The head of an Annapolis-based advertising firm that works with top consumer brands is betting the next breakthrough in electronics won't be in smart phones or televisions. Instead, Compass Marketing CEO John White believes the next frontier is the shelving at retailers' stores.
White says electronic shelf labels could revolutionize shopping, both for retailers and consumers.
The founder of the Annapolis firm envisions replacing the billions of paper price tags with labels that display price electronically, allowing retailers to change prices remotely in minutes. Compass and partner Panasonic are set to roll out a battery free, wireless electronic shelving system known as Powershelf, which the companies unveiled earlier this month at a New York retail trade show.
"I think this is going to be the largest selling electronic product in history," said White, who estimates 20 billion paper shelf labels are in use. "It will outpace the impact of the UPC bar code."
The system is powered by inductive electricity, a technology developed by an Ohio-based research and development company that created the wireless tags. Executives at Compass, which works with brands such as Procter & Gamble, Johnson & Johnson and Kellogg's, were so impressed by the technology that they acquired the company and now are developing the system themselves.
White said he saw great potential for expanding the technology to help retailers manage and price inventory in real time.
The marketing firm and Panasonic, the distribution and research partner, have added features such as a weight sensor on the shelves that alerts store managers when an item has gone out of stock. The system, which can be installed on existing shelving, also includes "beacons" that can send targeted advertising to shoppers' mobile phones in the stores.
"We can measure the inventory live on the shelf and report when it goes empty," with the capability to report data to particular stores, central offices and manufacturers, said White.
Compass got its start 14 years ago helping Chapstick, its first client, get its products sold in Sports Authority stores. It followed up by working with Mars to bring the candy makers products to Home Depot locations. Other brand clients include Duracell, Band Aid and Gillette and m&m's.
When the advertising firm acquired the Ohio company two years ago, Whole Foods already was using the electronic price tag portion of the system, White said. The organic food retailer uses the tags in about 30 of its stores in California, Texas, Oklahoma and Arkansas, and the more extensive system now is being tested in about 10 convenience stores, he said.
And a national discounter that has been testing the system is expected to announce a major rollout of its use, making it more widespread. White said he could not yet confirm the name of the retailer.
"Solving the retail out-of-stock challenge is one of the most significant opportunities facing the retail food and consumer products industry today," Mark Baum, senior vice president of industry relations and chief collaboration officer for the Food Marketing Institute, said in an email Monday.
The institute, an advocacy group for food and pharmacy retailers, is collaborating with food retail members on the Powershelf system to evaluate how technology can improve on-shelf availability, Baum said.
Such a system can help retailers stay competitive and improve the shopping experience for consumers, more than a third of whom will head to another store if the item they want is out of stock, said Rance Poehler, president of Panasonic System Communications Co. of North America. Out of stock inventory costs retailers about 4 percent of their sales, White said.
Poehler said traditional retailers have struggled to stay as nimble as online sellers to quickly adjust prices and manage out of stock inventory.
"That can have a huge impact on a retailer's bottom line," Poehler said in an announcement during the unveiling of the system this month at the National Retail Federation's annual trade show in New York.
"In an increasingly competitive retail environment, out of stock situations are unacceptable," he said.