As US businesses are dealing with a perfect storm of pandemic setbacks, labor shortages, supply chain disruptions, inflation, and a deteriorating international political climate, the “new normal” for businesses is that of constant change. With so much uncertainty retailers are seeking solutions and new business models that keep their companies thriving amidst this onslaught of challenges.
One seemingly unassuming device, the electronic shelf label (ESL), has been slowly transforming the retail industry since the mid-90s and is at the heart of a solution to today’s retail challenges in the US. In the 30 odd years since ESL began emerging on the market, their leap in technology and functionality has been staggering, and by 2020 the global market value of ESL has exceeded $1 billion.
Early adoption in Europe
ESL have been more widely adopted by retailers in Europe where they have been integrated into store operation and management of entire store networks such as Dutch grocer Ahold Delhaize and Auchan from France.
US labor market begins sharing EU traits
But this is where things are changing today – the labor-intensive retail industry is now shorthanded. At the height of the pandemic lockdowns in 2020, the retail industry was stuck in a low gear with a 17% of unemployment rate. In November 2021, a record 4.5 million people in the US quit their jobs and 686,000 left retail jobs, leaving the industry with a 4.4% quit rate. Operational efficiency now became a matter of vital importance for many understaffed retailers.
In addition to employee retention challenges, the power dynamic between employers and employees is also shifting. To attract staff in a limited labor pool, especially those who newly enter the job market, the big-box stores are forced to reexamine their payment policies. Increasing wages, providing extra bonus and benefits, and strengthening training and education have become the choice of many retailers to build trust and loyalty from employees. Target, for instance, recently announced that they will cover tuition fees of its US-based part-time and full-time employees who attend select schools. These trends are naturally driving up labor costs for businesses of all sizes.
“Now more American retailers have become aware of what electronic shelf labels have to offer beyond price displaying, especially in alleviating rising operational cost,” says April Cao, the US General Manager at leading ESL provider Hanshow. “Labor cost controls and operational efficiencies are now the most sought after benefits when businesses choose to rollout ESL and other digital store solutions.”
Enormous market potential in the US
The enthusiasm of the American retailers in becoming more tech-savvy has also boosted market confidence. The electronic shelf label market in North America is projected to reach a value of $768 million by 2026, at a CAGR of 21.5% over the forecast period of 2021 – 2026. It is expected to make up one third of the total market by 2026.
Tapping this market will require retailers to see the benefits of adopting ESL. “With ESL there is a potential to see our supermarkets and grocery stores are operated more orderly and efficiently with less intensive workload,” explains Cao. “We have been witnessing significant boost in operational efficiencies from our European customers. With the assistance of digital retail solutions, simultaneous price managing on one network across stores, even across continents is now possible. This was unthinkable prior to the technology.”
The technology has offered European retailers an elevated management experience with less labor involved, enhancing overall productivity. “Real-time data management helps us monitor our in-store circumstances and inventory. Stocking requirements are made automatically,” says Julien Morize, a manager at Super U store in Neuville aux Bois, France, talking about incorporating ESL solution into the daily operation.
Benefits of ESL speak for themselves
Retailers have also discovered an edge from the devices in facilitating their growing online services. For example, a system relying on existing in-store ESL is put in use by Carrefour to accelerate the process of picking and packing of online orders. After receiving online orders, store staff can follow a route generated by the in-store digital system, and locate targeted items accurately under the guidance of flashing lights on the ESLs. Along with other in-store IoT devices, the picking and packing of on-line orders can be finished timely even for new staff with little knowledge of the store layout.
“The LED flashing lights have really helped us in the daily management of the store,” claims Mickael Dupuis, the Director of a U Express store southwest of Paris. Being next to the national highway, being able to deliver fast service to the drivers heading south from Paris is vital for the prosperity of the business. “Investing in the ESL with LED flashing lights was a crucial move for the store, especially for the implementation of our delivery service. By the help of the flashing lights, our employees can find products easier. It has saved us a lot of time, and thus made our delivery service possible.”
On the other side of the coin, the presumed trade-off between investment in employees and job satisfaction can be broken. Freed from mechanical and repetitive job activities, retail workers can engage in tasks, such as providing improved customer service or learning opportunities that are constructive to their career development, while offering more added values to employers through improved employee satisfaction and retention rates.
The seeds of a retail digital transformation
Yet the wider spread of ESL adoption is only a prelude to other digital retail solutions that open even more opportunities for gains in efficiency. With ESL as the building block, an array of IoT devices such as smart trolleys, non-contact checkout kiosks, in-store marketing screens, robots for shelf monitoring, AI cameras, etc., can be incorporated into digital retail solutions. These digital solutions provide wide ranging benefits from reduced operations costs, enhanced shopping experience, a robust omnichannel, and even reducing food waste through dynamic pricing.
The tech-savvy Japanese retailer Aeon, for example, has been enjoying insights of customer shopping experience and retail efficiency through ESL along with in-store marketing screens and AI cameras. According to information collected through the in-store digital monitoring devices, such as sales figures, customer traffic, buying patterns, and the amount of time shoppers spends at certain areas, more accurate pricing is enabled to improve the effectiveness of promotion.
“The technology is not only changing how retailers operate their stores in the US,” remarks Cao, “it’s also enhancing the relationship between employers and employees, businesses and customers and fundamentally our relationship with technology, in a positive way.”
Electronic Shelf Label Market Size, 2020
Unemployment Rate - Wholesale and Retail Trade, Private Wage and Salary Workers