ASSOCIATED PRESS
July 25, 2001

RETAILERS EMBRACE ELECTRONIC SIGNS

Retailers Embrace Electronic Signs to Cut Costs, Stay Competitive

By Anne D'Innocenzio

NEW YORK (AP) - Ever get frustrated because prices in the aisles just don't jibe with what comes up at the cash register? Don't worry, help is on the way.

An increasing number of merchants are turning to "electronic paper," which allows them to instantaneously change prices and promotional messages on in-store displays, while synchronizing prices with those at the cash register, all through a central computer.

The movement is expected to gain ground as merchants are under more pressure to pare down labor costs and to respond more quickly to rivals' heavy promotional tactics.

In what is being seen as a major breakthrough, Macy's East plans to start testing within the next couple of days electronic paper signs, which are light and bendable, in its children's area in its Bridgewater, N.J. store. If successful, the retailer plans to roll out the 11-by-14-inch "SmartPaper" signs, patented by Gyricon Media, a Xerox spinoff, in its other stores.

Elina Kazan, a spokeswoman at Macy's, believes that these electronic signs will boost sales by freeing up the sales representative.

"Instead of spending time putting up signs, they can help the customer," she said.
Palo Alto, Calif.-based Gyricon, through its alliance with Thomson-Leeds - a display designer and manufacturer - is in talks with other retailers with hopes of rolling out the technology.

Meanwhile, Cambridge, Mass.-based E Ink, which tested electronic paper signs in 1999 in about 200 locations, will unveil an improved and lower-cost version early next year, said Russ Wilcox, vice president, general manager and co-founder.

At the same time, several supermarket chains such as Amsterdam-based Royal Ahold's Stop & Shop and Safeway as well as small independent stores, have installed electronic shelf labels, which link with the store's main computer either through radio waves or infrared light.

"I think this is going to be huge," said Bert Flickinger III, a Westport, Conn.-based retail consultant.

"There's pressure on labor costs, and price impact players like Wal-Mart and Kmart are putting tremendous pressure on department stores and small stores."

He noted that about 5% to 10% of overall merchants are short-staffed, while in the food and drug business, that number can be as high as 20%.

"They don't have enough people to merchandise the product, much less put out the signs," he said.
About $14 billion is spent on point-of-purchase promotions, but less than 50% of that is properly used, industry experts said. Having more flexibility in changing prices means that retailers can better optimize their promotions.

That will mean more dynamic pricing, Flickinger added, allowing for faster markdowns and markups to coincide with weather conditions, for example.

The new electronic paper technology from the likes of Gyricon and E Ink works on a simple premise.
Tiny globules of black ink are inserted between small plastic sheets. Inside each globule are even tinier chips of electrically charged white paint. The globules are "spun," by another electrical charge, which determines whether the black ink or the white chips are face-up.

The balls flip black or white to form images and letters, depending on the charge. And once the image is set, it can be "frozen" and continue to display the same image or characters without requiring new power. The signs subsequently can be changed with a few strokes at a keyboard or handheld device.

Improved technology in electronic pricing has helped cut costs, increasing its attractiveness to retailers, which will see a return on their investment anywhere from 12 to 18 months later.

For example, E Ink's initial signs, a meter long, cost $1,000 each to install. E Ink's Wilcox notes that the pricing for the second version of electronic paper has not been set, but he said that costs have been dramatically reduced. Gyricon's signs are priced at about $100 each.

NCR, the Dayton, Ohio-based maker of electronic scanners and labels, introduced a wireless version, which transmits information through radio frequency, and was able to reduce in half the costs for installing the labels - which now cost about $6.50 to $7.50 each.

But plenty of retailers are still sitting on the sidelines.

"The food industry is still taking a wait-and-see approach with all of these electronic vehicles. We are looking for additional cost reductions within the system," said Barry Scher, vice president of public affairs of Ahold USA.

"We have looked at electronic signs and electronic labels, and we are monitoring the progress," agreed Jan Drummond, a company spokeswoman for Sears Roebuck. "We like it, but it is about two years away from having an attractive investment (for us.)"