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Saturday, February 9, 2013

Digital Tags Help Ensure the Price Is Right

Digital Tags Help Ensure the Price Is Right

SOME decades ago, a grocery store’s aisles were often filled with “chunk-a-chunk-a” sounds, as clerks stamped prices to the tops of cans and boxes before putting them on shelves. It was a labor-intensive operation, but it did result in a price being affixed to most every item in the store.

A paper “Sale” sign accompanies an Altierre screen in a Kohl’s store.

Digital labels from Altierre are intended to help retailers keep prices up to date.

Then bar codes and computerized cash registers arrived. In most stores, prices were posted on shelves but not on the items themselves.

I’ve always trusted that the system works well â€" and I’ve tapped my foot impatiently when a shopper ahead of me slowed the checkout process by closely watching the prices that came up, as if the scanner might have recorded the wrong product code. What I hadn’t realized was that there is valid reason to be vigilant. The potential problems originate on the shelves, in the form of the shelf tags, which may or may not match the current price in a store’s computer.

A typical grocery store puts 5,000 items on sale in a week and removes sale prices from another 5,000. That creates an abundance of opportunities for mismatches when workers print out the new price labels in a back room, then hunt for the proper place on the shelf to attach them.

This has left store technology in an incomplete state: mostly but not entirely computerized. The next step is to go completely paperless by putting small, battery-powered digital price tags on the shelves. Price changes can then be received wirelessly from the store’s network, ensuring that the price displayed on the shelf and the one called up at the checkout counter are the same.

Altierre, a digital tag and sensor maker based in San Jose, Calif., has raised more than $80 million from investors and spent 10 years developing the technology for digital tags and the wireless networks they require. It asserts that outfitting a store with 20,000 to 25,000 tags, each costing about $5, would produce labor savings that would pay back the investment in two to two-and-a-half years.

The tags can provide multiple screens of information. To reduce power consumption, Altierre uses black-on-gray liquid crystal displays, the same type used in digital watches and pocket calculators. The most generous thing that can be said about this type of display is that its legibility is satisfactory.

At Altierre’s headquarters, a full-size mock grocery store is set up with its tags installed on the shelves. There, I was surprised to find that the LCD’s legibility problems didn’t seem so significant: shoppers stand close to the shelves anyway. On some shelves, Altierre showed off an improved tag, at a higher price, that uses E Ink technology. Its text is noticeably crisper than that of an ordinary LCD tag.

I asked Sunit Saxena, Altierre’s chief executive, why grocery stores haven’t leapt at the chance to save themselves money by installing the tags. “They’re treading carefully because the fear is, they’ll put 30,000 of these in a store where people are used to seeing paper and it will be a drastic change,” he said. “They worry that their sales will drop.”

Digital sign technology is hardly new. In France, customers are accustomed to digital signs in grocery stores, where an LCD tag with limited display capacity has been on shelves for about 10 years, says Michel Itié, an I.T. consultant. It shows only the price and the price per weight, so it requires a separate paper tag to show an item’s name.

Many French hypermarkets, which combine grocery stores and department stores, also use the tags. Mr. Itié is working with a company that is installing Altierre’s technology for the hypermarket chain E.Leclerc, which has installed 300,000 new LCD tags in 10 stores and plans to deploy a total of two million tags by year-end.

In the United States, grocery stores still cannot justify making the investment in digital price tags, says Patrick C. Fitzpatrick, president of Atlanta Retail Consulting. “If the payback was advantageous, you’d see them everywhere.”

Stores are eager, however, to find an affordable way to reduce price-related errors. Mr. Fitzpatrick says that when grocery store managers conduct “price integrity audits” and compare price labels on the shelves with the prices in the store computer, paper labels are only 95 percent to 96 percent accurate.

Randall Stross is an author based in Silicon Valley and a professor of business at San Jose State University. E-mail: stross@nytimes.com.

A version of this article appeared in print on February 10, 2013, on page BU3 of the New York edition with the headline: Digital Tags Help Ensure the Price Is Right.