The Barcode (R)evolution: both retailers and customers win

By Kasper Kwant en Olaf Zwijnenburg, published on november 3, 2020, 07:20

Click here for the dutch version

To further illustrate the content of this article, we have created a "live example" that shows the benefits of the new technology. The example below shows the journey of a vegetable basket in 5 steps from grower to retailer - all based on 1 unique constant barcode per unique product!

Technology plays an important role in the retail sector. New technologies are under development and existing technologies reinvented constantly. One of the places where innovation takes place is the Future Store Arnhem, where, amongst others, the good old barcode is being redeveloped. With regards to the barcode, it is more a matter of evolution than revolution. A revolution often results in winners and losers. In this evolution case, there are only winners. Both customers and retailers win, while chances arise though out the value chain.

The barcode is a relatively old technology that was developed mid-20th century. There are different standards, but the common denominator is that they all consists of bars. Each of the bars stands for a number. The EAN 13 – short for European Article Numbering – consists of a 13-figure code. The barcode is commonly used in keeping track of stocks and facilitating easy and quick processing at cash registers.

The old barcode technology currently is being redeveloped. The innovation focuses not so much on the barcode itself but more on the information systems that are interconnected with the barcode technology.

The figure below lists the advantages of the new technology, which will be elaborated on later.

Making information more accessible

The underlying system may hold much more information on a product, but if that information is not easily accessible, its value will be limited.

The traditional barcode is only readable with a barcode-scanner. The new technology will make reading the codes lots easier. Rather than reading the small print on a product label, customers may use their smart phone to scan the barcode and retrieve much more information on the product – even without needing to download a special app.

Retailers on the other hand can link the information contained in the barcode to their screens and other digital signings directly.

Sharing information is not only reserved for customers. Also within the value chain, information can be shared more easily, allowing for better insights. Retailers can track stock levels at producers and wholesalers. This allows (risk) management of stocks throughout the chain, instead of each party optimizing their own stock levels. This can result in lower overall stock keeping, higher rotation rates and better margins.

‘Dynamic pricing’: a dream come true

In many sectors ‘dynamic pricing’ is common practise. The travel- and hotel-industries have been applying dynamic prices already for years. But examples are also found in more trade-related sectors. Strawberries and flowers at the wet market are typically much cheaper just before closing than in the morning. And what about petrol being more expensive between commuting hours than afterwards? There are many more possibilities that currently are only partly addressed.

According to research by McKinsey, a better use of the dynamic pricing instrument could boost sales by some 2 to 5 percent and margins by 5 to 10 percent. Tying price to location is such opportunity; adjusting the price of a product to local market circumstances and price levels of competitors in the direct vicinity. In addition, supermarkets may drop prices when products are nearing their ‘best before’ date. That ‘price rule’ is stored in the information system and the customer may see a different price at different moments.

A next step could be personal pricing on the basis of facial recognition in the shop. Or rising the price of umbrellas when it rains. Such ‘price rule’ is added to the information system, the systems tracks weather reports and adjust prices automatically. The customer sees the price that fits with the current weather circumstances on his smartphone.

These are only a few, relatively simple examples. In practise the possibilities are nearly endless. Making the most of dynamic pricing currently is being frustrated by very practical issues. It is quite laboursome to continuously adjust prices in physical stores. New price tags or stickers are required every time the price changes.

Also in these instances this new technology provides a solution. Rather than on the product or shelf itself, the price information is stored in the underlying information system and always accessible via the barcode. Also for customers, who can scan the code with their phones.

The advantages of dynamic pricing are clear: less food waste, more choice for the customer and a better margin for the retailer. Thanks to the new technology these benefits are easier to be realised.

Conclusion: a brand new life for the barcode

Technological innovation not necessarily means inventing new stuff. Redeveloping existing technologies provide plenty of opportunities as well, as clearly is demonstrated by the new barcode.

Started off as a pretty static product- and price-code, the technologically revived barcode is set for a new and dynamic life, benefitting both retailers and their customers.

In this live example we unfortunately need to use different barcodes in order to tell the story. The best before date barcode below proves the operation of the system: every new hour the price of that constant barcode is adjusted without manual interference. Test it!