Labour costs are the catalyst for the adoption of electronic labels in the UK because there are so many benefits to retailers, staff and customers alike, explains Peter Ward Country Manager UK & Ireland, Pricer
In 2019, the cost of employing a UK supermarket worker was around £10. Five years on, the cost is £14 per hour including National Insurance, and rising, as retailers compete with each other to recruit from a shrinking labour pool. Inflation, more strident demands for higher pay from workers, their higher expectations on working arrangements, enhanced benefits, and greater job satisfaction), pressure to adopt the Living Wage (rumoured to be rising again) as well as the voluntary Real Living Wage, have all done their work. According to the Office for National Statistics (ONS), average weekly earnings in the UK increased by 6.5% in 2023.
An example comes from a mid-size UK retailer, which reported in April 2024 that its monthly staff labour costs had surged by £250,000. Despite this significant cost increase, the retailer was unable to adjust product prices to balance its books, leaving it with no choice but to explore alternative solutions to meet the financial strain. At the same time, retailers’ related costs have risen – inflation, workplace regulation, supply chain and, of course, the cost of buying in goods from brands that in many cases have put their prices up well above inflation.
And now the news is full of headlines about the concept of ‘work of equal value,’ leaving some retailers with an enormous backlog of wage claims because the courts have decided that there is parity between roles across the retail business, from warehouse to store.
If current trends continue, retailers will face even greater financial challenges in the coming years. As the cost of labour continues to rise, retailers will need to find ways to remain competitive without sacrificing quality or increasing prices. Failure to do so could result in reduced profitability, store closures or even business failure. For many retailers, particularly smaller ones, the situation is becoming unsustainable, with staff costs eating into their already slim profit margins.
The only answer is to find ways to increase productivity without passing the costs on to consumers which would damage their competitiveness. And we have already seen the impact of that, as retailers saddled with large debts have had less flexibility to lower prices.
One of the most promising avenues retailers are pursuing is greater automation, particularly at the shelf, which stands to benefit store staff, retailers and customers alike.
The labour costs saved by replacing paper with electronic labels are well-known, but the catalyst for adoption has been an attempt to cut food waste while at the same protecting margins on perishable items approaching their sell by date. On BBC radio on 2 October, independent retail analyst Chris Field reported on a roll out by 46 East of England Coops (rising to 120 next year) of electronic labels which have replaced the traditional sticky yellow markdown labels that are applied continuously throughout the day as items reach their final expiry time.
Using electronic labels, the retailer can send updates to staff hand-helds to tell them what items need to be marked down. The labels themselves change colour to yellow, the familiar signal to customers of a markdown. To make things even easier, labels are equipped with flash technology so staff can spot them instantly. East of England Coop has even added artificial intelligence to the solution which means the optimum time is always selected at which marked down goods are most likely to sell.
The triple benefit of this solution – to retailer, staff, customer – is the deciding factor. Retailers cut their labour costs when compared to staff having to continuously and often put sticky yellow labels onto products; staff are in turn free to pursue more rewarding tasks; and customers have more access to staff to help them shop.
A study by Pricer found that retailers who implemented electronic shelf labels experienced a 20% reduction in in-store labour costs. By automating time-consuming tasks such as price updates and product discounting, retailers were able to redeploy staff to more value-added activities, such as assisting customers and maintaining store displays. This not only improved operational efficiency but also enhanced the customer experience.
There is a fourth important benefit for both retailers and customers and that is a reduction in food waste. Consumers are calling for it and retailers are all either signed up to industry schemes that are mandating it or working with surplus food marketplaces to repackage food for resale.
As labour costs continue to rise and customer expectations evolve, greater automation in retail is not only inevitable but also necessary. Retailers that embrace automation will be better positioned to manage their costs, improve productivity and enhance the customer experience. While the shift towards automation may reduce the number of staff required, those that remain will be empowered to deliver better service, making the shopping experience more enjoyable for customers. In this way, automation represents a win-win solution for all parties involved – retailers, staff and customers alike.