Prior to the soaring demand for household goods, reduced workforces, store closures and other challenges faced by businesses around the globe today, brands and retailers were backed by a thriving economy. The spread of coronavirus has now placed an enormous strain on small businesses and the retail industry.
While it is impossible to predict exactly what the long-term effects of the pandemic will be, businesses large and small alike will continue to focus on the consumer to win trust and engage more directly with consumers to secure long-term loyalty.
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A recent GS1 US study titled “Powering the Future of Retail” focused on the need for the retail and consumer packaged goods industries to reorient itself and make big changes to be more consumer-centric.
The study revealed that 82 percent of retailers and 92 percent of brand owners support transitioning from the UPC barcode to a two-dimensional barcode (such as a QR code) that can hold more product data. This would be a gateway to providing information like product sourcing, allergens and more to empowered consumers.
The transition is estimated to take place over the next five years. Additionally, the research showed that while an estimated 68.5 percent of retailers use laser scanners incapable of reading a two-dimensional barcode, 84 percent are evaluating or plan to migrate to advanced optical point-of-sale (POS) scanning technology.
Although the retail industry has been upended by the global pandemic, the need to stay in tune with consumers will ultimately only grow in importance. This research is important for entrepreneurs who sell products through major retailers today, as it provides an opportunity to stay educated about a major shift impacting their sales channel strategy and can help growing businesses prepare now to become better aligned with the innovation strategies of their partners.
Small and mid-sized brands with revenues between $10 million and $1 billion were found to have similar technological readiness as the major players, but many respondents acknowledged that their adoption may lag behind by two or three years, as they have smaller budgets and fewer IT staff to implement these changes.
In measuring the overall appetite among retailers and brands of all sizes for upgrading packaging, backend systems and barcode scanners to better align with what consumers want, the study provided insights into the motivators behind the transition. Here are three that have particular relevance for up-and-coming retail brands.
Product information transparency and consumer engagement
Providing more information for an informed and seamless shopping experience is a key part of gaining consumer trust and loyalty. Consumers want to know that the products they buy are environmentally friendly, that their food is fresh, and they want to engage with the brands they love.
Today, product packaging may feature multiple codes for shoppers to scan with their phones for more information or for loyalty programs. As the industry transitions away from the UPC, there is an opportunity to consolidate these many codes into one robust data carrier that not only contains product identification and price look-up information, but can also direct consumers to details about product sourcing, ingredients, allergens, how-to guides, recipes and more.
This advanced data carrier would also act like a UPC does now, but with optical scanning equipment in place rather than a linear barcode reader. The new barcodes will have the same price-lookup function at the point of sale, but will also provide the opportunity to connect purchase data with larger systems, enabling stronger connections to loyalty programs or to alert a consumer that a product has been recalled, for example.
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Verifying product authenticity
As we see online marketplaces increasingly crack down on fraudulent sellers, especially during this time of crisis where bad actors are plaguing sites claiming to provide legitimate masks and test kits, there is an opportunity for reputable businesses to stand out if they continue to adhere to retailers’ vendor guidelines. Be on the lookout for these guidelines to evolve as the UPC begins to phase out.
One thing that will remain important to retailers is the requirement for each product to have its own Global Trade Item Number® (GTIN). A common misconception is that a GTIN and UPC are the same thing. The UPC is actually the barcode symbol that has a GTIN encoded into it, so that retailer scanners know what to charge the customer at the point of sale.
Online, GTINs are included in product listings to form a bridge between the physical product and its digital representation, which helps the consumer find a product more easily on search engines.
As the industry migrates away from the UPC, the GTIN will continue to be a major part of the way retailers confirm that a product is authentic.
Improved inventory accuracy and traceability
In the study, across all brands and retailers, inventory accuracy at point-of-sale were the two most frequently cited benefits of updating barcode technology to more data-rich solutions.
There is a perception that the UPC is not designed, or suitable, for the inventory management requirements demanded by today’s digital savvy consumers. As a result, there is an increased need for overall supply chain visibility to support expectations for transparency and traceability.
For example, a single barcode symbology that contains batch or lot numbers, as well as country of origin, would contribute greatly to better recall management and keeping shoppers safe.
A challenge for smaller brands is the ability to compile the product data that would be encoded into the new barcodes and prepare it to be shared with their partners to create supply chain visibility.
Small and mid-size companies are either just starting to look at how to use and share data and may not even know where to begin. The study suggests that the retail industry needs more technical solutions and support to compile data and make it more automated and actionable. There is a tremendous opportunity for retailers to share data and insights and to strengthen their partnerships ahead of the migration so that the data carriers function as intended.
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What’s next?
Ultimately, the research underscores the need to change, but also acknowledges why widespread collaboration from the retail community over several years is critical. There is no single date of transition, but there will be a period of transition where the UPC will exist alongside another data carrier on product packaging, and this will vary by industry, product line and retail channel.
In the near term, forward-thinking startups that are able to think beyond the current crisis can focus on making sure that they are compiling and sharing accurate and complete data with their current retailer partners, while staying educated on the changing dynamics of barcodes and data carriers.
