Electronic Shelf Labels - 9 Retailer created applications and benefits

6 Feb 2015 3:09 PM -

When the first of the Electronic Shelf Edge Labels (ESL) appeared almost  a decade ago, the key issue that suppliers of this technology were solving for was delivering lower cost of payroll in stores to big retailers. This was achieved through store associates not having to spend time  printing, placing and replacing paper shelf edge tickets around the store.  It also saved on cost of paper, print consumable, printers and often the cost of freighting or mailing tickets to stores in bulk. Depending on the country and the type of retail, this solution  appealed to certain early adopter retailers. So Scandinavia with high payroll cost, and grocery stores with high numbers of fast changing prices in a High/Low promotional pricing model were the  first to adopt ESL in scale. And it was store operations and IT that was leading the implementation.

Fast forward to 2015, and the technology with ESL has moved in leaps and bounds, with DisplayData leading the technology innovation. But more remarkable perhaps  has been the innovation with which retailers are adopting and harnessing this seemingly mundane technology. And how the decision to adopt ESL is now being driven not just by Store Operation and IT, but the Buying teams and Marketing too.

From visits to North America, Asia Pacific and Europe over the past year, we’ve been able to distil out 9 applications that key retailers have found for ESL in their stores. To give you an idea of how fast this is developing, when we first complied the list at a meeting at The Sofitel in London’s Heathrow Airport, there were only 6 on the list. Now there are 9!

More amazing is the adoption of ESL across such a wide and diverse group of retailers too. Dick’s Sporting Goods, Trader Joe’s, Wholefoods, Heinemann Duty Free, Sears, B&H photo, Verizon, Best Buy, T-Mobile,  AT&T, and Kiddicraft. There isn’t  a sector of retail in the US that hasn’t trailed and is now rolling out ESL in that country. So much so that the term “ESL has now happened in the USA” reflects the fact that most new and refurbished stores in the USA in 2015 are specifying ESL in the project plans.

To start, probably the simplest and most human test criteria for adoption of ESL we have heard came from a specialist grocery retailer in the US. Their Board of Directors asked the project team to ensure that labels pass through 3 gates before they could be rolled out into new or refurbished stores. These were in addition to the seemingly eponymous 36 mth ROI criteria the Audit & Finance or Investment Committees demanded.

1.       Does the label technology actually work?

2.       Do shoppers like the labels?

3.       Do store associates like the labels?

The Display Data labels in the  test stores in Austin, Texas and Atlanta, Georgia passed through these gates, and this retailer has now adopted the technology for all new and refurb stores in 2015. .

A second retailer, a large format mass merchant,  used 3 other wider criteria in trials in key departments in the North Eastern USA, in addition to ROI, and ran against a 90 day internally audited set of KPIs in these 3 areas

1.       Lower department payroll costs compared to previous 90 day period.

2.       improved sales and margin in each department.

3.       Better shopper experience measured in exit interviews of each department.

Again the labels passed the retailer’s 3 criteria gates and DisplayData labels are now rolling out across key departments with the stores.

So what have been the applications and benefits of ESL that the whole of retail business has found

1.       Productivity through lower store payroll costs, lower print and internal freight costs.

a.       This benefit has always been the backbone of the ROI calculation for most retailers. Depending upon the number of hours and rates paid per hour, plus the frequency of ticketing change, this generally provides the investment committee with a comfortable  40 to 48 month ROI.

2.       Improved store associate product knowledge, confidence and connection with shoppers.

a.       Within a specialist grocer, the ESL roll out has naturally allowed store associates to spend more time in the aisles that they like. This time has translated into more and better quality engagement with these shopper and better store associate  product knowledge in that aisle. Vitamin and supplement sales have increased significantly.

3.       Improved omnichannel price compliance and competiveness.

a.       Most retailers now view Amazon and other dedicated online retailers as their main competitor as these online retailers can “reach into store’ via the shoppers mobile device. One toy and childcare retailer runs bots that scrape their online competitors websites and automatically price match at shelf. This has led to a higher sales to visit ratio, as shoppers understand they are getting the same price as online, but are able to take the item away with them now. This retailer has an average $150 purchase per shopper, so the impact on sales and cash margin has been significant.

4.       Improved sell through stock availability communication in shelf out of stock situations.

a.       Mass merchant retailers of bulky items have used the ESLs at shelf  to communicate stock availability in store to shoppers. Shoppers looking for a single display item like a bicycle, lawnmower or microwave, see the ticket and gap and assume the item is not in stock so leave the store.  This communication has improved average sales to visit ratio, increased overall department sales and cash margin

5.        SKU specific pricing in product families.

a.       Linking the stores sales data by SKU allowed the buying team to raise the price of the most popular SKU in a family of products, usually a colour or flavour, the same pricing model many online retailers adopt. In one test the best-selling item took a price increase of 10% and sales velocity remained. Store shoppers, just like online shoppers,  wanted the red one and not the blue one, and were willing to pay for it. Sales through the department grew by 5.6% and the average gross margin for that department rose from 32% to 35.8%

6.       Automated clearance item price changes.

a.       In a fast format change electronics retailing store, the store associates began shrink wrapping the clearance items with an ESL inside the shrink wrap. As the new format printers were introduced, and dropped in price from $109 to $99, the remaining clearance items were automatically marked own again to maintain the discount relativities. At checkout the store associates simply removed the ESLs from the shrink wrap and recycled them, just like the old security tags in some  clothing retailers.

7.       Automated Bundle price and terms compliance

a.       In most Telco retailers in the USA now retailers are using larger format ESLs to communicate accurate and current bundle prices and terms to shoppers at shelf. They are able to automatically re-price across individual stores, or by city, state or nationally.  Price and bundling compliance is near 100% .

8.       Automated Time of day pricing.

a.       24/7 convenience stores are able to automatically apply time of days pricing in their stores to compensate for late night labour rates and lower night time sales volumes. In higher volume stores this has improved margin, and in marginal stores it has allowed for longer trading  hours to serve local shift work shoppers.    

9.       Rolling Multi currency pricing.

a.       In Duty Free and international airport shops, retailers are able to show current and accurate item prices on a single larger ESL across several key currencies. This has led to higher sales as most shoppers can self-serve with a price in their own currency that they can compare, and a faster purchase transaction time for time bound shoppers.

As ESL is rolled out to more and more stores, a larger number of people within stores will find new and innovative ways to apply these seemingly simple plastic labels. Most will use them to improve their shoppers experience in store, but all will  improve the sales and profitability performance of those stores.

Kevin A Moore FAICD, MCIM, JP
Shopper Marketing Director
Mirador Retail Technology

Whatever your retail challenge, chances are someone has found a solution and already successfully implemented it in an overseas market.

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