By Thomas Bornemann, Partner, Advisory, Ernst & Young LLP.
Just recently Gary Godfrey issued a post about technologies that improve the in-store consumer experience in this blog. One of them being digital shelf technology, which has created quite a stir in the consumer products industry. Retailers have identified great potential in combining a new generation of digital label and shelving technologies with the in-hand functionality of the consumer’s smartphone to provide consumers with a seamless, digital experience.
Integrating the store into the omni-channel world in a way that delights consumers could help reignite the commercial performance of retailers and manufacturers. But how can they achieve this goal? Adopting the right technologies is a key part of the answer.
Digital shelving — why now?
Retailers in some markets have been using electronic shelf labeling (ESL) for years. But the newer generations of digital shelf technology can transform what is possible. They offer the ability to connect better electronic labeling with the functionality of the shopper’s own smartphone, and then to integrate both with the retailer’s computer systems. They can also help to bridge the gap between the online and in-store experience, to enable retailers to compete with non-store fulfillment models. The demand for digital shelving continues to gain momentum for the following reasons:
- Establishing better price points: Digital shelving is able to give both retailers and manufacturers greater visibility across their supply chains. A retailer could use live data about how its customers are behaving in front of the shelf, and to help identify and fine-tune the sales tactics that are most effective for a specific product in a specific store. By combining that increased knowledge with sophisticated analytics, they could optimize prices in the store.
- Eliminating out-of-stock (OOS) issue: Some of the pilot results indicate investment in digital shelving could even help solve the OOS problem. The prospect of eliminating OOS could potentially make the business case for digital shelf investment on its own, almost regardless of the implementation cost.
- Creating a win-win situation: Another important benefit of digital shelving is that stakeholders across the industry — both retailers and manufacturers — could potentially come out as winners alike by collaborating on trials and work together. The true measure of what’s in stock is what the consumer actually sees on the shelf, not what the inventory system says is somewhere in the store.
The next big thing to succeed
CIOs in consumer products realize that the key to successful implementation of digital shelving is none other than analytics. There are two important reasons for this.
- Analytics needs to be an integral part of any proper pilot. If a retailer can’t capture, analyze and interpret the data from its test efforts, then it risks learning nothing of value or, worse still, going off down the wrong track, based on false evidence.
- Retailers need to ensure the prices, promotions and whatever else they display on their shelves are informed by reliable, real-time commercial analytics for effective investment. They also need to be confident that the data they collect about what’s happening at the shelf is gathered into a system of analytics and is actually used to make the decisions that matter.
Many CIOs have identified digital shelving as the next big trend of the consumer products industry. Retailers using digital shelving technologies effectively may find they are better executing omni-channel strategies, to offer consumers a seamless online and in-store experience. That in turn, could help them to be in a stronger position to make their sales and marketing efforts more effective, make their stores more relevant and engaging in an omni-channel context, and also help fend off online-only competitors.
To learn more about this topic, view this video by Forbes Insights on how disruptive technologies such as digital shelves are transforming the consumer products and retail industry: