A game of tag to improve retailer efficiencies

Food banks in Canada are expecting an 18% increase in demand in 2024 as consumers continue to face cost of living concerns. Last week, Liberal members of the House of Commons finance committee supported an NDP motion to implement an excess profits tax on large grocery retailers to address rising food prices.

Seeking efficiencies in retail

In response, grocery retailers are likely to seek new efficiencies. VusionGroup (Ticker: VU.FP and formerly called SES-imagotag), a recent addition to our portfolio, is positioned as a key player in this scenario, offering cutting-edge digital equipment and software services to help retailers digitalize and optimize their points of sale. The company offers an extensive range of IoT devices, such as electronic shelf labels, video displays, sensors, wireless shelf cameras and smart rails designed to streamline operations and reduce labour for low value-added tasks. Vusion’s in-house software solutions automate pricing and enable efficient inventory management, enhancing the shopping experience and brand marketing efforts.

The shift to electronic shelf labels (ESLs)

Switching to ESLs presents several advantages for retailers, including operational cost reduction and improved pricing flexibility, which can boost revenue and profitability. Changing paper-based labels in stores is labour-intensive and many staff are paid low or minimum wages, a sector that has seen significant raises. Prices displayed on ESLs can be automatically and quickly updated using Vusion’s software, allowing retailers to either reduce staff or reallocate them to higher value-added and customer-facing tasks.

Enhancing efficiency and the retail experience

The automatic pricing feature of ESLs offers additional benefits. Retailers can be more flexible with pricing, quickly adjusting to inflation and the competitive environment, thereby maximizing revenues and profitability. This flexibility also facilitates pricing adjustments, such as promotions on fresh produce, to limit waste. In general, fewer pricing errors improve the overall customer experience.

Another aspect of improving the customer experience is ensuring product availability on shelves. Industry experts estimate sales lost due to lack of products on shelves are around 8% of total revenues for a point of sale. By integrating ESLs and smart cameras, Vusion enables store managers to be automatically notified if a product is running low, prompting shelf replenishment from store inventory or triggering an order for more products. Optimizing inventory management maximizes cash generation at the store level.

Leveraging technology for inventory and online order efficiency

The COVID-19 pandemic accelerated online grocery sales in the US, a trend expected to grow at a rate of over 20% annually. Vusion’s products allow for efficient processing of online orders, with most being fulfilled directly from the stores. ESLs enable “pickers” to be more efficient by providing the fastest route to collect all items in an order. ESLs even flash to indicate where a product can be found, reducing the time employees spend on each order and minimizing the risk of incomplete or incorrect orders. Retailers and fast-moving consumer goods companies can also use ESLs as a marketing tool by implementing targeted promotions and offering coupons to customers.

Conclusion: Vusion’s promising long-term growth

Despite initial challenges due to concerns over battery life, technological improvements have addressed these issues and significant milestones, such as Walmart’s recent large-scale ESL deployment, signal a promising growth trajectory for the technology. Vusion’s leadership in the global ESL market suggests a strong growth outlook, with the potential for widespread ESL adoption and market penetration to the tune of 20% to 30% from approximately 7% today, or up to three billion labels by 2027. Adding replacement labels, smart camera installation opportunities, and cloud and software subscriptions only increases the potential addressable market.

With a dominant market share, a top-tier and broad product range, and strong relationships with major retailers, Vusion is an exciting long-term growth story in our view.