Retailers face potentially calamitous VAT shelf price update scenario

12 Mar, 2018
Hendrik Bredenkamp, MD of NEC XON Retail

The increasing VAT amount is having an enormous impact on retailers that use paper price tags but almost none on retailers that use electronic shelf labels (ESL).

Retailers that use paper price tags have to ensure that every single price in their stores changes overnight to reflect the new VAT amount on the morning of April 1, with many of the large retailers having to update 30 000 to 40 000 labels per store.

“The impact is huge,” says Hendrik Bredenkamp, MD of NEC XON Retail, which supplies Pricer ESL. “Even the smaller retailers have to update more than 10 000 prices in one night. The basic result is that everyone suddenly has a workload they’re not accustomed to so they have to hire extra staff, and buy a lot more labels than they normally would, which puts the label supply stocks under pressure because all the retailers are doing it at the same time. The cost is huge when you think about how many labels they have to do. Unless they’re like the Pick n Pay, SPAR, BP Express and other retailers who use the ESLs.”

The problem, he says, is that retailers must find an equitable means of handling discrepancies that inevitably occur under the manual, paper-based system.

Also impacting the enormous undertaking for retailers is the fact that employees will have to make sure they locate all the products in-store correctly, which can be a problem for items like chocolates, for example, which are usually placed at numerous locations throughout stores.

Bredenkamp says the ESL system requires only one change, the one VAT entry in the central database, which is then pushed from the retailer’s head office to all the branches and all the price tags are automatically updated at a rate of 90 000 per hour.

“Retailers who use the ESLs will basically walk into their stores in the morning and everything will have been done automatically in the night but for the other guys they’re having a real problem dealing with this issue,” says Bredenkamp.

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