Why rent when you can own?

Why own if we can make you rent? Barcode edition.

How mom & pop stores took back what was theirs: The UPC barcode.

“Renting, owning, why do I have to make a choice right now?”

Money, generally is the answer but like in real life it’s often the time cost that’s more important to a growing business. Time wasted doing the wrong thing costs more than just your hard-earned cash.

Owning your product’s barcodes is much like owning your first car, it’s freeing, more affordable, and allows you to do what you need to do on your terms and timetable, but is it for everyone? The answer, like most things in life, is a sliding scale vs an on/off switch.

A retailer’s POS system doesn’t care whether your UPC is rented or owned but if a line of code checks GS1's API to make sure you’ve made your latest payment before it allows your item to scan at the register, that’s not a solution, that’s clever gatekeeping for someone’s bottom line.

While there is a one-size-fits-all solution (Spoiler: renting from GS1), it’s the equivalent of throwing money at a problem until it goes away, as the “problem” here was created by GS1 in the first place while 90% of businesses don’t need to rent.

Which retailers behave this way? What choice should you make to save thousands? Let’s find the beep’n answer!

The History:

From the first pack of Wrigley’s chewing gum in 1974 to 2002, barcodes (UPCs) were sold outright, in bulk to the business that needed them. All was well for about 30 years until the UCC, now called GS1, realized that selling blocks of 100,000 UPCs to businesses with 1–10 products wasn’t the most efficient setup.

Hoping to become more efficient and also seeing that they would need more revenue to stay afloat in the decades to come they opted to switch from a sales model to a licensing one. They would cease selling giant 100k code blocks for chump change to now renting blocks of 100 to 1,000 to 100k, in varying $ amounts starting at $750 + an annual fee. If a business didn’t pay their annual fee they forfeited their UPCs.

The only kicker: They were backdating this change to 1974!

These UPC owners turned renters experienced everything from resignation, and outrage, to bitter acceptance, small business owners were floored by the change and yet predictably, statistically, most went along with it, not knowing they had any choice in the matter.

Then a few, then more & more started lawyering up.

It all culminated in December of 2002, a class-action lawsuit over the new annual renewal fees. Spectators figured the UCC didn’t want a judge ruling & setting a precedent on their unregulated industry, so they settled out of court. The original UPC owners had won, no fees for life.

This transformed the barcode industry into a pre & post-2002 barcode world.

Around this time is when the UCC rebranded as GS1, some have found the timing of this ironic.

Post settlement these newly issued blocks of codes are owned solely by the new GS1 and licensed annually. While this sounds like everyone now rents, this isn’t the case, there are now 2 options: Own & Rent.

The aftermath:

It turns out, when you buy something, you own it, and when you own it, you get to do what you want with it.

Every last barcode number issued from 1974 — 2002, billions of them, was no longer the property of GS1. It wasn’t until years later that the realization of this shift would become the current wholesale market, a secondary market for ownable UPCs.

Since the ‘70s countless businesses were formed, bought their barcode blocks (100,000 UPC codes), and never used them or went out of business a few short years later.

What’s notable is most businesses didn’t have 100 products and virtually none used the full block of 100k. Everyone’s heard the statistic, 80% of businesses fail in the first year, etc, it’s actually ~20% by year 1, ~50% by year 5, but you get the picture, this left a staggering majority of UPCs unused, out of work and collecting digital dust.

This natural business cycle went on for decades, leaving billions of barcode numbers unassigned and never used.

The new guard:

This unused potential spawned a new secondary market, founded by many barcode companies in the 90s that were already in the niche and saw the underserved, overcharged market. Now that the settlement was done these wholesalers opened new doors, unlimited price potential, and options for businesses that either couldn’t afford GS1's high prices or didn’t have the time to jump through all of the hoops GS1 had created, time-cost being a factor.

Many think of them as a car dealership vs the previous OEM manufacturer. OEM’s (Ford, Chevy) make the cars, but now the dealership down the road could buy these cars in bulk from the previous dealer that went out of business.

Some UPC wholesalers charge even more than GS1, some far less, but most have reasonable rates and are quite competitive, providing a litany of other services, perks and in a timely manner.

I myself am a bit biased, having worked in the barcode industry for over 10 years, I’ve seen my fair share of knock-offs and blatant scams, thankfully having navigated the space I’ve found the real gems.

Decision decisions:

“So why rent if owning is cheaper, quicker, and less headache?”

GS1.

GS1 is not a shy, stand-in-the-corner org, nor are they a government entity, they are more of a trade association and have deep roots in most of the founding retailers from the very start, like Kroger, Macy’s, Walmart, etc.

It should come as no surprise that the higher-ups within these partner retailers are on the board of GS1, as happens in this type of industry so that it sustains itself. From these mutual associations come the requirements to rent from GS1, without these larger retailers forcing this requirement you would be free to do as you please with any retailer globally. Unfair as that may seem, that simply is the name of the game, the golden rule.

Checking out:

Having consulted thousands of small-to-large companies I’ll sum up the advice that I give and what’s stood the test of time.

Have millions in funding & going straight into Walmart (not .com)? No? Then you’re like every startup, buy your barcodes, and own what you need to get started. Test the waters, and fail fast in order to find the traction you need in your niche.

As a percentage of all retailers, less than 1% want you to rent from GS1, this allows you to do as you please and find product/market fit.

Once you grow up and out and “hit the big leagues” you can afford to drop a few grand on barcodes and enter those SKUs into the GS1 affiliated stores.

There’s no wisdom in overpaying and no virtue in fighting a mountain, so be flexible and make the best choice for your startup. Your company’s path isn’t binary, but a sliding scale, most successful businesses I’ve worked with own, rent, and often at the same time.

Let’s beep’n go!

@ScanBeep I help businesses with turn-key barcode solutions, sales, label printing, and GS1 consulting. Reach out and let me solve your beep’n headaches.