Barcode is Evolving – A Pivotal Transition for Retailers and Consumers Alike

Almost 50 years ago, the barcode was scanned for the very first time in 1974 on a pack of Wrigley’s chewing gum, kick-starting the retail industry’s digital transformation. Once viewed as a groundbreaking innovation, the resounding “beep” of a barcode scan is now commonplace at checkout counters and self-serve kiosks around the world – but the industry is transitioning away from this technology, and retailers and industry leaders say it’s for the better.

The UPC Barcode’s Legacy

The UPC barcode, found on the back of every consumer product today, will always be known for its role in streamlining retailers’ front-of-store and back-end process. Its ability to store a product’s identification in a linear format and digitally scan at point-of-sale eliminated the need for cashiers to manually enter prices at the register, expediting the checkout process while simultaneously minimizing human error and reducing costs. Additionally, prior to the barcode, retailers had to manually count every item on their store shelves, in their back rooms, and in their warehouses to assess inventory levels – a daunting process that was often conducted infrequently and inaccurately, allowing for product shrinkage to go unnoticed and making inventory management a challenge.

The UPC barcode enables retailers to more accurately and efficiently track, plan, and adjust their product stock levels.

But despite its immense contributions, the UPC barcode wasn’t built for today’s tech-forward industry, hindering retailers’ digital transformation progress. While useful for price lookup at checkout and basic inventory management, the UPC can only hold a limited amount of information, the product’s identification number – this is no longer enough.

The Industry’s 2D Transition

Unlike 1974, retailers have significantly more to contend with than long queue lines and irregular inventory counts. To compete, they need a standardized way to address both supply chain needs and consumer demand. Thanks to explosive supply chain issues and changing priorities since 2020, it’s easy to picture the evolving market – empty store shelves and overflowing warehouses from inaccurate demand forecasting during the pandemic, the nation’s on-going battles with product or food recalls (which hit a 10 year high in 2022), and the evolving ESG regulations aimed at mitigating green-washing in consumer product marketing and supply chain processes. Tackling each of these challenges requires a level of product information and traceability largely unseen in our global supply chains today.

The need to address these gaps in supply chain visibility and data quality is driving retail’s transition to two-dimensional or 2D barcodes. Unlike the legacy UPC technology, 2D barcodes, commonly seen as QR codes, can encode more granular levels of product identification including a batch/lot or even a serial number. Additionally, using GS1 Digital Link it can link to highly detailed product information – including a product’s ingredients or components, where its sourced, how it’s made, and where it stops along the supply chain – to enhance retailers’ initiatives for consumer safety, trust, and engagement.

The Beginning of a New Retail Era

Through an initiative known as Sunrise 2027, guided by GS1 US and industry, retailers have committed to being capable of reading and processing the 2D barcode at point of sale, as brands transition from UPC to 2D barcodes. But many innovative brands are already making the switch today.

PepsiCo is delivering better experiences and up-leveling its digital operations with 2D barcodes on their products. These 2D barcodes take traditional QR code capabilities a step further – rather than pointing to a static URL, they leverage data standards, like GS1 Digital Link, to web-enable their barcodes and provide connections to all types of business-to-business and business-to-consumer information.

In the event of a product recall, PepsiCo’s manufacturers can use the 2D barcodes to quickly notify consumers, convey necessary safety information, and help retailers pull contaminated products from store shelves.

If a consumer picks up a bottle of PepsiCo’s Starry soda and scans the on-package digital QR code with their smartphone, they will immediately find key details on the drink’s ingredients, allergens, and nutritional information. They can also access insights on the product’s sustainability and recycling processes, as well as loyalty rewards or curated brand content (i.e. PepsiCo’s TikTok page) for further engagement opportunities.

Meanwhile, if a consumer scans the QR code on Puma’s sneakers, they can see proof of the product’s sustainable development and identify the materials that were used to create it. This information on when, where, and how the shoes are produced instills consumer trust and loyalty with Puma by allowing shoppers to validate the company’s ESG claims in an age where retail greenwashing runs rampant.

But the implementation of 2D in retail goes beyond consumer information sharing, helping retailers improve back-end processes, like inventory management. 2D gives retailers like Woolworths (an Australian Supermarket) a more granular view of their inventory, so they can identify which products are nearing expiration, reposition them towards the front of store shelves, and mark them down to encourage sales, thereby reducing food waste by over 40%.

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The retail industry is just scratching the surface on what can be done with 2D barcodes today, but one theme is clear – the technology will drive an unprecedented level of transparency and information sharing between brands and consumers moving forward. By 2027, 2D barcodes will become more commonplace on product packaging, allowing brands to adapt to the latest consumer preferences, curate new customer experiences and promotions, distribute essential product information, authenticate purchases, and more – all while also scanning at point-of-sale, eliminating the need for multiple data carriers taking up package real estate.

[To share your insights with us, please write to sghosh@martechseries.com]