WHITE PAPER OVERVIEW
Digimarc® Barcode
Labor Cost Savings for Retailers Overview
For the top 120 global retailers in the initial primary and secondary target
markets, the adoption of the Digimarc Barcode and Digimarc-enabled
image-based POS scanners could equate to billions of dollars in potential
annual labor costs savings.
Introduction
At 8:01am on June 24, 1974, at a Marsh Supermarket in Troy, Ohio, Clyde Dawson pulled a 10-pack
of Wrigley’s Juicy Fruit gum out of his shopping basket and handed it to the cashier, Sharon Buchanan.
Rather than manually keying in the price as she had done for the thousands of items before, Sharon
passed the pack of gum over a scanner that detected a barcode symbol which identified the package and
its price as 67 cents. This simple act 40 years ago marked the beginning of a fundamental advancement
in the retail industry that today accounts for billions of dollars in annual cost savings. Today, traditional
barcode symbols appear on over 10 million products across 25 industries throughout the world and are
scanned over five billion times each day.1
While the traditional Universal Product Code (UPC) symbol and the European Article Number (EAN) have
served the retail industry well, the technology possesses some inherent limitations:
•S
lower Checkout – Cashiers, or customers using self-checkout, must hunt for the printed barcode as
they scan each item.
• I naccurate Detection – Traditional barcode symbols are susceptible to damage or printing defects that
can lead to inaccurate detection.
•P
otential for Fraud – There have been numerous cases of traditional barcode symbols being swapped,
resulting in millions of dollars in loss.2
After 40 years, the retail industry is poised for a reinvention of the traditional barcode: enter the
Digimarc® Barcode. Built on Digimarc’s well-established digital watermarking technology, the Digimarc
Barcode includes the same Global Trade Item Number (GTIN) data contained in the UPC/EAN symbol but
repetitively distributes it imperceptibly across the entire package without any special inks, markings, or
printing processes. This new application significantly reduces time at checkout while promising the retail
industry millions of dollars in labor cost savings annually by speeding up the checkout process.
DIVE DEEPER
This paper provides a high-level overview of the white paper –
Digimarc® Barcode: A Quantitative Model of Annual Labor Cost
Savings and Return on Investment for Retailers. To access the
complete Model and accompanying ROI Calculator, visit
www.digimarc.com/model.
2
Digimarc Barcode Overview
When scanned by
a Digimarc-enabled
POS imaging scanner,
the Digimarc® Barcode
behaves exactly like
a UPC symbol that
has been invisibly
distributed multiple
times throughout the
entire package.
Original Package
UPC Data
is Extracted
UPC Data is Imperceptibly Embedded
as a Digimarc® Barcode Across All
Package Surfaces
Digimarc-enabled
Package
When scanned by a
consumer mobile device,
the Digimarc® Barcode
connects the shopper to
engaging mobile content.
Figure 1. Encoding Digimarc Barcodes Imperceptibly into Packaging.
A Digimarc Barcode is simply a Digimarc ID that also includes the product’s GTIN data. This means that
checkout clerks, as well as customers using self-checkout, can scan items quicker without having to hunt
for the barcode. Plus, packaging carrying Digimarc Barcodes can connect mobile-enabled shoppers with
additional product information, special offers, recommendations, reviews, social networks and more.
The encoding of a Digimarc Barcode is applied to the final digital image files of the package design as
part of the standard design process or as a post-design process enhancement. The Digimarc Barcode
encodes GTIN data repetitively over the entire surface of package and labels, including images,
graphics, and text.
Launch the Digimarc Discover app and focus the camera on this image to learn more
about the Digimarc® Barcode.
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The Digimarc Barcode and GS1
With the Digimarc Barcode, enabled image-based point of sale (POS) scanners can scan
any part of the package – not just the UPC/EAN symbol – to determine the product and
its cost at checkout. The GS1 management of GTIN registrations remains the same.
How Much Faster is the Digimarc Barcode?
The Digimarc Barcode was first publicly demonstrated at the National Retail Federation (NRF) 102nd
Annual Convention and Expo in January of 2014.3 At NRF, over 150 retail industry members received
hands-on experience scanning a basket of 20 Digimarc-enabled consumer package goods. The participants
were encouraged to scan the items as fast as possible. Scanning rates averaged 68.5 items per minute
(IPM) with the fastest scanning rate hitting 134 IPM.4 The current industry average scanning rate for
traditionally barcoded packaging is 21 IPM. Only seven of the 157 participants produced results less than
50 percent above the industry average; these seven still beat the current industry average by over 20%.
Digimarc’s initial estimate for average scanning rate improvement
post transition to the Digimarc Barcode is 33%.
Launch the Digimarc Discover app and focus the camera on this image to see the fastest
scanner at NRF 2014 in action.
Using the internal testing findings and accounting for payment and bagging not being part of the testing,
Digimarc’s initial estimate for average scanning rate improvement retailers can expect post transition to
the Digimarc Barcode is 33%. This rate is intended as a conservative assumption taking into account the
testing was not performed in an actual retail environment, which may or may not yield the same level of
improvement. Retailers and industry analysts can perform sensitivity analyses using the ROI Calculator
(www.digimarc.com/model) by varying this and other assumptions.
4
Detailed Analysis of Potential Annual Labor Cost Savings
The initial analysis focuses on retailers most likely to realize the greatest labor cost savings from
implementing the Digimarc Barcode. These would be retailers with high transaction volumes and
sophisticated workforce optimization systems. The Digimarc Barcode Quantitative Model of Annual Labor
Costs Savings and Return on Investment for Retailers (Model) focused on the top 120 of Deloitte’s listing
of the top 250 global retailers5 which are assumed to be the segments most likely to experience the
greatest savings gain. These primary and secondary markets include:
• Primary Market:
– Supermarkets (Kroger, Safeway, Woolworths, et al.)
– Hypermarkets/Supercenters (Walmart, Tesco, Carrefour, Target, et al.)
• Secondary Market:
– Cash & Carry/Warehouse (Costco, Metro AG, BJ’s Wholesale, et al.)
– Discount (Lidl, Dollar General, Aldi, et al.)
– Drugstore/Pharmacy (Walgreens, CVS, Rite Aid, et al.)
For the top 120 global retailers in the initial primary and secondary target markets, the adoption of the
Digimarc Barcode and Digimarc-enabled image-based POS scanners could equate to billions of dollars
in potential annual labor costs savings. Faster checkout coupled with effective workforce optimization
systems provides an opportunity for substantial labor cost savings.
The following diagram depicts the Model and illustrates the flow of calculations beginning with global
retail sales. The method and assumptions used to calculate potential annual labor cost savings in relation
to those sales are identified in the Model. Intermediate results (orange boxes) are shown along with key
assumptions (gray boxes):
Global Retail Sales
2. % Labor for Cashier
Total Labor Costs
Cashier Labor Costs
4. % Time Scanning
3. % Time Transacting
Transaction Labor Costs
Scanning Labor Costs
6. 1 IPM Increase in
Scanning Rate
1. % Sales for Labor
5. % Time on
Eligible Items
Addressable Scanning
Labor Costs
Annual Labor Cost Savings
from 1 IPM Increase
For a complete review of
each of the assumptions
underlying the Model used
to determine an estimate
for annual labor cost
savings, please visit:
www.digimarc.com/model
7. 33% Improvement
in Scanning Rate
Annual Labor Cost Savings
from 33% Improvement in
Scanning Rate
Figure 2. Computing Annual Labor Cost Savings from Global Retail Sales
The Model indicates billions of dollars in potential annual labor cost savings for the top 120 global
retailers in the primary and secondary target markets, which is only a subset of the addressable market.
Global retail sales are estimated to be $10 trillion, approximately three times the US market.6 The
estimates for savings in the Model are specific to approximately 30 percent of global retail sales.
5
The findings demonstrate significant potential annual labor cost savings and margin improvements:
Estimated Annual Labor Cost Savings and Margin Improvement from
33% Increase in Scanning Rate (USD in millions)
Segment
Annual Labor
Cost Savings from
Global Retail Sales
33% Increase in
Scanning Rate
Margin
Improvement from
33% Increase in
Scanning Rate
Primary Market
Supermarkets
$1,016,267
Hypermarkets/Supercenters $1,220,541
$1,397
$1,469
0.14%
0.12%
Secondary Market
Cash & Carry/Warehouse
Discount
Drugstore/Pharmacy
$206,272
$274,042
$245,097
$164
$88
$53
0.08%
0.03%
0.02%
Total
$2,962,219
$3,172
0.11%
Return on Investment
To aid retailers in calculating ROI when making purchasing decisions concerning the Digimarc Barcode,
the ROI Calculator is a valuable tool. The total cost of ownership of the Digimarc Barcode includes a
setup fee for encoding by Digimarc Professional Services plus an annual renewal fee, marginal costs of
delivery and acceptance testing of package designs, printing plate change fees, and possible upcharges
by scanning vendors.
The assumptions used in calculating ROI are tentative. The ROI Calculator does not include any costs
for Digimarc Barcode-reading software in image-based scanners, as it has not yet been established
whether there will be any upcharge and, if so, how much. Digimarc is not directly charging retailers a
separate software license fee. As to the cost of the scanners themselves, the general transition of the
industry to imaging scanners is already underway, with the cost of such scanners justified by other
features and benefits.
There are two scenarios which affect ROI:
1. All packages are encoded with Digimarc Barcodes.
2. Only private label packages are encoded.
Since retailers control their private label brands and can generate significant savings from the encoding of
these, we envision this will be the first step in the transition to Digimarc-enabled packaging. The encoding
of national brands will be influenced by retailers and the brands’ desire to facilitate consumer mobile
engagement directly from packaging.
The preliminary total cost of ownership assumes an initial Digimarc setup fee of $300 and an annual
renewal fee of $50 for each Digimarc-enabled package. These prices are subject to change.
6
Hypothetical Retailer Example
To demonstrate the significant cost savings the Digimarc Barcode can bring to the retail industry, the
following example of a fictional retailer has been produced using the Model.
Retailer ABC operates a chain of 250 supermarkets across the United States with annual sales of $10
billion of which $2.5 billion comes from its private label brand. The retailer offers its customers the same
40,000 distinct SKUs in each store of which 25% or 10,000 SKUs are private label products. The retailer
designs the packaging for the private label brand. Each store has installed Digimarc-enabled Datalogic
Magellan™ 9800i scanners and effective workforce optimization systems.
Retailer ABC’s in-store inventory replenishment has resulted in all private label products on the shelf are
Digimarc-enabled at the beginning of year one. The retailer “flips the switch” on the POS systems to start
recognizing Digimarc Barcodes on January 1. The total cost of ownership (TCO) for the first year includes
a professional services charge of $300 for encoding and an annual renewal fee of $50, both on a per
Digimarc Barcoded package basis. The cumulative year one TCO is $3 million and the ongoing TCO is
$0.5 million per year. Assuming full harvesting of the benefits of faster scanning rates by reducing labor
costs through effective workforce optimization system, the ROI Calculator indicates that, even without any
national brand adoption, the retailer could save nearly $4 million each year. Retailer ABC could recover
its first-year investment within roughly 9 months and realize a ROI of nearly 30% in the first year. After 5
years the total return could exceed $14 million with an ROI of over 275%. After 10 years the total return
could exceed $30 million with an ROI over 400%.
Adoption by national brands would dramatically increase the ROI. If the Digimarc Barcode were deployed
in all 40,000 SKUs, the TCO would not change for the retailer as the costs of the Digimarc Barcode for
national brands would likely be borne by the brands. The projected savings by Retailer ABC would increase
from $4 million to nearly $14 million per year. With full coverage of all eligible items, the projected five
year total return would exceed $60 million with an ROI of over 1200%. After 10 years, the total return
would reach $130 million with an ROI over 1700%.
Retailer ABC would save on an annual basis $55,000 per store if all SKUs were encoded and $15,000 per
store if only its private label brands were encoded; each Digimarc Barcode-enabled product contributing
$300 to $400.
Conclusion
Digimarc Barcode can provide significant hard cost savings to the retail industry while potentially saving
high-volume retailers billions of dollars annually through the reduction of cashier labor cost alone. Since
the Digimarc Barcode can coexist with traditional UPC/EAN symbols, the retail industry can seamlessly
transition to Digimarc Barcodes with minimal operational impact. The current upgrading of laser-based
to image-based scanners provides an opportunity for retailers to incorporate Digimarc Barcodes into
their processes without additional IT investments. The Model and ROI Calculator demonstrate that such
retailers can recoup their investments in adopting the Digimarc Barcode in less than one year.
The traditional barcode revolutionized the retail industry over 40 years ago, and the Digimarc Barcode
builds on this legacy by offering a new means of identifying and processing consumer packaged goods
that’s faster, more reliable, more secure and more versatile.
7
1.
GS1 2014 Annual Review
2.
www.deceptology.com/2011/01/fraud-and-thievery-with-fake-barcodes.html
3.
“Digimarc Unveils the Digimarc® Barcode at NRF 2014 – Significantly Improves Checkout Scanning Speed While Enabling
Unprecedented In-store Mobile Engagement,” Press Release, January 13, 2014, www.digimarc.com/press-room/press-releases
4.
“Fastest Hands Scanning Digimarc’d Packages at NRF,” www.vimeopro.com/digimarc/barcode/video/85198575
5.
Deloitte Touche Tohmatsu Limited (DTTL) and Stores Media
6.
S retail sales represented $1 trillion of the $3 trillion in Global Retail Sales in 2012. Data from Deloitte Touche Tohmatsu Limited
U
(DTTL) and Stores Media
Digimarc Corporation
9405 SW Gemini Drive
Beaverton, OR 97008
T: +1.800 DIGIMARC (344.4627)
F: +1.503.469.4777
[email protected]
www.digimarc.com
ABOUT DIGIMARC CORPORATION
Digimarc Corporation (NASDAQ:DMRC), based
in Beaverton, Oregon, is a leading innovator
and technology provider, enabling businesses
and governments worldwide to enrich everyday
living by giving persistent digital identities to
all forms of media and many other objects.
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Digimarc and the Digimarc logo are registered
trademarks of Digimarc Corporation. All rights
reserved. All other trademarks are the exclusive
property of their respective companies.