Digimarc® Barcode: A Quantitative Model of Labor Cost Savings for Retailers

The Digimarc Barcode represents a significant evolution in barcode technology – rather than the small black/white set of bars constituting a Universal Product Code (UPC) or European Article Number (EAN) symbol, a Digimarc Barcode contains the same data but distributes it invisibly across the entire package with no special inks, markings, or printing processes. Digimarc Barcodes can coexist on packages with traditional barcodes.

This innovation is a new application of the Company’s well established technology of digital watermarking. It provides significant improvements in scanning the traditional barcode on consumer product packages and labels. The scanning improvements enable significant cashier labor cost savings in high-volume retail environments. This labor cost reduction can be achieved with minimal impact to existing infrastructure and processes of retailers.

Digimarc has built a Quantitative Model and authored an accompanying white paper that analyzes the potential Annual Labor Cost Savings that can be realized from adoption of the Digimarc Barcode. The model calculates the total cost of ownership (TCO) and estimates the return on investment (ROI) in high-volume retail market segments. The model is based on estimates of key factors bearing on the cost of cashier labor associated with scanning goods at checkout within retail markets.

The model indicates that employing the Digimarc Barcode to augment the traditional barcode is likely to generate significant savings in cashier labor costs, yielding very attractive ROIs. The greatest benefits are expected to accrue to high-volume retailers where checkout time is a critical throttle point. The model estimates that the total Annual Labor Cost Savings for the group of 120 global high-volume retailers profiled in the model would be more than $500 million for a single item per minute (IPM) improvement in scanning rate at checkout.

The white paper includes a hypothetical example to illustrate how the Model works. In the example, a U.S. retailer with $10 billion in annual sales, assuming full deployment and harvesting of benefits, could realize a 5-year ROI over 1200%.

The model includes a ROI Calculator for retailers and other interested parties to study the effects on Annual Labor Cost Savings and ROI under various assumptions.

We plan to improve our model as we gather more data and receive feedback. Sign up below to receive updates about when we make changes to the model so that you can calculate your ROI using the latest model.

11 Discussions on “Digimarc® Barcode: A Quantitative Model of Labor Cost Savings for Retailers

  1. I understand the benefits of Digimarc ID for saving real state on a packaging . Let’s say I have a single tissue carton with Digimarc ID that is being sold as a single unit. The same single carton will be also used in a multipack format which is where the problem starts. The multipack also has its own Digimarc but will be sold as a single unit because the facial cartons are scanned through the clear poly. We cannot use white poly for multipack formats due to its negative impact on sales. Average consumer is proven to be interested in facial carton ‘designs’ and therefore, hiding the cartons from the consumer is not an option. What is the solution to prevent scanning inner units? Is it possible to keep at least two panels of single cartons clear of Digimarc?

    1. You have indeed identified one of our more challenging use cases. To answer your question, yes, you can keep two panels of the single boxes clear of the Digimarc Barcode if you choose. However, this may reduce some of the throughput performance benefits of the Digimarc Barcode on the single boxes. We are always looking for challenging use cases like this and would love to engage with you and your designers on possible solutions. If this is of interest, please contact our head of product management, Sean Calhoon at sean.calhoon@digimarc.com

  2. If I am selling to a wide range of retailers, it would be unrealistic to assume that they would all begin accepting this solution. Consequently, I am going to keep the visible GTIN barcode to satisfy all my trading partners. Will I have to rework my packaging to account for new invisible printing and how many printers are capable of doing this? We use 3 local companies to print our boxes and they have all of our printing plates. Any ideas as to how we implement using current artwork/plates?

    1. There is no need to choose between Digimarc Barcodes and conventional barcodes. The Digimarc Barcode and traditional barcode symbols can co-exist. In fact, in such circumstances, which we expect to be the case for many years, it would appear to the uninformed that the conventional barcode is just “working better” – unusually easy to read, fast, reliable, almost magical. Having multiple printers is no problem. The Digimarc Barcode is technically a package design change, like common changes in text, images, colors, etc. It is applied to the digital artwork files by our professional services group for a modest fee, and then you send the files to printers as part of your standard operating process. No special inks, materials, or printing processes are involved. As would be the case with other package design changes in the normal course of business, a printing plate change will be required. If you would like to get started, please call 503.469.4800 or email getstarted@digimarc.com.

  3. FEATURED QUESTION: I think I get the basics (based on study of 120 top global retailers there is billions of annual savings possible) but have one question as someone that’s not extremely experienced with the retail sector: Is the total margin improvement of 0.11% considered a big improvement in the retail world?

    DIGIMARC ANSWER: According to Food Marketing Institute (FMI), the average net profit after taxes for the supermarket industry in 2012 was 1.5%. A margin improvement of 0.11% would therefore represent an increase of roughly 7.3%

  4. QUESTION: I kept thinking about the bagging issue as I was reading the report. I don’t think that you addressed that issue enough. Seems to me that the bagging is one of the larger delays in checkout. Do you address this with Effective workforce optimization systems (EWOS)? You are very transparent in this report, however you do not explain what is meant by EWOS.

    DIGIMARC ANSWER: Of the three tasks associated with cashier transaction time – scanning, bagging and tendering – the model isolates only the scanning task. Some retailers tell us that the tendering task can often take the most time. Tendering begins after the last item is scanned and the cashier presses the “Total” key. Bagging often occurs in parallel with tendering so regardless of whether the cashier, the customer or a third person is doing the bagging, the quicker the items are scanned, the sooner bagging and tendering can begin. WOS – Workforce Optimization Systems are tools provided by companies such as JDA and Kronos that enable retailers to improve operational efficiency by more precisely managing the scheduling and allocation of their workforce.

  5. QUESTION: Have you factored in what portion of the 120 retailer’s cashiers are covered by CBA’s (collective bargaining agreements)? Perhaps there are issues in cutting 40 hr ee’s to 37.5 hour ee’s with staggered start hours. Will some retailers who don’t have unionized cashiers be concerned that this could cause some union organizing? Are there any other issues in some of the CBA’s that may be impediments to retailers realizing the cost savings?

    DIGIMARC ANSWER: No, we have not included CBAs into the model and don’t believe it is our domain to do so. With the adoption of workforce optimization systems by most high-volume retailers, however, we believe that identifying and harvesting operational efficiencies is something retailers are already actively supporting.

  6. QUESTION: If i am in charge of staffing my store …. I probably have a couple of other objectives … like trying to staff with mostly full time employees. Therefore, I am not sure that we can translate every minute saved in scanning into lower staffing costs. If I save 1FTE (full time equivalent) over a weeks time i may not be able to reduce my staff at all. If I have 14 shifts per week (say I am open from 7am -11pm), that is 2.8 hours per shift (40hrs/14shifts). Perhaps when I get to 4 hours per shift, I can cut to a part time position. I think most stores work with standard hour positions. 40 hrs/wk 20/hrs/wk etc. Unless you reach certain threshold levels will you be able to save the dollars and then flat no savings until the next threshold is hit. I think graphically it will look like steps and not a line.

    I think the issue of peak traffic staffing is also an issue but i don’t really know how the industry views that, and I don’t think that is addressed in the report.

    So using the model, if we isolate only the time component, can we say the following regarding a full time employee’s 40 hour work week:

    40 hours x transaction time .44 = 17.6 hours
    17.6 hours x scanning time .40 = 7.04 hours
    7.04 hours x eligible items .95 = 6.69 hours
    6.69 hours x scan time reduction .25 = 1.67 hours per week savings in time.

    That is 20 minutes per day.

    I am not sure how I realize that 20 minutes per day in savings per ee …. unless if I have 12 cashiers and I cut one of my 12 cashiers to part time 20 hours/week?

    DIGIMARC ANSWER: Given the slim margins that high-volume retailers operate under, many are utilizing more sophisticated workforce optimization tools such as JDA and Kronos that enable scheduling of resources in 15 minute increments. Building efficiency into the checkout process also enables retailers to better utilize cashier time for non-transaction duties such as re-stocking, helping customers in aisles, etc. Not all retailers will choose to harvest the efficiency gains in the form of labor cost savings. We anticipate that some retailers may allocate the benefits between labor cost savings and increased customer satisfaction through shorter checkout lines.

  7. We received the following question via email. To help facilitate an open communication for all interested parties, we will post the questions and answers on this forum.

    QUESTION: If it takes up to 10 hours of Digimarc professional services (DPS) to do the initial package coding….and in your example a retailer has 10,000 sku’s….and the retailer wants to roll this out quickly….say in two months they want all the coding done so that they can begin to replace the inventory…..would that not be 100,000 hours (10000 x 10) of professional services? With a typical 40 hr/week ee working 177 hours in a month or 354 over two months….would that not require 282 (100,000/354) full time employees at DPS to accommodate this one retailer’s private label brands? How will Digimarc handle widespread adoption? Having a network of certified coders seems unrealistic if its really $300 a pop for up to 10 hours of work.

    DIGIMARC ANSWER: The estimate of “up to 10 hours” quoted in the paper refers to the upper range of effort that may be required to encode some of the more challenging packages. Although it’s too early to characterize all of the packaging inventory that will be encoded with the Digimarc Barcode, we expect that the majority will take significantly less than 10 hours to encode with many requiring less than an hour. Over time, we expect to provide encoding tools and training to certified third parties to build a network of qualified service providers. We also expect that original package designs will increasingly contemplate encoding early on in the process, enabling retailers’ design teams to encode the packages themselves.

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