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Over the past few months, the IoT Connectivity and Platforms group has received several inquiries about the dynamics of the electronic shelf label (ESL) market.

Several trends appear to have piqued interest in this area:

  • ESLs are getting a lot more sophisticated. The early generations of ESL were limited to basic LCD display. Traditionally, the main rationale for retailers to deploy these types of ESL was to automate price updates.

  • Over the past few years, there has been a shift to e-paper for the display technology. The latest generation of e-paper ESLs feature colored text and LED lights to attract the eye and integrate QR codes and/or NFC to make useful information (e.g. allergens, offers) easily accessible on the smartphone. Some retailers are looking at integrating ESL with beacons, cameras and smart displays on the shop floor. The aim will be to improve the in-store experience for shoppers and develop greater understanding of their behavior.

  • A few major retailers, such as Walmart and Kroger, have announced significant trials or deployments of the more advanced forms of ESL. In 2018 Kroger announced a trial of advanced ESL (Kroger EDGE, using ZigBee, Wi-Fi and BLE) across 200 stores. By early last year it had installed digital shelving units across 92 stores.

  • The competitive dynamics of the ESL space are changing. Long-term incumbent merchant ESL providers Pricer and SES-imagotag face growing competition from new entrants like Hanshow.

  • Although IR, proprietary 2.4GHz and sub-GHz remain dominant, new standard-based solutions based on BLE and ZigBee are gaining more attention.

 

ROI for traditional and advanced ESL

The decision on whether to adopt ESL has historically been based on the upfront and ongoing cost of ESL versus the labor cost of manually changing prices. This meant that ESL saw most adoption in regions and countries (e.g. France, the Nordics and Switzerland in Europe) where labor costs are high enough to support return on investment (ROI) in a reasonable timeframe. In countries where labor costs are much lower (such as in emerging markets), there has been less incentive to invest in ESL.

Today’s more sophisticated forms of ESL are designed not only to generate cost savings, but also boost revenues and/or margins through personalizing the shopper experience and encouraging people to spend more in store. As such, this potentially opens up the ESL opportunity to countries where the ROI based on cost savings doesn’t stack up. However, this does make the ROI calculation for advanced forms of ESL more complex.

 

ESL market dynamics

We have developed some initial estimates on the market size for ESL. This factors in tracking the installed base of ESL and reporting by merchant market vendors. According to these estimates, some 90 million IR- and RF-based ESL were shipped in 2018 (note: this does not include ESL developed in-house by retailers).

The longtime dominant players in this space, Pricer (headquartered in Sweden) and SES-imagotag (headquartered in France), account for the lion’s share of the market. However, a significant factor in strong recent growth in the market has been the impact of challengers, such as the China-based Hanshow, which says that by mid-2018, it installed some 30 million ESL across more than 40 countries. Other significant players in the market include Altierre (USA), Displaydata (UK), Opticon Sensors (the Netherlands), SOLUM (South Korea) and Zkong (China).

Historically, IR, proprietary 2.4GHz and sub-GHz have been the connectivity technologies of choice for ESL, but standards-based technologies are making headway. As in other sectors, merchant vendors and their customers can benefit from ongoing enhancements to standards and innovation from a broad ecosystem of chipset vendors and software providers among others. This will become more important as the focus of merchant ESL vendors shifts from selling physical ESL to monetizing the installed base of ESL through offering complementary services such as device and data management.

According to our initial forecasts, annual global shipments of ESL will exceed 100 million units in the next two years. Later in 2020, we plan to publish a dedicated report on retail IoT, including more granularity on where the ESL market opportunity is heading.