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ASCM Insights

Digital Watermarking Connects the Digital and Physical Retail Experiences

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The 12-digit Universal Product Code (UPC) bar code continues to be a standard part of the retail experience. However, the information provided by UPCs — manufacturer and item number — is a fraction of what today’s consumers and supply chain partners are looking for. Fortunately, a new study shows that retailers are ready to move to the next level.

New technologies are putting data right at people’s fingertips and leading to heightened consumer expectations for product information. People want to instantly know an item’s ingredients or where its parts were sourced from, as well as the journey it took along the supply chain. They also expect a seamless checkout and returns experience.

A report from Digimarc, a provider of auto-identification and data capture solutions, notes that shoppers have become accustomed to “the endless shelf” of online shopping and now expect the same conveniences and product availability at brick-and-mortar stores. This is backed up by a survey from The Harris Poll, which found that 82% of shoppers get frustrated when items don’t scan properly and 86% say lines get backed up when cashiers have difficulty scanning.

Forward-thinking retailers and brand owners are finding new ways to streamline operations, improve accuracy at the point of sale, provide details about products, and reduce complexity for both shoppers and trading partners. One way they are doing this is with digital watermarking.

Make your (digital) mark

Digital watermarking is not new — it has been used in government security and banking for decades. But the science is now coming to the commercial marketplace. Digital watermarks can be printed all over a product’s packaging, yet are invisible to the eye. This is particularly useful for an item that has multiple bar codes.

The marks are read simply by pointing a scanner or smartphone in an item’s general direction — rather than having to hunt for a bar code. “The idea is to speed up supply chains and point-of-sale transactions,” writes Loretta Chao for The Wall Street Journal. “Companies will be drawn by the increased ability to control product information and other potential benefits.”

Chao adds that a detailed registration process is required for each item, which will enable users to ensure product information is consistent from origin to checkout, even if the item changes hands or is resold. Consumers can scan the product and immediately see the information registered by its brand owners and manufacturers.

“The need for more data is already evident on packages cluttered with proprietary bar codes to drive consumer engagement and enable more advanced use cases for retail, brand management and supply chain,” according to “Powering the Future of Retail,” a report by GS1 and VDC Research. “A single bar code symbology that contains all of this information, in addition to product identification, could provide benefits for every stakeholder along the supply chain. The newfound ease of capturing and sharing this data through a single interaction creates greater visibility and increases operational efficiencies.”

The report indicates a number of additional advantages from digital watermarking and related advances, which include

  • better inventory accuracy
  • seamless collaboration with trading partners
  • greater accuracy at point of sale
  • improved consumer engagement and opportunities for communication
  • enhanced customer experience by providing nutritional and sustainability information or interactive video
  • confirmation of product authenticity and reduce counterfeiting
  • traceability to safeguard consumers and execute faster and better product recalls
  • waste prevention by eliminating sell-by versus expiration date confusion
  • smoother returns
  • lower operating costs.

Change management

Barriers to widespread adoption will be affected by both cost and disruption to products and packaging. “Even those companies that adopt [digital watermarking] codes likely will use them alongside UPC codes for the foreseeable future,” Chao notes. “That is because many retailers, such as mom-and-pop grocery stores, would need to replace their hardware before use of the code can be more widespread.”

The GS1 and VDS Research report concurs: “The amount of change management required cannot be overstated: from the technology itself to associate and customer self-scanning training and competing priorities for capital investment in the face of rapid change. This is complex, important work that industry is undertaking.”

However, it seems like the biggest challenge will be lack of trust in data quality and partner integrity. The research urges brand owners and retailers to work together to bridge these gaps, strengthen their partnerships and better understand consumers.

Wilkie agrees, noting that widespread adoption will require substantial collaboration over several years. “There is no one single quick fix,” she says. “Industry stakeholders will need to focus on making sure that the data encoded is accurate and complete. While this transition is a serious undertaking with many moving parts, there is a majority agreement that we must change the status quo and make investments in our future.”

How to get started

Digimarc offers the following eight steps to ensure a successful launch:

  1. Establish strategic objectives and key performance indicators to ensure maximum benefit for your business.
  2. Identify all of the store media and artwork — private-label packaging, hangtags, labels, signage, displays, circulars and more — that you would like to enhance.
  3. Define project scope, and identify all stakeholders essential for success. This includes brand suppliers, print suppliers and systems integrators.
  4. Verify your retail scanners and retail scale environment and equipment is ready and enabled.
  5. Assess your consumer and retail store mobile applications to ensure compatibility with your scanning engine.
  6. Enable stores by adding the appropriate software to your devices.
  7. Begin adding the technology to your identified media assets and artwork, in partnership with your production suppliers.
  8. Train associates on the benefits of the tool.

“While the UPC bar code has served the retail industry well for 45 years, we need to consider the serious impact that technology and the consumer is having on the way we shop,” Wilkie says. “Consumers expect recalls to be more efficient, they want to know their food is fresh, they want to engage with the brands they love, and they want to check out and return items quickly. Winning consumer loyalty is enabled by providing more information and a seamless shopping experience.”

About the Author

Elizabeth Rennie Editor-in-Chief, SCM Now magazine, ASCM

Elizabeth Rennie is Editor-in-Chief of SCM Now. She may be contacted at editorial@ascm.org.

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