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Sears’ $1.1 Million Wrong-Price Penalty: No Simple Tech Fix

Written by Evan Schuman
July 21st, 2010

Sears and its Kmart subsidiary on Monday (July 19) agreed to write a $1.1 million check to various California law enforcement agencies to settle charges that the company repeatedly charged consumers much higher prices than advertised. Officials said the overcharges appeared to be human error–as opposed to a technology glitch. But the overcharges happened so often and in so many locations that they seemed to be systematic.

The frustration for other retailers trying to avoid Sears’ fate is that technology can only go so far and that without extraordinary vigilance, pricing errors are almost unavoidable. A relatively tiny number of chains in the U.S. have toyed with electronic shelf label (ESL) packages—including TJX, Wal-Mart, Albertson’s, BJ’s Wholesale, Costco, Kohl’s, Pathmark, A&P, Whole Foods, Waldbaum and Kmart itself—but few have been deployed in a meaningful way.

California authorities point out that, even had they been deployed, today’s ESL offerings likely wouldn’t have spared Sears the fine. First, there are too many low-tech issues. For example, if store management places a big sign in an aisle proclaiming that everything in a particular section is an extra 40 percent off today only, the shelf labels would be superseded and made irrelevant. Also, many of the items at Sears were clothing items that had their own pricetags, as opposed to goods that are solely governed by a shelf label.

Although those are all low-tech issues, ESLs have plenty of high-tech issues, too. Among such issues is wireless interference (no wireless signal, no updated pricing). But if those wireless problems are sufficiently intermittent, store management may never even know that some of the labels are not being updated.

A technology consultant working for NCR Canada–one of the larger vendors trying to sell ESLs–recently posted a wonderful blog item on some of the technology’s very real hurdles, especially cost.

“There is still a significant startup cost with thousands of tags required at the outset. There will also be an effort to get all of the tags programmed with the correct UPCs, and the installation costs, which may also require changes to shelving and tag mounts in the stores,” wrote NCR’s Tim Dickey. “There is also the cost and effort of validating that all tags are working with the wireless network and interfacing with the program to validate prices correctly required at every store. From an ongoing perspective, the costs appear very low at first glance, but it is important to consider that there will be replacement costs for tags that are stolen or damaged, or just quit working. If there is a failure of the wireless system, or the software program to update the tags, the tags will be frozen at one price, and not updatable.”


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2 Comments | Read Sears’ $1.1 Million Wrong-Price Penalty: No Simple Tech Fix

  1. MikeL Says:

    This is a simple example of an attempt to use technology to correct human behavior rather than using humans to correct human behavior. If staff and department managers aren’t held accountable for improper shelf/item pricing IT can’t solve that. Store and district managers need to start firing people until they find ones who will work. And if that doesn’t happen the CEO needs to replace store/district managers. IT is great but it can’t fix stupid.

  2. Bill Bittner Says:

    I have implemented ESL’s and have designed a system for automated verification of paper shelf tags. The key take away here is that this is still a problem after so many years of trying to address it. I think the reason it remains a challenge is because people don’t take a systematic approach to the problem. By looking at the way people execute price changes to ensure there is a feedback mechanism and continuous monitoring instead of assuming labels and prices are updated, retailers can go a long way to eliminating fines and disappointed customers.

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