1. Good news for retail supply chains as smart shelving goes mainstream

Ericsson Industry Watch

Good news for retail supply chains as smart shelving goes mainstream

Out-of-stock items, walk-outs and food waste cost billions of dollars in retail losses. Plug-and-play smart shelving could be one key to updating the antiquated systems at the heart of it all.

At one of the year’s biggest retail trade shows, NRF 2015, smart shelving manufacturers took one step forward toward solving some of the most outdated in-store inventory management processes. Integrated smart shelving like Panasonic’s Powershelf, which tracks and updates pricing, stock levels and expiration dates on its wirelessly powered electronic shelf labels, will do much more than just save time on manual labelling and pricing. It could be the backbone for an industry-wide effort to make massive improvements in supply chain efficiency, food waste and sales.

Eliminating stock-outs
According to the Harvard Business Review, out-of-stock items – or stock-outs, in industry trade speak – represent significant revenue losses for retailers. In fact, their survey data showed that as many as 21% to 43% of customers faced with a stock-out will go to another store to buy the product. For a billion-dollar business, they calculate, this could mean $40 million in lost revenues. Thanks to automatic out-of-stock alerts for store employees, empty shelves could be a thing of the past.

Reducing food waste
In the U.S. alone, it is estimated that nearly one-third — or more than 130 billion pounds – of the available food supply at the retail and consumer levels was wasted in 2010. Although the majority of this waste is in consumer households, grocery retailers nonetheless play a critical role in preserving perishable foods and coordinating efficient supply and demand. By alerting retailers when freezer temperatures are too high, smart shelves can largely prevent unnecessary waste due to human or technical errors. On the demand side, price discounts can be automatically triggered when an expiration date approaches, with dynamic pricing fully controlled from the store’s back-end system. The next natural step could be to carry the same expiration tracking data over to consumers’ smart fridges at home – where the major economic and environmental savings await.

Interactive promotions and engagement
At the moment, it’s still early to pin down what concrete impact features like branded shelf surfaces, tablet displays and push notifications will have on retail sales. But with customers actively comparing prices and getting competitor’s offers in-store through apps like Cash Dash, the battle for prices, promotions and special offers is increasingly taking place at the shelves. When timing becomes this critical, dynamic pricing and promotions are likely to be used aggressively to influence consumer decisions down to the point of sale. Smart shelving could be a powerful tool to underbid and out-promote nearby competitors with key items and rewards that adapt to supply and demand.

Although smart shelves are nothing new to some retailers (Walmart began developing its own in-house systems over a decade ago), the fact that major electronics manufacturers like Panasonic are getting onboard is a sign they’re ready for the mainstream. With solutions so straightforward they can be installed overnight, the barrier to real-time in-store inventory management may have just fallen for good.

Written by Erik Kruse

Erik´s specialties are future consumer demands, industry dynamics and how the ICT world will evolve over the next 10 years. At Ericsson, he has worked on company strategies and research into future trends and requirements.

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