Are UK retailers ready to adopt Electronic Shelf Labelling?

The big four grocers trialling Electronic Shelf Labelling has put the technology back on the map and raised the possibility that the UK retail industry could adopt it en masse. Tesco has been spotted trialling the technology in one store, while Morrisons is also experimenting with its labels in Leeds.  

But a Tesco spokesman said the grocer is still “at the early stages of this trial and will review feedback from customers and colleagues before deciding the next steps”.

Meanwhile, Morrisons is testing a colour LCD video shelf-edge system, but a spokesman at the retailer also says no decision has been made yet about a further roll-out.

A tipping point

Electronic Shelf Labelling (ESL) is by no means a new technology and Tesco hit the headlines back in 2013 for trialling it in the UK at an Express store in Letchworth, but nothing ever came of the trial.

However, the technology has progressed significantly in the last four years, and is much more developed than the “numeric only” displays of the past.

“The product and its performance has moved on immeasurably,” says Andrew Dark, chief exec of ESL firm Displaydata. “At the same time the need to do something more agile than paper have grown and grown.”

The ESL devices of today are full colour devices that have a much higher quality image that allow them to display a wealth of information rather than the price alone.

At the same time battery life has improved significantly alongside its ability to communicate and integrate with a retailer’s inventory and pricing systems.

Miya Knights, global technology research director at insight firm Planet Retail, believes the grocers are primed to roll out ESL technology.

“Now the grocers are trialling the latest state of the art devices and because the situation they are being used for has changed, they are more likely to move from trial into pilot for roll out this time than they were previously,” she says.

The change in use case for ESL is being driven in part by regulations in the UK around pricing, and EU-wide requirements for the display of food information at the shelf.  

Knights says this EU requirement has led to countries including Romania and Poland adopting the technology faster than the UK because the information displayed on the packaging is much less sophisticated and as a result needs to be displayed via ESL.

Combat pricing errors

Dark believes a Panorama investigation exposing errors in pricing caused by paper labelling has put doubt in customers’ minds about the integrity of pricing, and this could be resolved through ESL.

It is understood Tesco’s primary motivation in trialling the tech is exploring how it can ensure accurate pricing.

However, concerns have been raised that electronic labelling will allow Uber-style surge pricing, which will involve the real-time increase in prices at times of high demand.

Dark argues that such stories do not understand the competitive pressures on retailers.

“The market is too competitive,” says Dark. “If you premium price your products at any time a competitor will get the business.”

Knights suggests the one time a retailer might be able to increase prices is when a 24-hour store such as SPAR has no competitors in the immediate vicinity open.

Dynamic pricing

Both Dark and Knights believe ESL technology will introduce ‘dynamic pricing’ at a time when retailers are seeking to shift stock at a reduced price to avoid wastage in grocery, or deliver promotions.

The technology will have a number of other benefits for retailers as well because it will enhance the customer experience by providing helpful product information when staff are busy.

Knights believes this is why consumer electronics and mobile phone retailers have been quicker to adopt the technology because such purchases are “highly consultative and is it not always easy to get hold of a member of staff”.

DIY is also another area that will benefit because of the bewildering array of products, according to Knights.

The knock-on impact of the living wage

It has been suggested one of the key drivers for the technology is the introduction of the living wage, which has led to retailers seeking ways of reducing in-store staff.

“We’ve reached the tipping point [for the technology] in terms of the reasons for building the business case but the roll outs we will see will probably be quite piecemeal,” says Knights.

She predicts it will be rolled out gradually as retailers refit individual stores. This is because the price of ESL has not come down due to the extra functionality being added to the technology.

“If we consider the bottom line capital costs then it is still a large number,” says Dark.

Nevertheless, Dark believes the technology is on the path to becoming ubiquitous.

He predicts the introduction will be led by the ‘tier 1’ stores – the national chains that are household names – before being introduced by every ‘ma and pa’ store in the country.

Dark predicts national retailers will begin rolling it out within the next two years and it will take them up to five years to fit out their entire store estates.

After a number of false starts it appears the technology is on the cusp of going mainstream.