by Richa Gupta with Aleksia Bruzho, Research Intern | 07/23/2024

 

Walmart, the world’s largest retailer also known for its commitment to technology innovation, announced plans to implement Electronic Shelf Labels (ESLs) in 2,300 of its U.S. stores by 2026. The retailer initiated this move in 2023 at a store in Grapevine, TX to enhance pricing accuracy, improve operational efficiencies, and manage its extensive inventory through digital price tags. Walmart’s strategic partnership with French technology company, Vusion Group (formerly known as SES Imagotag), to implement ESLs across these stores, which represents around 21% of its total locations, signifies a big leap towards in-store digitization.

Key features of Vusion Group’s ESL products include automated pricing, improved product picking (with blinking LED pick-to-light), operational data display, and enhanced shopper engagement via NFC tag or QR code scan. Additionally, store associates can now make price changes via a mobile app, reducing the time needed for the same from days to minutes. This initiative also focuses on energy optimization, using recyclable materials, and reducing packaging, contributing to Walmart’s broader environmental sustainability goals. While “Walmart swears it’s not introducing surge pricing,” this remains a legitimate concern among consumers who see dynamic price changes as retailers’ way to capitalize on higher demand and combat inflation.

Walmart’s ESL adoption marks a significant milestone in the North American retail market, which has traditionally been slower (and more hesitant) to invest in such technologies compared to Europe. This can be attributed to several factors, including the low cost of traditional paper-based labeling (¢5 as compared to $5+ for ESLs) and the initial expense associated with deploying ESL solutions. Additionally, an investment in dedicated shelf-edge label printers has historically been relatively cheaper. However, the landscape is changing as US-based retailers recognize the benefits of digitization and real-time data capture, and are faced with intensifying labor cost-related pressures.

VDC’s View: Operational benefits could potentially outweigh financial risk

VDC believes Walmart’s adoption of ESL technology is a significant indicator of the broader acceptance and readiness for digitization in the US retail sector. This move could be the big push that other large retailers have been waiting for to fully embrace ESLs and similar digital solutions. In today’s increasingly omnichannel retail setup, businesses want to maintain price integrity AND reactivity across online, in-store, and other consumer touchpoints. ESLs give retailers the ability to seamless collect, manage, and maintain vast amounts of pricing and inventory data in real time, which is crucial for modern operations. ESL investments can also align with retailers’ environmental sustainability goals – and strongly support Environmental, Social, and Governance (ESG) principles – as they look to reduce their carbon footprint and reduce paper wastage. While the EU has long been at the forefront of ESG integration with its detailed regulatory frameworks and an outward display of a commitment to sustainability through its ambitious targets (including the Digital Product passport), VDC believes that the US’ decision to rejoin the Paris Agreement and drive impactful carbon reduction will have a profound influence on businesses’ investment towards the same.

Ongoing labor shortage in the retail sector is another driving force behind the adoption of ESL technology. By reducing the time employees spend on manual price updates and inventory checks, ESLs allow workers to focus on more value-added tasks, thereby improving overall productivity and minimizing, if not eliminating, the need to hire labor to make time-intensive manual updates. In Europe, this shift has been a significant selling point, and VDC’s research suggests that the US market is likely headed in the same direction due to the labor shortage as well as the rising labor costs.

AI-powered ESL solutions can help retailers factor in customer demand and competitor pricing for high margin and/or fast-moving products, especially as it is easy for employees to update prices across the store in real-time. VDC expects to see retailers increasingly leverage AIDC technology to reduce friction in the shopping journey by connecting customers to sales associates to help them find the products and services they need. Technology investments will include – electronic shelf labels (ESL) to automate in-store shelf management, and vision to power loss prevention and inventory cycle counts.