The Effect of Electronic Shelf Labels on Store Revenue

Abstract

ABSTRACT Today’s retailers have a strategic imperative to integrate their channels. Some have implemented electronic shelf labels (ESL) to replace paper tags to technologically enable the omnichannel transformation by aligning the presentation of price and product information between online and offline channels. However, consumer reactions to ESL are yet unexplored. They could be positive or negative: on one hand, the fear of frequent price changes, a known phenomenon in e-commerce, could spread to offline channels and reduce consumer purchase intent and overall revenue; on the other hand, ESL could prevent showrooming by signaling price consistency and offering consistent information (e.g., including reviews) between the on- and offline channels. We explore a retailer data set that allows isolating the “mere ESL effect”, as the retailer’s pricing strategy remained unchanged over the introduction of ESL (i.e., no dynamic pricing), but the presentation of the price and product information was integrated through ESL. A difference-in-difference analysis establishes that revenue in product categories in which ESL was introduced grows at the expense of those product categories in which it was not introduced. Visitor numbers are not affected by introducing ESL. This finding supports the adoption of e-commerce capabilities in a brick-and-mortar store as it could help prevent shopper behavior aimed at exploiting channel differences (i.e., showrooming for price or more information).