Supply chain disruptions, new shopping patterns, and a labor shortage may collectively become the final catalyst for ESLs
Electronic shelf labels (ESLs) have been around for 30 years. Yet they are still a rare site on retail shelves. For most fast-moving consumer goods retailers, the ROI has never made sense relative to other technology investments. Countless grocery retailers have piloted ESLs over the years, some on multiple occasions, only to cancel the initiatives prior to rollout.
Benefits May Be Finally Outweighing the Costs
Retailers are once again taking a serious look at ESLs, thanks to a confluence of trends currently building a strong case for the technology. The reduction in price per unit coupled with a prolonged labor shortage and the growing number of use cases have several grocery chains and convenience retailers launching a new round of ESL pilots. They want to learn if the ROI finally justifies chainwide rollout, or if the results will once again fall short of the hype.
As retailers evaluate their findings, here are the key factors we believe may once and for all tip the scales in favor of ESLs.
1. Lower unit cost.
Historically, cost has been the biggest hindrance to ESL adoption. The sheer number of units needed for a typical convenience store or grocery store chain is simply too high to justify the investment. With unit costs coming down considerably in recent years, a hurdle rate is now much more attainable. Like everything else, recent supply chain disruptions and inflation have impacted ESL prices, but not significantly enough to cancel pilot testing.
2. Simplified store operations.
As supply chain disruptions continue to result in multiple rounds of cost increases for merchandise in just about every category, store associates are beating a path to the shelves to change the price tags again and again. The process is time consuming and fraught with inaccuracies. Already facing labor shortages, these added tasks are feeling a lot like the proverbial last straw. ESLs eliminate the burden, automating and centrally managing the legwork with price and promotion information updated in a matter of seconds. Speed and accuracy of price changes go up; staff hours required to manually make the changes drop to zero. As a bonus, retailers report increased sales from implementing promotional prices more quickly.
3. Enhanced in-store analytics.
Movement sensors can be cost-effectively installed in each ESL allowing retailers to monitor store traffic and create heat maps. This provides a deeper understanding of in-store traffic, which can assist with store layouts as well as product, promotion, and display placements. With this capability, retailers can see how many people passed by certain products or displays, track conversion, and make adjustments as needed.
4. Faster online order fulfillment.
Somewhat ironically, e-commerce is driving one of the newer and more compelling use cases for ESLs. By adding an LED to an ESL, the Pick to Light fulfillment process used in warehouses can be easily executed at the store level. Here’s how it works: An associate scans a customer order, and a signal is sent to the ESL, prompting it to flash. Associates simply look for the light to quickly and easily find the correct product. This method results in faster pick times and helps boost seasonal associate productivity, making it a big hit particularly in grocery and other large format retailers.
5. Boosted customer engagement.
Advancements in ESL functionality are generating new opportunities to attract and engage customers. With full color capabilities, ESLs and shelf edge displays can lead in-store marketing efforts to drive conversion for key promotions. These capabilities will only increase over time.
Will It All Be Enough to Seal the Deal?
Despite the cost reductions, operational benefits, and many new use cases that come with ESLs, the investment remains significant for retailers. Only time will tell if the current pilots finally point to an attractive ROI. If not, it will be back to the drawing board for retailers, at least for the short and intermediate term. In the longer-term, as costs continue to come down and use cases continue to increase, it seems like an eventuality that ESLs will one day be commonplace at leading food, drug, and convenience chains.
Chief Marketing Officer & Chief Strategy Officer
Rob Gallo is well suited for his roles as Chief Marketing Officer & Chief Strategy Officer with his knack for connecting the dots and finding better paths to reaching goals. He has more than 20 years’ experience in doing just that — as a trusted strategist driving real business results for the world’s biggest brands.