Published Tuesday, April 3, 2001
Lowering the price of change for stores
Safeway is testing new electronic price tags at two stores in the Tri Valley
By Janet Adamy
TIMES STAFF WRITER
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PLEASANTON -- As if Commerce One and PeopleSoft didn't do enough with technology here, Safeway is also enhancing the digital landscape by testing fancy electronic price tags at two Tri-Valley stores.
Instead of old-school paper tags, battery-powered digital boxes display the cost of everything from pasta to beer at two stores in Pleasanton and Livermore. More dependable than their paper counterparts, the tags catch shoppers' eyes by flashing specials.
Electronic shelf tags have been around for a decade, but a recent drop in their cost, coupled with improvements in their technology are making them more attractive to retailers. Eight of the nation's 10 largest retailers are looking into whether the costly systems are worth the accuracy and price-changing power they promise.
It costs about $120,000 to set up an electronic shelf tag system in the average grocery store, said Marc Lynn, sales director for NCR DecisioNet, which is providing the tag system in the Pleasanton store. That's a big investment for a grocer but one that Lynn said retailers will soon realize pays off.
"Five years from now, the electronic shelf label will become about as common in the grocery store as (grocery-item) scanning is today," Lynn said.
With electronic tags, a store doesn't have to send an employee through the aisles to change prices every time an item goes on sale. That saved one grocery store testing the labels 3,400 labor hours in a year, Lynn said. Safeway designates an employee in every store to monitor price accuracy.
The system also eliminates the human errors that come with changing prices. The digital tags will always match up with prices at the register because the information comes from the same source.
Perhaps the most notable aspect of the system is the power it gives retailers to change prices. With the traditional paper tags, a price change would have to be at least 5 cents to make it worth the labor and paper costs, Lynn said. But with the digital tags, grocers can change all the prices in the store just by keying a change into a computer.
Whether that's a good or bad thing for consumers remains to be seen. Safeway spokeswoman Debra Lambert touts the fact that this allows stores to put items on sale more quickly. But that also means it's easier for them to raise prices.
Lambert said the system won't lead to more tailored pricing and that the main benefit is the system improves the logistics of changing prices.
"We change weekly a lot of items," Lambert said. "They're on sale, they come off sale, and that's a lot to manage."
Charles Cerankosky, a supermarket industry analyst for McDonald Investments in Cleveland, said Safeway is not likely to risk irking customers by unfairly monkeying with prices.
"I think at the end of the day, pricing is going to be based on local competitive decisions," Cerankosky said. "Just because you can change prices every five minutes doesn't mean you will."
Costco, Sam's Club and Target are among the retailers testing the NCR tags, Lynn said. He's been talking to retailers about the tags for the past four years, but in the past year, interest has increased because they've gotten cheaper and better. The same system that costs $120,000 now cost $250,000 four years ago. Tags that once had four displays of information now have 16. And while it used to take five hours to beam new prices into the tags, it now takes just an hour.
"It's becoming more for less," Lynn said.
He thinks smaller chains are more likely to adopt the system first because their leaner management ranks make it easier to approve changes.
After testing the tags for a year, Binghamton Giant Markets, a 12-store grocery chain in Binghamton, N.Y., has a proposal on the table to put them in all stores. The tags have saved the store 15 hours of labor per week.
"There is a payback," said Jim Whittaker, the market's director of management support services.
Karla Hill says the digital tags in the Pleasanton store have made her more price-conscious. The Pleasanton resident said she recently picked up a box of Frosted Flakes but then put it back when she saw the cereal's price on the eye-catching tag. If it had been a paper tag, she probably wouldn't have noticed, she said.
"It makes me compare more," said Hill, who was looking at the price of the Frosted Flakes again to see whether it had come down since her last visit.
Janet Adamy covers the retail industry. Reach her at 925-943-8263 or jadamy@cctimes.com.
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