Why it matters:
- The global digital shelf label market is expected to grow at a compound annual rate of 15.8% from 2024-2030, according to Grand View Research.
- Walmart is rolling out digital shelf label technology to 2,300 stores by 2026, citing the opportunity for faster price changes and picking/stocking efficiencies.
- One grocery store owner saved as many as 50 labor hours per week and said he expects a return on his investment in digital shelf labels in under two years.
Price changes are among the most labor-intensive tasks at retail, but that may soon be changing.
Retailers, including Walmart, IGA (The Independent Grocers Alliance), and independent supermarkets are increasingly embracing digital shelf labels (DSLs), also known in the industry as electronic shelf labels (ESLs). These centrally controlled displays, which appear almost identical to the paper displays they replace but offer a host of additional capabilities, eliminate the need for employees to physically change the paper slips that have long been used to indicate item prices on shelf edges.
"A price change that used to take an associate two days to update now takes only minutes with the new DSL system," said Daniela Boscan, a Food and Consumable Team Lead at a Walmart store in Hurst, Texas, in a blog post. "This efficiency means we can spend more time assisting customers and less time on repetitive tasks."
Walmart appears to be the first, and is certainly the biggest, retailer to announce that it is transitioning to DSLs. The company recently said it would roll the technology out to 2,300 stores across the U.S. during the next few years. Last year the company said it was rolling out DSLs to 500 locations after initial tests generated positive results.
DSLs have been much more widely deployed in Europe than in the U.S., although they have been tested by several U.S. supermarket chains, including Whole Foods, Amazon Fresh, Kroger, Hy-Vee, ShopRite, and Schnucks. Retailers in other categories, including home improvement and convenience stores, have also tested DSLs.
In 2018, the Defense Commissary Agency (DeCA), which operates grocery stores at U.S. military bases around the world, rolled out DSLs to its more than 240 locations. In 2021, a Busy Beaver home improvement store in Delmont, Pennsylvania, became the first home improvement store in the country to roll out DSLs for every item merchandised throughout the store, according to Pricer, the technology provider for that location.
"Walmart's recent announcement involving digital shelf labels represents a major expansion of this technology in the U.S.," said Matt Pavich, Senior Director, Strategy & Innovation at Revionics, an Aptos Company, which provides technology solutions for retailers. "Although retailers have talked about digital shelf labels for decades, it has mostly been a technology that existed in niche spaces or in other markets like Europe."
The global DSL market is expected to grow at a compound annual rate of 15.8% from 2024 to 2030, according to Grand View Research.
Consumers' ongoing interest in e-commerce may be a driving force in the adoption of DSLs by retailers of all stripes. In addition to providing retailers with the ability to change prices in an instant, DSLs also can be prompted to light up when item pickers (or item stockers) are looking for them.
Other advantages of using DSLs include the ability to implement dynamic pricing, or the ability to change prices based on supply and demand. For example, fresh bakery items might be discounted at the end of the day to optimize sales and minimize waste, and other items might similarly be discounted as they near their expiration dates.
Walmart cites benefits from digital shelf labels such as rapid-fire price changes and streamlined online order fulfilment
The ability to quickly implement Rollbacks — the temporary price reductions that Walmart is known for — are among the key benefits that the retailer said it foresees.
Pavich said Walmart's rollout of DSLs will help the retailer be even more competitive on price by enabling it to implement price changes more rapidly and efficiently.
"Walmart is the most competed against retailer in the U.S., and its investment in digital shelf labels has raised the stakes significantly for every retailer trying to match/index or beat them on prices and promotions," he said. "Once this new technology is rolled out, Walmart can move as quickly as it wants on prices and do it cheaper and with higher compliance than their competition."
In addition, Walmart said the ability to light up the DSLs to make items easier to find for employees who stock shelves and for e-commerce order pickers was also key. The DSLs have what the retailer called "stock to light" and "pick to light" features, which allow employees to prompt an LED light on the shelf tag to flash by using their mobile device. This feature has become increasingly important amid the increased interest in click-and-collect and delivery, both of which require store workers or third-party pickers to locate products quickly.
Naifeh's Cash Saver had been implementing as many as 2,000 price changes per week and spending 50 hours per week changing prices using paper tags. 'Now it's just download a file and hit Send. Three minutes later, you’ve got 2,000 price changes.'
Judson Naifeh, Owner, Naifeh's Cash Saver
"The 'Pick to Light' feature guides us directly to the products needed for online orders, speeding up the picking process and improving order accuracy," said Boscan in the Walmart blog post.
In fact, making item picking easier is one of the key benefits cited by grocery e-commerce solutions provider Instacart for its Carrot Tags software. The Carrot Tags solution helps Instacart's shoppers find items more quickly and confirm order accuracy by triggering flashing lights on the tags to locate items, for example. Retailers can also use the Carrot Tags software to display product attributes such as gluten-free, organic, or kosher, and other information, such as whether a particular item qualifies for Supplemental Nutrition Assistance Program benefits.
[Read: How 'Retail Concierges' (Both Digital and Human) Are Poised to Disrupt the Shopping Experience]
Independent supermarket Naifeh's expects a return on investment from digital shelf labels in less than two years
The cost of converting to DSLs can vary based on the features offered and other factors, but reports indicate that retailers should expect to pay about $100,000 for digital shelf labels. Maurer's Market IGA, a grocery retailer in Wisconsin Dells, Wisconsin, paid $208,000 to install digital labels in its store, which has 20,000 SKUs, Jeff Maurer, the store's owner, said in a recent IGA blog post.
Increasingly, retailers are seeing the investment as worthwhile, however.
At Naifeh's Cash Saver in Covington, Tennessee, the rapid-fire price changes that suppliers were implementing in the wake of the pandemic had become a cost burden that the independent supermarket operator could no longer incur.
"We just had so much inflation and so many price changes that we could just not keep up," said Judson Naifeh, the store's owner, in a DSL case study posted on YouTube.
He said the retailer had been implementing as many as 2,000 price changes per week and spending 50 hours per week changing prices using paper tags.
"Now it's just download a file and hit Send. Three minutes later, you've got 2,000 price changes," said Naifeh.
The retailer last year installed a digital shelf tag solution from VusionGroup — the same company that is supplying Walmart's DSL solution, in partnership with point-of-sale solutions provider Retail Data Systems.
In addition to the labor savings, Naifeh said the retailer was also realizing benefits from the increased accuracy that the tags bring, as well as other features, such as the retailer's ability to light the tags with different colors to highlight different types of promotional offers, for example. In addition, a "WIC" display can appear on the tags for products that are eligible for the Women, Infants, and Children government benefits program.
Naifeh said he expects to recoup the cost of the tags in less than two years.
"There's definitely a payoff on these," he said. "I can't wait to see what the future brings for these tags because the opportunities are endless."
Other retailers expected it would take longer to achieve a return on investment (ROI). While Maurer said he expected an ROI in about 1 1/2 to 2 1/2 years, another IGA retailer that is testing DSLs at two stores, Bowling Green, Kentucky-based Houchens Food Group, said it expected an ROI in about 3 1/2 years, according to the IGA blog post.
Tate Family Foods cites customer satisfaction from digital shelf labels: 'They say they are easier to read'
Wendy Tate, Owner of Tate Family Foods, a four-store grocery chain in Maury City and Greenfield, Tennessee, also recently rolled out DSLs and said her customers shared a positive reaction right away.
"The very first day, we had customers say that they liked them for their clarity," she said in a case study on YouTube. "They say that they are easier to read."
In fact, the retailer's concern around optimizing the customer experience was a key factor driving the installation of the DSLs, she said, citing the tendency for paper tags to become displaced.
"[Customers] were having to ask what the prices were," said Tate.
Customers also appreciate the retailer's ability to highlight different types of sales and promotions with different lights on the tags, she said.
The labor savings that the DSLs are expected to bring were another factor in the decision to install the tags, Tate said, adding that the stores' scanning coordinator, who had previously been responsible for switching out the paper tags, was now freed up to perform other tasks. While it previously might have taken her five minutes to change a tag, she can now do it in about 30 seconds, Tate said.
The scanning coordinator can now change prices throughout the store from her office, and Tate herself can now change prices if she so chooses using an app on her phone.
"We've made it better for the customer, and we've made it easier on our employees," she said.
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