Getting ready for QR codes on packaged goods

Way back in 1974, at a grocery store in Troy, Ohio, a humble pack of Wrigley’s Juicy Fruit gum became the first product ever scanned using a Universal Product Code (UPC), the zebra-striped identifier now universally known as a “barcode.” With one cheerful beep, a retail revolution was underway. Today, barcodes grace more than a billion products, filling the air with cheerful beeps (10 billion daily) that have, for the last half century, been the closest thing we have to a soundtrack of modern commerce.

Those beeps aren’t going anywhere, but the barcode’s time as the preeminent product scanning label is fading.

The global nonprofit standards body Global Standards 1 (GS1)—which gave us the barcode in the first place—is promoting what they call the Sunrise 2027 initiative, a retail-wide drive to see checkerboarded Quick Response (QR) codes replace the traditional horizontal-line barcodes by 2027.

Why? Because QR codes, also known as 2D barcodes, are simply better.

Developed in the mid-1990s, QR codes store data in two dimensions rather than one, which means they can store a lot more of it, including links to online resources that further expand their access to information.

Creating a QR code standard for packages will bring important changes for retailers, manufacturers, and consumers:

• For retailers, 2D barcodes will streamline checkout, supercharge inventory tracking—potentially opening up views of goods moving from factory and farm to store—and unlock real-time pricing and promotions.
• For manufacturers, QR codes mean greater supply chain visibility and precision, while creating conduits for real-time feedback and product testing.
• For consumers armed with smartphones, QR codes will answer every question they might have about a product prior to purchase and be portals to interactive worlds of discounts and how-to instruction. Sunrise 2027, to put it bluntly, is going to work.

Whether it will work by 2027, however, is a different question. The transition to QR codes will need a synchronized global effort among manufacturers and retailers, not to mention new investments in hardware and software, all of it scheduled to take place during an awkward, never-to-be-repeated “transition period” when barcodes and QR codes will share space on product packaging, with all the potential pitfalls and hilarity of a neanderthal sharing an apartment with a homo sapiens.

Below we take a closer look at Sunrise 2027: Why it’s happening, what the upsides are for businesses and their customers, as well as the hurdles and obstacles that may yet impede humanity’s progress, as we stumble our way toward that dawn.

What’s in one QR code? 7,000 characters

To understand why QR codes are better than barcodes, and why the obsolescence of the latter at the hands of the former now feels pre-ordained, some history and a dab of geometry is in order.

A standard barcode stores data in just one dimension, horizontally, using up to 14 varying-width vertical bars to encode numbers or letters. This system allows for trillions of unique product identifiers, enough to give a unique digital “name” to every vended product in existence. Since 1971, GS1 has been doing just this: assigning Global Trade Item Numbers (GTINs) to new products and encoding each of those numbers in the scannable hieroglyphic known as a UPC, what we know as a barcode.

For retailers in the 1970s, the arrival of the barcode was something like a miracle. Cashiers no longer had to squint at price tags or flip through dog-eared inventory books—laser scanners read barcodes in milliseconds, relaying prices instantly. Behind the scenes, the same technology could identify the contents of a crate or a shipping container without the need for ladders or crowbars, meaning that warehouses and supply chains ran more smoothly than ever.

QR codes for retailers: Greater transparency for shipments and freshness dates

What changing from barcodes to QR codes could bring to stores and stockrooms.

For retailers:

• Your scanners are (probably) ready. The standards group GS1 says that at least 75% of checkout and handheld scanners have the hardware to handle QR codes with a software or firmware update.
• More product data. QR codes are at least as quick to process as barcodes—even fractions of a second quicker, in some cases—but contain much more information, such as product freshness dates. This greater transparency can expand views of product shipments from factory and farm to store.
• Barcodes won’t vanish overnight. If your scanners are still working, retailers can transition at their own pace.

Not smoothly enough, however, for a man named Masahiko Hara. Hara, in the mid-1990s, worked for a subsidiary of Toyota charged with helping the auto giant track the flow of car parts through its factories. At the time Toyota’s system ran on proprietary, in-house barcodes that not only told workers what a part was—say a right-handed engine mounting bracket—but where it had been manufactured, which production line it was bound for, and a slew of other essential factoids, each encoded in a barcode of its own, requiring individual scanning.

Hara’s breakthrough? Add a second dimension. His team developed the first QR code: a square matrix storing 7,000 characters, scannable 10 times faster than a barcode. All the pertinent facts about a part could now be stored in a barcode, which for Toyota yielded a bounty of efficiencies and second-order benefits in which businesses of every size are about to share, if they aren’t sharing in it already. If all goes to plan, Sunrise 2027 will illuminate a business world where every product’s place of origin, batch number, expiration date, and shipping status is just a scan away—and that’s before any consideration of The Other Thing.

The Other Thing is the customer. For half a century, barcodes have existed in customers’ peripheral vision as a sort of inscrutable alien presence. But QR codes both invite and reward engagement by the unschooled civilian. Armed with the smartphone-camera scanners in their pockets, customers can point their smartphone cameras at the code to reach a new level of understanding of the products they buy.

Consider: Scanning a QR code on a package of ground beef could reveal not only its price, but where it was processed, whether it contains any allergens, and even whether it was ethically sourced. Scan a code on a bottle of vitamins, and you can pull up a full ingredient list, the recommended dosage, and—importantly—a real-time alert if the batch has been recalled. For the sustainability minded, QR codes can provide details on recyclability, carbon footprint, and corporate responsibility pledges, while deal hunters can expect to frolic in a perpetual fire hose of real-time discounts, promotions, and loyalty rewards.

But while these benefits may leave few downsides to using the QR code, hurdles to widespread adoption remain.

Hurdle 1: Scanners that once read narrow datasets will take in much more

Science fiction fans may weep at the thought, but the cold hard truth is that laser guns are now old-fashioned. We thank them for their service, knowing that the 1D-barcode revolution could not have happened without them. But the 2D barcodes of the future will require an image scanner, a piece of technology that is much like a camera.

Yes, cameras are everywhere these days. But as many have learned, smartphone cameras read QR codes so slowly that you can almost follow along in real time as the camera works to focus its lens on the coded image. Modern retailers don’t have the time for this. Only dedicated high-speed image scanners have the necessary fast action, reliability, and security to get the QR-scanning job done, especially in supermarkets, box stores, and other high-throughput operations.

These devices exist. In fact, according to Steven Keddie, GS1’s Senior Director for Automatic Identification and Data Capture, at least 75% of modern retailers are already using image scanners to process regular barcodes at checkout, devices that can read GS1-powered QR codes with a simple software upgrade.

For many businesses in that 25% still "pew-pewing" about the place with handheld, slow-reading laser guns—particularly small retailers with thin margins, or those blessed to inhabit relatively low-throughput sectors such as luxury goods or high-end fashion—the thrill of shaving a few nanoseconds off the checkout process may not be worth the cost of upgrading to image scanners.

Hurdle 2: Taking advantage of data-rich QR codes could require software upgrades

At the most basic level, an image scanner does three simple things: It reads a barcode (of either one or two dimensions); it emits a cheerful beep; and it then sends word of the product’s identity to a retailer’s point-of-sale (POS) system. The POS system handles pricing and the rest of the checkout process. It also delivers relevant data to the organization’s back end—either an integrated ERP application or an archipelago of dedicated software systems—to record the sale and resulting change in inventory.

QR codes for consumer goods makers: New labels to make, better data for marketing

What changing from barcodes to QR codes brings to factories.

• Label printing tweaks. Most existing technology can print QR codes, though depending on design, some printing techniques, like “wet on wet,” may need adjustments to deliver sufficient clarity and detail.
• Marketing data. QR codes link to product pages, allowing brands to serve up tailored content, promotions, and product info.

For the past 50 years, the data payload of that transaction has been featherlight: just the 14-digit (at most) GTIN, corresponding with an item in a product database. But not for much longer. While a QR code can be used to encode a single GTIN and nothing more, the norm moving forward will be for those two-dimensional barcodes to carry much more information.

Does this mean businesses will be forced to upgrade their software systems to match their fancy new hardware?

The GS1 standards group is adamant that whatever backend system a business runs today will be able to receive the data in the same way it receives data now, without needing to “parse out a whole new dataset,” Keddie says.

Mindful that such overhauls can be “very expensive,” Keddie says great care has been taken in the way data is organized within the next generation of QR codes. Scanners have the option of reading them in any of three “modes”—from Mode 1, which contents itself with finding the product’s GTIN, up to Mode 3, which delivers all available GS1-compliant data.

That being said, the potential to benefit from the additional data could mean companies find themselves facing competitive pressure to invest in upgrades to make it possible to integrate QR codes into ERP and product information management systems. To gain the most benefits, companies will want to ensure data integrity and smooth data access across the supply chain.

What a ground beef package could say with a QR code

For illustration, let’s return to our package of ground beef. Using the baseline Mode 1 data scheme, the GTIN embedded in its QR code will tell the shelf stackers and checkout people that this package of ground beef is, as it appears, a package of ground beef.

Those operating at higher modes will know a lot more about the beef, including its expiration date. By itself that one secondary data point opens a world of possibility. With an ERP system churning in the background, discounts and “buy one, get one free” deals can kick in automatically as the expiration date approaches, nudging thrifty shoppers willing to scan the code toward a purchase.

Meanwhile, inventory systems are tracking the beef’s battle with Father Time in real time, reordering new stock with cold-blooded punctuality, preventing both empty shelves, and unsellable waste. Meanwhile, the art of product placement gets more precise, as staff move soon-to-expire products to the front of grocery shelves informed by data. With fully implemented QR codes, backend systems can balance looming expiration dates with pricing and marketing variables, assigning products to specific patches of shelf.

Hurdle 3: People still need to get comfortable with QR codes

If businesses adopting QR codes feel familiar, it’s because we have, in fact, been here before. Three years ago, in the throes of the COVID-19 pandemic, QR codes started showing up in restaurants as menu replacements.

Restaurateurs jumped at the chance to ditch paper menus, which not only required physical cleaning every night, but had to be scrapped and replaced every time the chef invented a new dessert. That diners would use their own phones to do the scanning, the need for restaurants themselves to invest in new technology was minimal. It appeared advantageous.

Yet it didn’t happen. For a month or two, QR codes seemed to be in every restaurant, and then many disappeared. Why?

QR codes for consumers: Greater product information

What changing from barcodes brings to aisles and checkout counters.

• More than just prices. Scanning a QR code can tell you about ingredients, sourcing, instructions, and even discounts.
• Easy to use. In tests, consumers have adopted QR codes without difficulty, and with a lower incidence of mistakes.
• Use your smartphone. You have a scanner in your pocket.

Because people, it turned out, didn’t like QR codes—at least not as replacements for paper menus. Even those few seconds it took a smartphone to call up a menu from a QR code had proved an intolerable inconvenience for customers accustomed to scanning menus with their eyes. Menu pages, when they loaded, were difficult to navigate. There’s also the issue of trust: Unlike a clickable web link at an e-commerce site, people can’t see the destination for visiting a QR code-directed web page. People didn’t miss paper menus until they were gone, but when they were gone, they missed them hard enough to bring them back.

Expecting an adjustment period

It’s unlikely people will miss the 1D barcode itself. However, there will be some adjustment period required by consumers, as well as employees of retailers and consumer packaged goods manufacturers, to the use of QR codes.

A pilot test the GS1 standards group performed was promising in this regard. Before the test at Germany’s Metro supermarkets in 2018, Keddie says Metro added staff to its call center and prepared education materials to help customers understand how to use the scanner at when they reached the self-checkout.

What Metro found in practice was that “they didn’t need to tell anybody anything,” Keddie says. At checkout, customers simply looked at the scanner, looked at a product they wished to scan, noticed the 2D barcode, and said to themselves, as Keddie puts it, “Oh, I must need to scan that.” Metro’s scanning failure rate—when a checkout assistant must help a consumer finish a purchase—dropped from 0.4% to 0.0%.

All that said, experts expect that there may still be resistance to change when it comes to QR codes.

While the case for investing in new hardware scanners for QR codes may be strong, a retailer’s decision could depend on its recent equipment expenditures. For example, if the lifespan of a retailer’s existing laser scanners is 10–15 years, and they were all replaced at great expense nine years ago, the case for waiting and replacing them as needed is also compelling.

The data QR codes open up

With all the attention devoted to AI, it would be understandable to overlook the change in a packaging label. But make no mistake: Leading consumer goods makers and retailers are laying the groundwork, running pilot tests, and asking questions about the investments and potential returns on QR codes.

And it’s not difficult to see why. Not only do QR codes hold much more data than the barcodes they’re replacing, but they will also provide detailed product information to consumers as readily as they will to businesses. They are symbols of a new era, an age of greater transparency, engagement, and collaboration, and of a new way of buying and selling that’s defined not only by the increase in the volume of data produced and collected with every transaction, but by the new directions in which that data is flowing.

None of which is to say that retailers and manufacturers need to rush headlong toward the timeline described by the Sunrise 2027 project. Far from it. It’s imperative that businesses be clear-eyed about their priorities and determine if shifting to a new packaging label should be one of them.

But that doesn’t mean they shouldn’t be ready. The sun will rise tomorrow, whereas the transition from 1D to 2D barcodes will occur whenever a critical mass of consumer-packed goods companies and retailers are ready.