Electronic Shelf Labels: Where’s the Tipping Point?

VDC’s analysts have been following the electronic shelf labeling market for years, and with good reason: we love disruptive technologies. 

Many of the disruptive technologies we follow have proven more evolutionary than revolutionary:
• 2D barcode symbologies,
• RFID, and
• voice recognition

Each of these technologies has made fools of optimists and cynics alike.  Still waiting for that much ballyhooed 5 cent smart label?  Take a number.  Still waiting for multi-modal data capture to be embraced globally by warehouses and T&L operators?  We’re already there.

So what’s the deal with electronic shelf labels? 

The value proposition is as compelling as it was in the eighties and nineties, even more so with the new functionality ESL suppliers have added in recent years:
• dynamic displays,
• temperature and stock monitoring,
• longer life displays that consume less energy,
• Stock to light capabilities, etc. 

Yet, ESL suppliers have yet to successfully secure that elusive retail reference account that will start those dominoes tumbling, particularly in North America, which remains largely under-penetrated.

The capital outlay required to support ESL is far from insignificant and is compounded when high volume retail chains (those who stand to benefit the most) consider investing.  With the average North American supermarket carrying 46,852 items and ESL volume pricing approaching $5.00, the cost to outfit a single supermarket can easily exceed $250,000.   The alternatives are far less CAPEX intensive.  Accounting for labor savings alone won’t provide a return on investment in less than three years, not with the “median stock clerk” earning $9.38 per hour, sans benefits. 

As with the aforementioned technologies, finding the tipping point has as much to do with accessing incremental revenue as it does with labor savings and operational efficiency.

How much incremental revenue might a typical supermarket access through pricing optimization, and what impact might this incremental revenue have on the ROI calculation? 

These are the questions forward thinking retailers are contemplating, and endeavoring to answer.  Is this the breakout year for ESL?  Are we there yet?  Are we there yet? 

ESL is one of nine retail automation technologies we’re covering in 2010.  Learn more here: Retail and Transaction Automation Equipment, 2010