ESL: The (Seemingly Endless) Search for Retail Adoption

Jan 18, 2010

By Bill
, President, BWH Consulting

Once again
this year, there are new companies introducing new electronic shelf label
(ESL) systems that they hope will – once and for all – replace paper
labels at the shelf edge in supermarkets.

It was
two years ago, in this space, that I asked the question, “Is
it time for the electronic shelf label?

I had a
look at W5 Networks, a privately owned ESL start up. W5’s solution appeared
similar to the early, wired versions, using a paper “surround” printed
with the detailed product information and an LCD window to display the
retail and unit price. W5 moved to a wireless network that greatly reduced
their installation cost. Based on some Google searches, it appears, however,
that W5 has been absorbed into another company or dissolved.

one of the new ESL players is ZBD Solutions, which was demonstrating
its new solution in the Innovation Station area at the NRF BIG Show.
ZBD also uses wireless communications to reach the shelf edge but it
removes the need for paper surrounds to carry the product details. Their
monochrome “epaper” display is resolute enough that to carry detailed
product descriptions, which are, of course, updated electronically. In
fact, the tags can contain several screens of data that can be directed
to display unit pricing, emphasize promotions, or help employees with
shelf layout and replenishment.

ESLs have
seemed to be a “no brainer” for at least 20 years, but no one has, it
appears, met the price point necessary for mass adoption in supermarkets.
Special situations in perishables departments have seen implementations,
but the thousands of weekly price changes done in center store are still
executed manually. W5 Networks argued that their costs were justified
by some additional features, such as temperature sensors and interactive
buttons that integrated the tag into the retailer’s shelf and inventory
management processes.

ZBD has
gone back to a simpler approach, focusing on the display function, but
it is also significant that they have reduced the in-store coordination
involved by eliminating the paper surrounds. The wireless capabilities,
of course, are a great time and money-saver. One small transmitter per
store is all that’s required. Although the per unit cost of the ESLs
is no lower than earlier models, the company claims the system benefits
result in “ROI in as little as 12 months.” ZBD has introduced its system
in other retail verticals – mobile phone and CE stores, for example –
and points to the ability to display “rich content” on the devices, including
branding, logos and product information.

One thing
of concern about the ZBD approach is whether it will be accepted by the
various jurisdictions that control Unit Price Labeling requirements today.
One of the reasons earlier vendors stuck with the printed surround was
because it made it easy to comply with various state requirements for
fonts, font sizes, and label colors. The company says regulations will
need to be addressed on a state-by-state basis where such regulatory requirements
exist (and possibly a county-by-county basis), but that the graphical
controls should be adequate to do any customization necessary for compliance.

Questions: What’s holding up the adoption of ESLs? Given the investment,
what retailer benefits would make them a “must-have”?

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8 Comments on "ESL: The (Seemingly Endless) Search for Retail Adoption"

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Nikki Baird
Nikki Baird
13 years 9 days ago

My current theory on this issue is that, aside from the cost/benefit challenge of the “right” price point for ESL, the biggest barrier is planograms.

If you’re going to automate price labels, then theoretically the best way to do that is through integration to the planogram, but that also assumes that what’s on the shelf reflects what’s laid out on the planogram. As an industry, we can’t get THAT right well enough without the complication of ESL. I see it all the time–products stuffed behind other product facings, the right brand but the wrong product at the facing….

As retailers get more granular in their pricing, it may well mean that such a mistake (wrong product, wrong place) means reflecting the wrong price for the wrong item–which can get retailers in trouble.

Roger Saunders
13 years 9 days ago

Nikki makes a solid point, and the planograms do present an issue. In addition, those planograms are driven by an age-old challenge for retail boxes–no matter how “great we make our designs,” we seem to remodel entire stores every 7 to 10 years, keeping the box “fresh.”

Aakash Pahwa
Aakash Pahwa
13 years 9 days ago

We all acknowledge that ESLs hold a lot of promise in terms of productivity gains, especially in terms of labor hour efficiencies. However, how does a retailer address:

1) The customer perception. Customers today are smart and understand that at the end of the day, they are the ones paying for any new technology (more so if the technology is visible in the store). Let’s say for a discount grocer, it makes hard to justify (in customer’s eyes) such a visible technology improvement.

2) Read and Bust. Tests show that ESLs look and hold good for the shelves on eye level. Shoppers struggle to get a good read of the ESLs which are placed on the shelves above the eye level. When it comes to ESLs placed on the bottom two shelves, shoppers at times end up banging the cart and busting/damaging the ESL tags. Yes, there are plastic ESL holders etc, however, how effective?

Ben Sprecher
Ben Sprecher
13 years 9 days ago
Perhaps one of the biggest barriers to adoption is not cost, but price. Today, the price of an ESL installation is one big up-front payment that covers the full costs of the devices and installation, plus some profit for the ESL company. As the article points out, retailers can make this back in as little as 12 months. What the article doesn’t say is how they come up with that figure. I’m assuming that the calculation is based on the cost of the labor needed to manually change shelf prices every week. Even if the math is correct, that’s a hard sale to make to retail store operations. ESL companies are asking store operations to cough up cash up front in order to save labor down the road. Most retailers just don’t budget that way, so many store fixture companies struggle to get retailers to write the big check. What if ESLs were priced differently? What if the ESL company installed the equipment for a nominal fee, and then charged a small fee per shelf-label… Read more »
Mark Plona
Mark Plona
13 years 9 days ago

New technology is always exciting….

However, as has been pointed out, the cost of these systems can also be a barrier. Although chains are better able to move or share the costs among neighbor (perhaps more profitable) stores, the independent grocer may not have this luxury.

While the system shows promise and great flexibility in being able to satisfy many local Unit Price Labeling Requirements with regards to font and size and location on that tag/screen, there is no mention of how to deal with those that require color such as orange.

So changing those particular perceptions and showing the ROI will be the key to far wider acceptance.

Also, a well managed store at the shelf will have several obvious advantages over one that is not. However, I must say, the planogram’s integrity at store level may remain an issue regardless of how the shelves are tagged.

Jeff Weidauer
Jeff Weidauer
13 years 9 days ago
ESLs have been a mirage on the horizon for more than two decades; always just out of reach here in the US. Europe and Asia have seen much greater implementation, for various reasons. The primary hurdle for ESLs tends to be stated as a cost issue. Even with labor reductions, the up-front investment is considerable. As the technology drops in price, however, we’re sure to see some adoption of it. The bigger issue, I believe, is that ESLs are an incomplete solution. Because the technology to create bright, attractive colors remains expensive and power-hogging, ESLs today are universally monochrome. Transitioning stores to ESLs would be like going back to monochrome labels, with little to no marketing impact. Shopper marketing has put a greater emphasis on shelf edge communication than ever, and while ESLs can theoretically provide more info than a printed label, it won’t matter if you can’t draw attention to the label to begin with. The response so far has been to add flashing lights (annoying), flags or shelf talkers to the ESL (which… Read more »
Ralph Jacobson
13 years 9 days ago

In a perspective to respond to Nikki’s, I’d suggest that ESLs can actually SIMPLIFY planogramming challenges. Yes, they have been around for 20+ years, now, however major retailers internationally have made this work. In Japan, Ito-Yokado (Asia’s largest retailer) completed the ESL deployment of 184 stores, way back in 2005. Carrefour has rolled our ESLs across the globe. Eroski in Spain has also followed suit.

The ROI models are there for this technology. They no longer have to be the ugly devices of the past. There are some great suppliers (Pricer, etc.) who make tags with fantastic functionality, like number of facings, reserve stock, and next delivery information right on each tag.

As with the rest of the world, the U.S. has to learn from the past and not be too weary to make a move for the future.

James Tenser
13 years 9 days ago

Cost is clearly a significant factor in ESL adoption. But I’d submit that process and organizational changes may be greater ones. Their widespread use would require changes in store labor practices, planogram compliance practices and in-store sensing and measurement, for starters. The associated economic impact is very difficult to forecast. I have strong doubts that present ESL vendors are able to provide dependable guidance in these operational areas.

While the label systems themselves have evidently advanced in meaningful ways, FMCG retailers won’t adopt them until and unless they have worked out their own In-Store Implementation methods for measuring and maintaining planogram compliance.


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