Reinventing the Barcode: the picture that drives planetary-scale commerce.
As artwork, the barcode may not impress you. But as a technology, it is a phenomenon like no other. Barcodes shaped our planetary economy.
The impact of these tiny black and white graphics is so massive, the scale dwarves the consequences of any other image in history. No religious icon nor political banner united as many humans in so vast a global enterprise, all toiling independently towards common goals.
Barcodes are the pictures that transformed the world. Literally. And now they are about to evolve again. That’s what this article is about.
In my previous articles in this series, I wrote about two identity systems for people and two identity systems for products.
Product identity is typically conveyed via images in the form of a graphic design. Barcodes are one example of such a graphical identity system. But the product identity system that people are most familiar with is branding and logos, because they are so heavily promoted. These are graphic design systems that are designed to make it easy for consumers to spot their favorite products. To build that kind of instant recognition, a massive investment in advertising and marketing is necessary. The global advertising business funded the global expansion of commercial television; but now that broadcast TV is in decline, mass branding is doomed.
As a consequence, the barcode must evolve because it has to work much harder to offset the collapse of broadcasting.
Globally, brand advertising and marketing represents about a $1 trillion annual market in goods and services. Half of that money is spent on TV advertising.
By comparison, the barcode represents the global supply chain, which generates a whopping $40 trillion in goods and services.
It is not an overstatement to say that the humble barcode is forty times more important than all advertising in terms of moving products.
Take that, Mad Men!
Helen of Troy may have had the face that launched a thousand ships, but the barcode is the picture that launched the five thousand container ships in operation today.
The advent of product identity barcodes in the mid-1970s spurred the growth of globe-spanning supply chains. It also made feasible many aspects of modern consumer society, such as supersized retail shops, and an explosion of individual products that evolved from a single branded item into sprawling families of sub-brands with an endless variety of ingredients, flavors and colors. Let’s dive into this topic.
Barcodes function like steroids for the global economy. They make it grow faster, stronger, better.
The secret power of the barcode is the feedback loop: by scanning items in a grocery cart at checkout, retailers pioneered the continuous collection of data at the level of a single store.
The advent of barcodes in a grocery store in Dayton Ohio in 1974 marks the beginning of Big Data in the retail supply chain.
By tallying the scans at every cash register, the managers of retail chains caught their first glimpse of information that could tell them in real time how to make better decisions. Scanned register data proved which products were selling fastest, which displays and floor layouts attracted the most shoppers, which discounts really stimulated purchase behavior. Retailers gained arithmetically-accurate insight about how to forecast demand and prepare for seasonal surges, external events and other outside factors.
In my previous articles on brand identity, I argued that logos tell a story. Barcodes do, too.
Unlike the fantastic and fabulous stories told in advertising campaigns, the tale told by the barcode is strictly non-fiction.
Here’s what the barcode has to tell us. Barcodes make it possible for a retailer to understand in a granular scale exactly what is happening in each store: which items are selling fast, which are selling slowly, which merchandising techniques work best, which promotions are most successful.
Barcode data enables a shop manager to optimize shelf space and floor space and thereby maximize sales, while maintaining inventory without shortages or buildup. Without barcode data, just-in-time-delivery would be impossible.
I’ll admit, this may not be the stuff of gripping drama, but nevertheless, the story told by the barcode is deeply meaningful because it drives changes in every store in every city in every nation on earth.
Let’s consider some of the biggest changes wrought by the barcode:
Barcodes enabled neighborhood grocery stores to grow 100x larger into a suburban superstore. Prior to the debut of scanner technology at the register, grocery stores were limited in size because they could only handle a limited number of items and they struggled to serve more than a handful of customers at once.
In the old days, pre-barcode, inventory management was painful because it was a manual process that took workers away from customers. In order to take inventory, every shop was obliged to close for two days each month or quarter while all of the employees conducted a hand count of merchandise on the shelves. The combination of barcode data scanned at the cash register and the low-cost personal computer in the early 1980s made it possible for retailers to streamline that process with inventory-management software programs.
In the 1970s, inflation raged and prices fluctuated constantly: groceries frequently needed to relabel the prices on items on the shelves. This was done by hand, and it took all day long to complete the task. A young clerk armed with a handheld label printer would pick up each individual item on the shelf and apply the new price tag. After inventory management systems were installed, prices could be changed at once, just by entering the new price in the inventory management system and then updating the price displayed on the shelf. This reduced inefficiency in managing the store.
Meanwhile, in the 1970s the checkout line was a dreadful experience because the checkout clerk had to manually key in each price for each item into the cash register. Inevitably, typing errors occurred and then an alert shopper would object. Then the whole line of shoppers had to wait while the the clerk corrected the mistake. It was not uncommon to wait in a line with 12 or more shoppers in the 1970s.
These factors kept grocery stores small: their inventory was constrained to a size that could be managed by a slow, inefficient manual process. Barcodes removed these constraints, and by the 1980s shops began to grow much bigger in order to showcase a burgeoning number of items. The era of the Big Box store was upon us, and barcodes made it possible.
Equipped with barcode data, grocery stores were able to expand into several adjacent businesses, including bakeries and in-store delis, drugs and health care, liquor and beer, flowers and seasonal goods. Conversely, big box retailers were able to compete with grocery stores, too. The decisive moment in this competition was Walmart’s entry into the grocery business in 1988.
Barcodes established the notion that data assets could be valuable enough to license to other companies. Barcodes mark the origin of Big Data in retail. The data collected by scanning barcodes is the link that binds a retail point-of-sale terminal in BestBuy in Boise to a manufacturer in Shenzhen.
One byproduct of inventory management systems was SKU-specific information about what was selling, and what wasn’t. This information was useful for grocers and department stores, of course, but it was vitally important to manufacturers who otherwise had no visibility into what was happening in US stores.
A market for data soon arose. Retailers found they could sell valuable data to their suppliers. Soon the big retail chains had a new revenue stream, a lively trade in scanned data from the point of sale.
Barcodes enabled globalization. Prior to the advent of the barcode scanner, manufacturers on the other side of the planet had no idea what was happening in stores in the US and Europe. They were therefore largely unable to supply them, except for low-priced commodity items that rarely changed. Stylish, seasonal and locally-relevant goods were typically produced nearby.
Globalization was initially a byproduct of global warfare. The first globe-spanning supply chains were established by the US military to provide equipment and materiel to GIs in overseas combat theaters. During the Vietnam war, the US shipped hundreds of thousands of containers of equipment and gear to Asia to keep soldiers fed, clothed and armed.
Those Vietnam-bound containers typically returned to the US empty, until some clever captains began to load up empty shipping containers with merchandise picked up in Japan, and later in Hong Kong and Singapore.
But that innovation was just the beginning. Containers dramatically lowered the cost of shipping , but that did not inform Asian manufacturers about what was fashionable or popular or needed in the US.
The cost of shipping plummeted, thereby shrinking the planet enough to make global trade of commodity items and off shore manufacturing viable. But containers provided no signal to manufacturers about what to make next.
So the container ship was only one part of the equation. The other vitally important part of the equation was data. When a manufacturer packed up a shipment, each box or pallet is assigned a unique ID number (UID), which is scanned at various stages throughout the journey, thereby providing retailers with early notice of an incoming delivery and also confirming receipt of the goods after delivery. This information is transmitted through an Electronic Data Interchange (EDI) system, so that the shipper, the manufacturer and the retailer share common knowledge about the whereabouts of the merchandise. Finally more data is collected at cash registers when a clerk scanned an item at checkout: this data is like lifeblood flowing back to manufacturers all over the world. It provides the crucial signal that enables them to adjust their output for varying demand from markets all over the world. Without barcodes and EDI, global commerce would be much smaller.
Eventually, the barcode made China the world’s workshop. UPC Barcodes were introduced in the late 1970s, around the same time that the United States began to normalize diplomatic relations with the People’s Republic of China. By the time the technology was widely adopted, China eventually supplanted Japan and the Asian Tigers as the primary source of manufactured imports in the US.
The list of changes wrought by barcodes is endless. Here are a few more:
Barcodes are the reason that container ports have spawned and sprawled relentlessly on the periphery of every major coastal city from Vancouver to Shanghai to to Singapore, Hamburg, Long Beach, Busan, Rotterdam, Valencia, Felixstowe, Santos, Jeddah and Mundra. Every city that can accommodate container ports has done so.
Barcodes favored organizations that embraced digital technology. The earliest proponents installed scanners because they expected to save time and money by speeding up the checkout process and reducing errors. What they discovered was that an investment in computerized systems could also enable the enterprise to scale. Soon a new breed of national retail chains emerged, leveraging data-driven insights at huge scale and establishing a global supply chain. In this way, the barcode reorganized retail at the national (and eventually international) level, where it had previously been confined to local or regional scale.
Barcodes also hastened the rise of much more product diversity. Scannable product identity made possible innumerable variations of blue jeans, fostered traceable organic produce and countless other forms of speciality merchandise that previously was impossible to imagine let alone produce. The data from barcodes helped manufacturers evolve away from one-size-fits-all mass branded merchandise towards a new generation of products aimed at tightly-defined customer segments.
For such a powerful technology, barcodes are surprisingly understated.
Barcodes don’t look very impressive. Just a set of black and white stripes with some corresponding numbers. It would be hard to imagine a graphic design that could be more generic, or simpler.
But that’s because we are not the audience for this image.
Humans need lots of visual stimuli, differentiation, noticeable detail, bold shapes and colors. We crave something memorable.
But barcodes were created for a different audience that, candidly, doesn’t care about all that.
Barcodes are artwork for machines.
A barcode is a graphic representation of a digital signal. Those black and white stripes correspond to the invisible ones and zeros that define and govern our digital world.
The reason that the barcode consists of simple black and white lines is that they were designed for relatively primitive equipment in the mid 1970s. The first scanners were adapted from motion picture technology. The printing presses were sometimes decades old. The design of the barcode sprang from these twin constraints.
Barcodes are digital signals that can be seen — and understood — by machines.
The barcode predates the now-ubiquitous feedback loops that govern today’s always-on digital world. In a great many ways, barcodes were the precursor technology that paved the way for the digitization of the entire economy, the great transformation that we have been living through for the past 30 years.
Now the barcode is ready for an upgrade into the digital era.
One salient aspect of the 21st century digitized economy is dematerialization. Whatever can be replaced by software will be. For 15 years, digital substitution of information for physical goods has rocked one industry after another. Intangible assets, like data, intellectual property, proprietary business process and knowhow, are now significantly more valuable than tangible physical assets.
Today nearly every product is surrounded by a cloud of information, but that data remains invisible to consumers and therefore it is very difficult to access. Moreover, it’s not easy to link the physical item to the correct data. Even a Google search may lead to inaccurate, outdated or false information, and sometimes that search will lead you to a rival product instead.
Enter GS1’s Digital Link. This new standard builds upon the classic UPC barcode by adding a way to link a barcode to a directory of information. Where the link points is entirely up to the manufacturer. The Digital Link barcode could point to a web site, a wiki, a multimedia tutorial or a Facebook product page.
Now that all iPhones and Android devices are equipped with augmented reality, a consumer just needs to scan the Digital Link barcode in order to automatically pull up the data associated with that identity.
With Digital Link, the product itself is the new marketing channel: consumers can scan it to access rich data and multimedia about the product, the ingredients, how to use it, how to maintain it, where to get it repaired, recall information and access to updates.
GS1 Digital Link can also be useful in mobile shopping and e-commerce, ensuring that accurate product description data from the manufacturer or retailer is associated with the online offer.
At GS1 Connect in Denver on June 19, we will be showcasing some of the early implementations of Digital Link. And if you want to experiment with Digital Link yourself, here are a couple of handy tools developed by Evrything.
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My previous post in this series examined huge changes underway in mass branding and marketing. It is titled Artificial Intelligence Is Completely Reinventing Media and Advertising. Check it out!
If the topics in this series of articles interest you, then why not join me for a discussion in person? I will be the host and master-of-ceremonies for the Innovation Track of GS1 Connect, the biggest gathering of supply chain experts in the world.
Beginning June 19, I will moderate a series of discussions and speeches about the rapidly unfolding future of the global supply chain and the future of product identity at GS1 Connect. The conference takes place in Denver, Colorado from June 19 to 21. The event will attract an audience of thousands of executives from retail, distribution, logistics, labeling, manufacturing and enterprise software. The speakers are world-class thought leaders. I’ve been conferring with them for several months about their presentations. We will be focused on the technologies that are reshaping the supply chain: artificial intelligence, software automation, digital identity, distributed ledgers, bigger data, security and much more.
If you are interested in digital identity, product identity, blockchain for supply chain, business process automation, the application of artificial intelligence to manufacturing and retail, then this is a conversation you don’t want to miss.
If you plan to attend GS1 Connect, please introduce yourself. I really hope to see you there.
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Digital identity is a complex and sometimes bewildering topic. I’m writing this series of articles to help clarify my own understanding, and I welcome your comments, corrections and contributions.
For 30 years, I’ve been focused on designing and launching new digital services. In the process, I’ve grown fascinated with the way we are constructing a digital version of the real world. During my career, I’ve supervised the launch of the world’s first mobile video services, some of the earliest PC games, online games and mobile games, and the biggest live online learning programs in the world.
I’m also the author of the award-winning book Vaporized: Solid Strategies for Success in a Dematerialized World which you can read in entirety here on Medium (or if you are feeling generous, you can buy the book on Amazon . Thanks, I love you for that!).
Today I serve as the Special Advisor for Digital Identity to GS1 US. GS1 is the global standards body for product identity.
