Electronic shelf labels and out-of-stocks: what do they really change?

What an electronic shelf label knows

An electronic shelf label displays what the inventory system sends it: price, promotion, SKU, sometimes book stock or a code for order picking. It is updated remotely, without walking the aisle. Its first value is there: no more gap between the shelf price and the till price, no more labelling round at every price change.

It carries no sensor pointed at the product. So it does not know whether the shelf in front of it is full or empty. Everything it can show about availability comes from book stock.

What it brings against out-of-stocks

Three real, indirect contributions:

1. No more label out-of-stocks. A product present without a label, or with the wrong price, is not bought or creates a dispute at the till. The electronic label removes that case, frequent after price changes and promotions.
2. A signal on low book stock. Where the system allows it, the label can show a pictogram or change colour when book stock falls below a threshold. The employee walking the aisle sees at a glance the SKUs to reorder or check, without a handheld.
3. Help with replenishment. Some labels light up on demand to guide an employee to a SKU’s location, which speeds up shelf filling and the search for a misplaced product.

What it cannot do

Book stock is wrong in a large share of cases: DeHoratius and Raman measured 65% of inventory records inaccurate at a retailer. A label showing “stock: 12” in front of an empty shelf detects nothing; it even gives false reassurance. The mechanism is described in phantom stock: what to do when the book stock says the product is there.

Likewise, a product in the back room, delivered but not put out, has correct book stock and an empty shelf: that is a shelf out-of-stock, not a stock-out (stock-out or shelf out-of-stock), and the label does not see it. Corsten and Gruen locate 72% of out-of-stocks in these store causes.

How to use it properly

Use	What the label does well	What to add
Prices and promotions	instant update, zero till discrepancy	nothing
Low stock alert	visible signal on book stock	reliable book stock (cycle counting)
Replenishment guidance	fast location of slots	an organised replenishment pass (organise replenishment)
Empty shelf detection	nothing	a shelf count, or shopper reporting

The rule: the electronic shelf label is a display connected to the system; it replaces neither the shelf count nor the correction of book stock. It makes visible what the system knows, and the system does not know everything.

A worked example (hypothetical)

Take a fictional 2,000 m² store equipped with electronic labels with a low book stock alert. Over a week, the alert shows on 80 SKUs. A shelf count the same day finds 120 SKUs absent. About fifty are common to both lists; the other 70 are absent from the shelf with positive book stock (back room, phantom stock). The label flagged fewer than half of the real out-of-stocks: useful, not sufficient. The figures are illustrative.

What shopper reporting changes

Shopper reporting with ShelfAlert looks exactly where the label does not: the shelf. A product reported absent while the label shows positive stock is an out-of-stock invisible to the system, to treat the same day. The two pieces of information complement each other. 14-day trial, no payment card: see the plan for store managers.

Sources

• DeHoratius, Raman, “Inventory Record Inaccuracy: An Empirical Analysis”, Management Science, 2008: abstract.
• Corsten, Gruen, “On Shelf Availability”, 2004: summary.
• Gruen, Corsten, Bharadwaj, “Retail Out-of-Stocks: A Worldwide Examination”, GMA, 2002: full study (PDF).