Retailers Support Transition to Data-Rich Barcode

Study shows retailers, brand owners are ready to move beyond UPC.

March 09, 2020

EWING, N.J.—A research study from GS1 US, the information standards organization for supply chains, reveals that 82% of retailers and 92% of brand owners support transitioning from the universal product code (UPC) to a data-rich two-dimensional (2D) barcode (e.g., QR Code, GS1 DataMatrix), digital watermark and/or RFID in the next one to five years, reports

The study, “Powering the Future of Retail,” recognizes that an advanced data carrier is needed for retail to evolve. The next-generation barcode(s) to be chosen by industry will embed more information on product packaging and continue to leverage the GS1 Global Trade Item Number (GTIN) standard—the number encoded in the UPC that uniquely identifies a product at checkout.

Additionally, research found that while 68.5% of retailers use laser scanners incapable of reading a 2D barcode, 84% are evaluating or plan to migrate to advanced optical point-of-sale (POS) scanning technology. Plus, 60% of tier 1 retailers ($1 billion+ revenue) are prioritizing updating their entire POS infrastructure in the next 18-24 months due to omni-channel commerce and mobile POS requirements.

“Consumer expectations for rich, quality information have risen since smartphones became essential shopping tools,” said Bob Carpenter, president and CEO, GS1 US. “Some retailers and brand owners have already begun addressing this need by implementing data-rich carrier solutions, often alongside the UPC, for fresh, prepared and packaged foods to provide consumer engagement via SmartLabel and to better manage supply chain efficiencies.”

The multi-phase study was conducted in collaboration with VDC Research over the course of two years (2018-19). It concluded that in addition to improving the consumer experience, other motivators for migrating to a data-rich barcode and upgrading POS systems include improved inventory accuracy; product authenticity (to minimize the spread of counterfeit goods); traceability and recall management; freshness and waste prevention (via expiration dates); and returns management.

“The UPC has served the industry well for more than 45 years. However, consumer and retailer demands for expanded product information require us to evolve our capabilities to support the emerging needs of modern commerce,” said John Phillips, senior vice president, customer supply chain and go-to-market, PepsiCo. “Leveraging data-rich carriers will unlock a host of significant benefits for the consumer products industry and ultimately our multichannel customers, including enabling better consumer engagement opportunities.”

There are barriers to migrating to a data-rich barcode, including cost, disruption to products and packaging, a lack of capital investment and the IT staff needed to make technical infrastructure changes. During the transition, brands and retailers will need a flexible architecture that supports dual barcoding, a practice currently used for some products leveraging 2D carriers.

Following the change, industry will determine if the UPC barcode remains or if full migration to a sole, data-rich carrier is adopted. Provided GS1 Standards are used for the data structure in the 2D barcode, the UPC, digital watermark and/or RFID products will continue to be accepted at POS during the transition period and beyond.

Today’s UPC does not carry the additional information required to support future supply chain and customer needs,” said Dave Bornmann, senior vice president grocery and fresh, Publix Super Markets. “Before adopting a new data carrier, further considerations will be necessary to evaluate the return on investment from upgrading scanning equipment, enhancing supporting systems and the additional labor needed to collect and verify data. We are confident that in partnering with GS1 US, retailers and our trading partners can begin the challenging work of updating product data carriers and infrastructure, while also minimizing POS disruption for consumers.”

“This is complex, important work that the industry is undertaking,” said Mark Baum, chief collaboration officer, The Food Industry Association. “The magnitude of not only systems improvements but also change management requirements cannot be overstated. However, given the fundamental shifts in consumer behaviors and attitudes, we must work together to align the industry’s capabilities with what is needed to succeed in a rapidly changing marketplace.”