Retailers looking for new ways to update prices are rethinking older technologies.
Electronic shelf labelling has been around for years but it is one of those technologies, along with RFID, that has never quite taken off. That could be about to change if Kingfisher chief executive Ian Cheshire’s predictions are right. He said last month: “Dynamic pricing will become much more common [in retail]. People are used to it because of airlines.” For many retailers, the business case hasn’t added up in the past. The costs of implementation have been too high in comparison with the expected benefits. But as is often the case with technology, prices are starting to drop and the IT is becoming more advanced. Retailers are starting to look anew at dynamic pricing.
Dynamic pricing means retailers can change the price of products immediately, making their pricing strategies much more flexible. They can do it using software that tracks factors affecting price – such as competitors’ prices or demand forecasts – and then display the new prices across their stores using electronic shelf labels. At a basic level, this means that if demand rockets for a product – when the Duchess of Cambridge wears a Reiss dress, for instance – the retailer could increase the price of that item. It could also use forecasting analytics to predict what demand will be for products at certain times of the week or month, and change prices each day accordingly. Or it could analyse the prices its competitors are charging online and use that to make sure its prices are the lowest in the market. Kingfisher’s French DIY business Castorama already uses electronic shelf-edge pricing, and Cheshire said the next generation of B&Q stores are likely to feature electronic pricing and a dynamic pricing system. At present the retailer is testing how the technology might work. Cheshire said there are several advantages to using such as system. It means shops would consistently display up-to-the-minute accurate prices, and that store staff would save time on manually pricing goods. It also gives the retailer a “much greater focus on the visible price file”, he added.
How dynamic pricing can drive revenue
Price optimisation is a hot topic for retailers. But it can result in frequent price changes and, manually executed, these changes are time consuming and expensive. For this reason retailers are increasingly seeing a business case for electronic shelf labels, which display price information electronically and update prices immediately and automatically, controlled from a central server. They allow prices to be changed according to the marketing strategies of the retailer. Even price changes during the day – such as happy-hour pricing or end-of-day markdowns for fresh products – are enabled through this technology. Additionally, the system ensures that shelf prices and the point of sale system are always in sync.
But electronic self labels, or ESLs, are not new. In fact, they predate many of the technologies we see in stores today. ESLs emerged in the late 1990s and at that time it was conceivable that within 10 years we would see mass adoption. But 15 years on, France is the only market where we see dominance of electronic pricing technology. There, more than 60% of the shelf labels are digital. That is because the driving force in France has primarily been legislative. The lack of take-up in markets such as the UK is because retailers are put off by the upfront costs. They also believe the quality of information on digital labels versus the paper alternative is poor and there are logistical challenges of such a roll-out. Many would rather wait for someone else to take the first step.
However, as the technology matures and the price of hardware falls, more retailers in more countries are taking a serious look at it. One such example is supermarket group Billa in Austria. Billa fitted out more than 1,000 stores with an Imagotag e-ink paper display to cope with the volume of price changes required on a national ‘best price guarantee’ promotion on 300 key value items in the stores. The motivation and business case for ESLs can’t be just cost reduction – it has to be a conduit to drive revenue. Used well, it could be more than that, because combining the ability to store real-time competitor data and price optimisation means display technology can help retailers to launch marketing campaigns and promotions that improve customer loyalty, value and their ability to compete effectively and in real time.