Consumer Packaged Goods (CPG) companies traditionally have struggled to get the right product at the right place in retail stores. Retailers need to plan for their limited shelf space and display as many products as possible to maximize their profits. Many retailers struggle to get the right product on their shelves, and often customers walk out of the store due to the non-availability of a product. In the traditional approach, CPG companies had to manage just the retailers and manufacturers. However, with the online marketplace boom, companies depend on e-tailers like Amazon, eBay, etc., to sell their products.
As per the latest report, in 2021, US merchants recorded a record $870.8 billion in online sales, an increase of 14.2 percent compared to the year prior as the sales numbers from online mediums keep increasing, it becomes critical for CPG companies to monitor and collect data from varied sources. With more and more products being sold online, it is cumbersome to collect data manually for analysis and enable performance optimization of products at online marketplaces.
What is Digital Shelf and Digital Shelf Analytics?
According to the Market Statsville Group (MSG), the size of the global digital shelf market is expected to grow from USD 381.1 million in 2021 to USD 7,498.5 million by 2030, at a CAGR of 40.1% from 2022 to 2030.
One of the key solutions to resolve the issue of shelf management and maintaining data from various sources is Digital Shelf Analytics which will be critical for CPG companies in 2023. The digital marketplace has its best practices, just like traditional retail stores.
DSA is a dynamic approach to continuously analyzing the e-commerce data of a digital shelf. It allows companies to keep track of their digital sales and metrics that influence sales from various platforms. It provides insight into data from various marketplaces and competitors’ pricing. Data is automatically scraped using API connections based on metrics like rating, reviews, product placement, availability, etc.
Digital shelf goes hand in hand with digital shelf analytics. As per Gartner, it is referred to as, a “connected shelf in a physical retail store, which can include computer vision, weight or other sensors, Electronic Shelf Labels (ESL) or LCD displays.” Gartner classifies the technology as “emerging” with a “high” benefit rating.” ESLs help the company augment the customer experience and help retailers stay flexible and scalable. ESL is used by retailers to display product pricing electronically and enables them to ensure dynamic pricing for a product. Dynamic pricing can help businesses keep pace with recent market trends and competitor pricing.
Importance of Digital Shelf Analytics
- Improve Analytical Accuracy: As data received from digital shelves is automated, it is devoid of human errors. Analytical accuracy provides real-time data on the company’s products compared to its competitors. It ensures that companies can make dynamic decisions based on the available data.
- Evaluating Digital Performance: It allows CPG companies to understand their position vis-à-vis their competitors and how their digital assets are performing in the market. DSA helps companies to analyze data points and use them to their advantage. For example, if a company is aware that its competitor’s product is running out of stock, it can increase the advertisement effort to sell its product.
- Online Positioning: DSA is based on search engine optimization. It is important to track how a product performs, whether the number of searches related to it is increasing or decreasing. For SEO to be successful, it is essential that product information is kept updated and correctly displayed across channels.
- Improving Conversion Rate: In today’s world, it is important to keep track of how a product is turning consumers into customers and analyze how the same product is performing across different online channels. It is important to realize which platform performs best for your product and try to navigate all your traffic to that page to increase sales. Retailers usually don’t provide this data hence it is important to have a digital shelf to maximize sales.
- Strengthening Brand Integrity: It is vital for a company to maintain the same image and provide similar information for a product across multiple platforms. Digital shelf analytics helps you monitor each seller’s content compliance so you can spot issues in your brand integrity before they grow into bigger problems.
ESL Implementation:
ESL management system includes hardware like base stations, transceivers, and electronic shelf labels. Both serial and Ethernet-based communication channels are through this system. Key components of the architecture include a cloud-based server, inventory management system, pricing system, mobile application, gateway controller, network infrastructure, ESL, and POS system.
Price displays are updated automatically using a communication network. Small digital or plasma display screens are placed in front of the products. ESLs are operated wirelessly using low-frequency signals from a centralized computer allowing instantaneous display changes. The technology is based on radio frequency and infrared systems which link the master checkout with the shelves. To keep ESLs in sync with the POS price and the planogram master store operations software is needed.
Investment needed to implement ESL/Digital Shelf:
To create a successful digital shelf, it is necessary for data to flow between the company and its digital shelf using its digital shelf analytical capabilities at all its selling channels. It is important to track product performance across all the platforms (retail stores/online) where it is being sold. For a company, it is important to get its digital shelf strategy right and have a formal plan as to how data will be analyzed, who will analyze and what company aims to achieve by using the data. However, setting up ESL is quite expensive as they have high initial set-up costs and need changes in pricing procedures to make the best use of it. For example, a 30,000-tag system can initially cost almost $350,000. However, if implemented and installed properly, ESL system systems can break even in 2-3 years.
Digital or electronic shelf labels are effective and innovative ways for retailers to maintain their inventory and pricing. It enables retailers to update the prices of a product in real time, leading to reductions in pricing errors and streamlining retail operations. Customers can also take advantage of accurate and consistent pricing apart from additional product information retailers provide. As the digital shelf keeps on evolving, it will continue to improve and provide benefits to the retail industry hence making it easier and more convenient for both retailers and customers.
References:
https://www.inriver.com/digital-shelf-analytics/
https://www.pricespider.com/digital-shelf-analytics/
https://www.efundamentals.com/what-is-digital-shelf-analytics/
https://gepard.io/glossary/what-is-digital-shelf-analytics
https://www.transperfect.com/blog/digital-shelf-why-its-so-important-tpt-digital
https://www.marketstatsville.com/digital-shelf-market
Image reference:
https://www.telink-semi.com/benefits-electronic-shelf-label-retail/
is a Lead Business Analyst with 9+ years of experience in the IT Industry. He has rich expertise in CPG (Consumer Packaged Goods) with focus on business consulting & development.
Tushar is an experienced professional in business analysis, process design, requirements elicitation, and process discovery across the CPG domain. He has worked in different roles and capacities as a product owner, insights analyst, and bid manager with a specialization in CPG Sales & Marketing, trade promotions, retail execution, and CRM.
