Buying groceries in the US could soon require looking at many more digital screens. Price tags, normally printed separately for items that use paper and ink, are slowly being replaced by digital displays that grocers say will increase productivity and potentially lower prices for consumers.
Walmart, of the nation largest grocer in terms of turnover, recently announced expansion plans these “digital shelf labels” in 2,300 stores nationwide by 2026, which could expose millions of consumers to the technology. It will also introduce dynamic pricing – a concept usually linked to ride-share apps like Uber – to the old-fashioned practice of buying bananas and milk.
How do digital shelf labels work?
Digital shelf labels – or electronic shelf labels (ESL) – are digital price tags that can be adjusted remotely. Although these digital tags do has become a relatively common basic product in the food industry throughout Europethey only started to gain popularity in the US towards the end of the 2010s. While ESLs can vary by brand and manufacturer, they are generally small, battery-powered e-paper displays that can communicate wirelessly with a remote server over a local Internet network. In Walmart's case, employees can access and adjust the screen through a centralized mobile app.
In the coming years, grocery store customers will likely interact with ESLs in the same way they interact with traditional paper labels. The ESL shows a brief description of the product and its price. However, these smart tags go one step further by including QR codes that customers can scan with their phones. Consumers are then redirected to a page with additional information about an item, such as its origin and nutritional information or the price per weight. That additional context could allow shoppers to make more informed purchasing choices.
Grocers like Walmart are optimistic that ESLs will improve their overall productivity and efficiency. Before ESL, store associates had to manually change price tags weekly to reflect changing prices or new markdowns. Walmart stores typically house about 120,000 products in their massive facilities, so all those manual price adjustments can add up quickly. Now employers can use a mobile app to quickly change prices. ESL offers the ability to change the prices of thousands of items at once. Prices per individual items, according to NPRcan fluctuate as many as six times per hour when ESLs are present.
“A price change that used to take an employee two days to update now takes just minutes with the new DSL system,” Daniela Boscan, Food & Consumable Team Leader of Texas, Hurst, Texas, Daniela Boscan, Food & Consumable Team Leader at Walmart said in a blog post. “This efficiency means we can spend more time helping customers and less time on repetitive tasks.”
Employees working in the store can also flash the ESL's lights to quickly move a human associate to a shelf or area that requires physical attention. In Walmart's case, employees who pick items for delivery can also quickly locate and find items with ESLs through their mobile app. Hopefully the days of frustratingly weaving back and forth between the aisles desperately looking for the spice section are over. The shift to digital shelves could also help improve. The digitalized pricing system will also give companies more control over adjusting prices for items nearing their expiration dates, which could theoretically lead to less food waste.
But the potential appeal of early school leaving is not just limited to marginal productivity gains. The ability to change prices on the fly means that supermarkets using the technology can also reduce Uber-like price increases. With that model in mind, supermarkets could have an incentive to raise prices for water or ice during hot days or warmer items in the winter. They could also verbally increase product prices during peak shopping times or during holiday periods, where consumers are more likely to pay high grocery bills. For example, with an ESL, grocers could gradually adjust the price of a turkey in the days or hours leading up to Thanksgiving. ESLs can also help store markdown or discount items that are nearing their expiration date. That could lead to better deals for shoppers and potentially prevent a store from throwing out an expired item.
“This represents a significant shift in the way I and other store associates manage pricing, inventory, order fulfillment and customer interactions, providing our customers with an even better shopping experience,” Boscan added.
Which supermarkets use these labels?
Walmart is not the first American supermarket to try out ESL. Kroger, Ahold Delhaize, Midwestern Schnucks, and Amazon-owned Whole Foods have all experimented with ESLs in some form for several years. While Walmart may not be the first to notice this trend, its entry is significant due to its size. Last year, Walmart accounted for 23.6% of all US grocery sales. That makes it the largest grocer by sales in the Courtney. After successfully piloting ESL at a location outside Dallas, Walmart now says it plans to expand the pricing practice to 2,300 stores by 2025. This means that millions of American consumers at the supermarket will be able to interact with digital pricing systems in the near future.
There are signs that ESL could become the new norm. This is evident from a recent market research conducted by the company Incisiv on behalf of Verizon estimate more than 26% of grocers and general merchandisers have the option to use ESL by 2023. At the same time, small, independent grocers may lag behind larger corporate players, in part due to new hardware and software requirements needed to power so-called “smart shelves.”
ESL is part of a larger trend to introduce dynamic pricing for everyday consumer goods
Dynamic or peak pricing is expanding rapidly and applies to more everyday consumer goods. While dynamic pricing is usually only associated with rideshare apps like Uber or Lyft, they have also become an important part of airline ticketing and even live music and event sales. Consumers critical of dynamic pricing claim that these practices have led to unfair price tags and the apparent impossibility of obtaining concert tickets. Fast food giant Wendy recently caused a brief online controversy of its own after announcing its dynamic pricing trial. Wendy's tried to backtrack by saying the price is changing would not amount to “surge pricing” and could actually save consumers money on certain items during off-peak hours.
It's unclear whether U.S. shoppers will willingly embrace digital price tags and potential dynamic pricing. American consumers repeatedly cite high food prices as one of their top financial concerns, especially after inflation-related price increases in supermarkets in recent years. Frustrations over grocery prices reached a boiling point earlier this year and prompted President Biden publicly urging supermarket chains to lower prices to match declining inflation. In theory, ESLs could help achieve that goal by helping grocery chains manage inventory more efficiently and offering discounts on items nearing their expiration dates. However, whether companies actually use ESLs for the benefit of end users, as opposed to their own, largely remains to be seen.
