESLs, First American projects that price accuracy and labor savings will lead to an ROI within 12 to 14 months, said Dick Onufer, general manager, First American, located on the St. Regis Mohawk reservation known as Akwesasne, three miles from the Canadian border.

"Although [ESLs] are not considered standard equipment, we wanted to do as much as we could technology-wise for this store," he said. "We want to give back to the community as much as we can."

ESLs are small plastic LCD modules that replace paper labels at the shelf edge and register price changes electronically. First American's ESLs, called StoreForward, were supplied by Wincor Nixdorf, Austin, Texas, a supplier of point-of-sale systems that entered the ESL arena in the past year. The labels were made by Tagnetics, Dayton, Ohio. Established ESL providers include NCR, Atlanta, and Telepanel, Markham, Ontario.

First American is one of the few food retailers in the United States, outside of Connecticut, to install ESLs, which retailers in other states have struggled to cost-justify despite the labor savings gained from electronic price changes.

In Connecticut, where ESLs are popular, the electronic labels exempt stores from item-pricing requirements, saving an average of about $85,000 a year, according to Pete Abell, senior partner, ePC Group, Boston. "With the exception of stores based in Connecticut, it's very difficult for a supermarket to achieve an ROI with ESLs," he said.

In New York, although item-price marking is not required, item-price accuracy is enforced, making ESLs more attractive. "A retailer will get fined [$500 per occurrence] if a discrepancy is found between the price noted in its scanning system and the item's shelf price," Abell said. "I've seen retailers who've had price discrepancies for one-quarter to one-half of all prices." Mistakes like these are often the result of human errors that occur during manual price changes, he explained.

Since First American is a brand new store, its initial investment in ESLs is not as substantial as one required by an existing store. "The cost of installing ESLs in new stores is about $12,000 to $15,000 less than retrofitting an existing store with the equipment," Abell said.

Maintenance costs associated with First American's system may also be reduced since the ESLs don't contain batteries. "Typically, labels that contain batteries tend to require a little more maintenance than those without batteries," Abell said. "Batteries usually have to be replaced every couple of years."

WIRELESS NETWORK

The StoreForward system sends price changes to the ESLs in real time from a store tag controller in the back room over the store's wireless RF 802.11b network to tag area controllers (TAC) mounted on each gondola, refrigerator and freezer, according to Ron Early, president, Tagnetics.

The TAC then distributes pricing information to individual labels via Tagnetic's patented inductive coupling process. "We drive a proprietary signal and communicate with each individual tag uniquely," Early said. The tags are powered via an electrical strip rather than by batteries.

First American's choice of an 802.11b network for use with ESL is a wise one since the network can be used in other areas of the store, Abell said. "It's the same frequency used with wireless handheld devices," he said. "To get a true ROI, it's important to use the same frequency or infrastructure to do other things beyond just shelf labels."

First American will leverage the ESLs for tasks beyond displaying price. For example, the system's stock-to-light feature helps store associates stock items with a flashing light emitting diode (LED).

"If you scan the bar code on an item, its corresponding electronic shelf label will blink," Early said. Tags will also indicate how many facings a particular product should have. "If the store has a run on diapers and there are no diapers left on the shelf, the person who rebuilds it will know how many facings there should be," he said.

In addition to ESL technology, First American will install two self-checkout terminals in the near future. The store also features dual-till registers to accommodate both Canadian and American currency. And it electronically maintains its HVAC system and piped its vestibules and sidewalk so that hot water can melt snow and ice during the winter.

Along with the 10,000 residents on the reservation, the store hopes to attract Canadian and American consumers with its tax-free products.