RFID in Retail

Posted by Mike Butler on February 13, 2018
RFID in Retail

With renewed interest in RFID coming from multiple sources, and new implementations for major retail brands proving ROI, it feels like third time lucky for the tireless technology.

At the turn of the millennium there was a lot of buzz about RFID, which was rekindled a few years later when Wal-Mart announced an implementation, which then took a few years to fizzle out unsuccessfully.  RFID in retail never quite seemed to achieve lift-off velocity, and was occasionally eclipsed by other upstart tech (for example RFID’s little cousin, NFC).  But the technology itself never went away and is finally about to have its time in the sun.

Sea change

Before we go on, let’s very quickly remind ourselves why RFID saw something of a false-start.  I’d personally point to three reasons:

Cost.  Indisputably the biggest obstacle for many years to widespread adoption. The price of the average RFID tag in 2003 was around a dollar.  Today, it’s around 10 cents, and there’s a concerted push to get the price down further.  Dan Gutwein, Intel’s Director of Retail Sensors, is quoted in this GDR blog “A lot of governments, the Japanese in particular, are investing heavily to bring the price of RFID technology down to a penny or so per tag”.

Immaturity of the multichannel landscape.  Go back a decade or so and while online was obviously seen as the brave new future, that’s where all the focus was going, to the detriment of the joined-up picture.  The implications of having inventory, whether in transit or not, being called on to serve various sales channels, hadn’t sunk in.  In other words, ‘inventory visibility’ wasn’t on everyone’s lips.  Today, delivering profitable omnichannel is the goal.

Lack of education and understanding of the tech.  In the wider supply chain particularly, suppliers felt somehow ‘penalised’ by having to pay for the inclusion of RFID tags into goods (or pallets) for a technology they hadn’t asked for and didn’t see as a direct benefit to them.  Today, the picture is much clearer and standardisation of the technology makes it easier and more sustainable.

The market has well and truly evolved, and matured.

Where Macy’s go, others will follow

One of the most prestigious names in retail – Macy’s – has been rolling out an RFID implementation for over a year now, with a target by the end of 2018 of being able to track every item across its stores and fulfilment centres.  Bill Connell, senior vice president of transportation, store operations and process improvement for the retail giant, said in this article that for Macy’s “RFID isn’t a project; it’s very much integrated into how we do business.”

Macy’s has acknowledged a significant impact on profitability.  While it has yet to release full figures, Melanie Nuce, VP at standards organisation GS1 US1 let slip at a retail conference last year that Macy’s fashion department may see an uptake in sales volume of 200% since introducing RFID.  To say that this tantalising figure has got the interest of the retail industry would be an understatement.

RFID is seeing similar success on the other side of the pond too.  Fashion retailer River Island is now attaching RFID tags to every single item.  Jon Wright, River Island’s head of loss prevention, sees RFID as nothing less than transformational.  He says that under a manual stock-checking system stock accuracy was about 70%; now RFID has taken this to 98%.  While River Island used to do stock-takes twice a year, it now does them weekly.

Other high-profile retail names in the UK have thrown their hats into the RFID ring.  John Lewis expects to have most of its fashion range tagged imminently.  Marks & Spencer, Zara, Tesco and Asda are also at various stages of trialling and implementing. 

It’s an inventory management thing

But let’s take a step back for a moment to remind ourselves what this is all about and why it’s important.  Radio Frequency Identification (RFID) tags can be attached to individual goods in order to automate the tracking of merchandise throughout the end-to-end retail supply chain, thereby removing the need for staff to manually scan products.

RFID’s ‘sweet spot’ is inarguably inventory management. 

With the rise in omnichannel and its associated innovations, inventory ‘mobility’ has accelerated, with a corresponding complexity in the ability to track where this inventory is with any reliability.  In a sector where margins are squeezed and cut-throat competition the norm, being able to save money on inventory efficiencies is seen as central to profitability.  RFID is supplying the single, accurate, automated view of all inventory.

A recent Forbes article quotes two killer statistics from the RFID Lab at Auburn University: RFID raises inventory accuracy from an average of 63% to 95%, and reduces retail out-of-stocks by up to 50%.  Few retailers can afford not to take notice of such efficiencies, particularly when competitors are making the running.

The Click & Collect imperative

One of the key accelerators of the inventory management agenda has been the exponential success of Click & Collect.  While most retailers now have their C&C operations in place, many have found the increased pressure it places on the returns channel has hit profitability, so focus has turned from implementing to optimising C&C operations. 

One of the keys to this has been ensuring that instore picking is easier and more reliable – so that inventory can be ‘working’ on the shop floor right up until it needs to be picked up by an associate to fulfil a C&C order.

Click & Collect gurus Doddle are now extending their own expertise into retailers to remove the instore hassle for them completely.  Retailers can now replicate Doddle’s market leading Click & Collect experience in their own store environments with Powered by Doddle, Doddle’s end-to-end Click & Collect software solution, which incorporates RFID technology.

That retailers are taking notice of RFID again was evidenced by how busy RFID solutions providers such as Zebra Technologies, Tyco and Deteco were at NRF 2018.  (Zebra’s Smart Lens technology in particular looks set to change the instore landscape once again, with its four sensors – RFID Transition Point, RFID Backroom, Sensing Network Appliance and RFID Point of Sale – designed to meet the unique needs of specific areas as inventory, shoppers and associates move around the store.)

Managing products, managing people

In Europe and the US, RFID has to date not been a serious consideration for grocery retailers due to the price per tag.  As the price drops this may well change, but in the meantime it’s instructive to look at the example of Japan, which seems set to lead the way in grocery and convenience store RFID due to what might at first seem an unlikely factor: its chronic labour shortage.

As Japan’s employee shortage worsens (in urban areas there are reportedly two jobs places for every one individual) it could be said that interesting times lead to interesting innovation.  This recent Bloomberg blog takes up the story:

“7-Eleven owner Seven & i Holdings Co. is joining forces with rival operators Lawson, Ministop, FamilyMart UNY Holdings and East Japan Railway to introduce radio-frequency identification, or RFID, by next year. That should preclude the need for manual bar-code scanning; by 2025 all Japanese convenience stores could have fully automated checkouts. RFID tags are already widely used by retailers in anti-shoplifting devices. Turning them into price tags would enable customers to walk out of stores without having to scan items at checkout counters.”

Japan has often proven itself a global leader in both technology innovation and consumer trends.  You wouldn’t bet against 7-Eleven Japan providing a glimpse into the future.

Key to innovation

RFID is also proving its value as a notable drive of innovation within retail more widely than in the field of inventory management.

In fashion retail, ‘Magic mirrors’ can utilise RFID tags within items of clothing and scanners within the interactive mirrors to identify which item(s) a customer has brought in with them, and suggest accessories accordingly, which the mirror can then add ‘virtually’.  This application can be extended to produce invaluable insight for retailers about their current product ranges – one example is identifying which items frequently enter the changing rooms but are rarely purchased, which might indicate a problem with the garment which can be relayed back to the buying teams.

RFID is enabling the ‘smart store’ more generally.  If a certain product is overstocked, the smart store can trigger digital signage to deliver customer offers to shift the excess stock, and change the cross-sell recommendations made to instore employees on their mobile devices.  If an item sells out completely it can be instantly removed from merchandising rotations.

Rebecca Minkoff is one luxury brand which has been using RFID in its stores for a few years to deliver a more personalised, engaging experience.  It has recently extended its RFID innovation beyond the stores, through a limited edition smart bag, each of which has its own RFID-enabled handtag, qualifying the owner for the company’s loyalty program and unlocking exclusive perks and content.  This will also furnish Rebecca Minkoff with more information about the owner’s shopping habits – and, given that a handbag tends to travel with its owner, about their lifestyle generally.

One example of recent high-profile RFID which was actually outside of the retail sector but suggests ways it might be used by retailers is that of a campaign called #LookingForYou by the Battersea Dogs and Cats Home in the UK. 

Staff handed out brochures that contained RFID tags to potential “stray pet parents” in a London shopping mall.  As recipients passed digital billboards they were activated to show appealing dogs which appeared to be following them.  As a result of the campaign, website visits increased by more than a third, the vast majority of whom had never visited the Battersea Dogs and Cats Home website before.  Many pets were successfully re-homed as a direct result.

All things to all people?

It’s official – RFID tags are helping retailers to win the inventory management war.  Finally. 

RFID tags can double as price tags, replace bar codes for payment, and act as security tags.  They can aid marketing efforts, particularly across channels.  And they are also great spurs for innovation and creative thinking, as we’ve briefly explored above.  As the price per tag continues to drop and their use within retail becomes so ubiquitous that suppliers will see embedding RFID tags at point of manufacturer as business as usual, the technology’s success is only going one way.

This time, RFID looks here to stay.

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