Although RFID technology has been readily available in the retail industry for over 15 years, its adoption is ramping up now as companies revise inventory management strategies to bolster profits as well as meet the demands of omnichannel retailing.
Loss prevention is also playing a role in driving demand. But the accuracy offered by the technology coupled with more advanced software solutions to track inventory is fueling adoption — especially among larger retail chains. Here, Mark Roberti, founder and editor of RFID Journal, discusses these and other trends.
RFID Journal is presenting an RFID in Retail and Apparel conference — free to brand owners and retailers — on Oct. 6 in New York to where companies and experts will be sharing best practices as well as the benefits of the technology.
WWD: It seems there’s been a shift in retailers adopting RFID technology. There seems to be more willingness than in prior years. What’s driving this?
Mark Roberti: Two things are driving it. First, a number of retailers around the world, including American Apparel, Lululemon Athletica, Macy’s and Marks & Spencer in Europe, have proved that RFID can be used to take inventory very quickly and very accurately, which means cycle counts can be done more frequently without running up additional labor costs. Frequent cycle counts means you can improve inventory accuracy in the store from an industry average of 65 percent to better than 95 percent. Because customers can find what they are looking for, more items are sold at full price and not marked down, which improves the bottom line.
Another reason is that as more retailers adopt, more of their competitors are realizing they are behind and need to catch up. So each time one new retailer announces it is using RFID in its stores, it spurs several others to start looking at the technology more seriously. Adoption is thus gathering momentum. Barring any serious downturn in the economy, I would expect that adoption in retail will continue to accelerate and then we’ll reach a tipping point and it will explode.
WWD: In the fashion apparel segment, what are some of the most popular categories for RFID use, and why?
M.R.: Today the three most common categories to start with are jeans, shoes and bras. The reason is that RFID delivers the most value when it is used for tracking complex stock-keeping units. With each of these categories, you have multiple colors or fits and styles that make it difficult to maintain optimal inventory levels in stores.
When customers go into a store to buy one of these items and don’t find it, they will leave without making a purchase. Often the item is in the back of the store but has not been replenished, so the item gets marked down and that’s a reduction in overall store profit margin.
WWD: What’s the best way to implement RFID into a retail business? Does it require a strategy? Why?
M.R.: Virtually any apparel, jewelry or sporting goods retailer can benefit from using RFID to boost in-store inventory accuracy and improve store execution. But the best way is to develop a strategy based on your goals. Do you want to be an omnichannel retailer and use stores for same-day delivery? Do you want to improve customer service and the customer experience? Do you want to be the low-cost provider that takes cost out of your supply chain? Each of these approaches would involve a different way of deploying an RFID system.
It’s difficult to take a big bang approach with RFID. Tagging all items in all stores requires an investment in infrastructure but also a great deal of coordination with suppliers. It makes more sense to rollout by category, and the categories you choose will usually be determined by your strategy.
WWD: How has the growth of omnichannel retailing impacted the adoption of RFID technology? Does it go beyond inventory management? How?
M.R.: It is not really possible to have an effective omnichannel strategy without using RFID, because RFID is the only technology available today that gives retailers the inventory accuracy needed to be an omnichannel retailer. Some retailers attempt to sell online and allow customers to pick up in stores, but they often don’t expose inventory in stores to people on their website because they have little confidence that the item will be there when they come in to pick it up. So they wind up missing out on sales online as well as impulse sales when the shopper gets to the store to pick up their item.
Omnichannel retailing requires a high level of store execution. Store associates often have to shop their own stores and pick items from the shelves that have been ordered online, so they are there for the customer to pick up or so they can be shipped from the store to the customer. Dr. Bill Hardgrave, head of the RFID Lab at Auburn University, points out that retailers who have tried to do this without RFID have a success rate of 35 percent to 60 percent. That is, a store associate picking items are able to locate only 35 to 60 percent of the items in their own store. RFID can make it possible to have the inventory and find it much more effectively.
WWD: On the RFID solution side, which companies are considered leaders and why?
M.R.: Tyco Retail Solutions, Checkpoint, SML are among the leaders on the software side. Avery Dennison, Smartrac and Invengo are among the leading providers of tags. (Avery and SML also have service bureaus for apparel tagging.) Zebra, Alien and Impinj are among the leaders in providing readers to the retail sector.
WWD: And who are some of the retail end-users who are leveraging RFID in the right way?
M.R.: Macy’s is doing an outstanding job. They’ve been working with suppliers to increase the number of tagged items in the store and it’s a critical effort as they evolve into a true omnichannel retailer. Lululemon is doing a good job of using RFID to enhance the customer experience in the store. In the United Kingdom, Marks & Spencer has tagged all non-food items in its stores and has been a leader in using RFID worldwide.