The era of the universal product code (UPC) may be nearing an end.
According to results of a recent research study titled "Powering the Future of Retail" from GS1 US and VDC Research, 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.
The study also showed that while an estimated 68.5% of retailers use laser scanners incapable of reading a 2D barcode, 84% are evaluating or plan to migrate to advanced optical POS scanning technology capable of reading 2D barcodes. Also, 60% of tier 1 retailers ($1 billion or more in annual revenue) are prioritizing updating their entire POS infrastructure in the next 18-24 months due to omnichannel commerce and mobile POS requirements.
Any next-generation barcode(s) the industry selects 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.
The research cites barriers to change such as cost, disruption to products and packaging, a lack of capital investment and IT staff required for technical infrastructure changes (e.g., updating legacy back-end systems). It also revealed that readiness will vary based on industry priorities, ability to leverage the data, and a company's technology modernization plans.
During any transition, brands and retailers will need a flexible architecture that supports dual barcoding, which is already in use for some products leveraging 2D carriers. Following the change, the 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, digital watermark and/or RFID and the UPC, products will continue to be accepted at POS during the transition period and beyond.
"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. Now is the time for all retail stakeholders to align on a limited number of data-rich carriers that give consumers information about the products they buy and additional data that can be leveraged by the supply chain."
"Today's U.P.C. does not carry the additional information required to support future supply chain and customer needs," said Dave Bornmann, senior VP, 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."
GS1 US and VDC Research surveyed nearly 600 IT decision makers at retailers to understand their priorities, purchases and plans to modernize as it relates to POS hardware and software. GS1 US and VDC Research also conducted 50 interviews with retailers, brand owners, solution providers, industry associations and academic institutions.