Will RFID Alter the Retail Landscape in 2014?
A blog on the RFID 24-7 website with the hyberbolic headline, "RFID Will Alter Retail Landscape in 2014," posits that this will be the year when bold predictions made for the technology will finally come to fruition.
Inventory management remains the primary reason that merchants are using RFID, but data derived through item-level tracking is expected to open new opportunities for improving the customer experience, as well.
Increased use of RFID is also expected to have a significant effect on retailers’ omni-channel initiatives. According to the piece, item-level tagging has led 98 percent or higher inventory accuracy levels. Having a much better handle on inventory will enable stores to serve as distribution hubs for brick and mortar stores.
"We’ve been talking about omni-channel for a while, but I think we’ll see some true omni-channel deployments this year," Bill Hardgrave, dean and Wells Fargo professor, College of Business, Auburn University, told RFID 24-7. "I think we’ll see a couple of retailers that will really catch everyone’s imagination as far as what you can do when you really do know what products you have and where you have them. Then you are able to provide that customer with a true omni-channel experience. We’ll see some examples of that this year and that will set the tone for everyone else."
At the RFID Journal LIVE! 2013 conference, Prof. Hardgrave spoke of RFID as a "disruptive technology," providing retailers with the means to improve shelf replenishment, manage price changes, reduce shrink and achieve other benefits.
Discussion Questions
Will 2014 be the year that RFID fulfills the promises made by the technology’s evangelists? Where do you expect RFID to have the most significant impact at retail?
If a retailer sells apparel and does not employ RFID for inventory management, they will be at a significant disadvantage by the end of 2014. Increased sales and reduced labor cost are proven results of the use of RFID for at least apparel stores and apparel departments.
Haven’t we been hearing this for years now, that 20xx will be the year it fulfills its promises?
I think more progress will be made, but its an evolution, not a big bang. That being said, in addition to better inventory management helping enable omni channel retailing, RFID should start to play a role in the emerging in store location market which focuses on identifying where customers are in-store and selectively, this is key, delivering them relevant messaging. I would expect some initial deployments will start to become public in 2014.
RFID continues to be an exciting development for retailers and their supplier partners. But the real impact of the technology will happen when it moves beyond operations oriented activities like inventory to customer facing activities like merchandising and checkout. RFID is certainly becoming more pervasive in the area of display control – just look at what Lord & Taylor and Macy’s are doing with shoes to ensure they have the right styles on the floor. Take that a step further and have shoe sales reps with mobile units that can tell them what sizes are in stock (or not) and you really have something. Take it to POS and you’re approaching disruptive technology status.
To George’s point, “the year of RFID” seems to be an annual topic on RetailWire. There is no doubt that the technology is gaining traction and significant users, but the question is “what’s taking so long?” It will become easier to sell senior management on the expense investment in RFID if it can demonstrate quick revenue and margin payback, not just improved inventory accuracy over the long haul. At the same time, retailers need to face the loss-prevention risks of conversion from security tags to RFID tags.
RFID provides one of many information sources that can aid us in managing the supply chain, as well as potentially yielding many benefits elsewhere. As an additional information source, it certain will add value, but this information comes at a cost. How much value RFID actually adds, and where it adds it, therefore will determine its prevalence.
We must understand RFID’s limits in supply chain management, especially as applied to in-store out-of-stock reduction, which often is cited as one of its greatest potential benefits. There are indeed several limitations to the applicability of RFID to OOS reduction. The most obvious is that the RFID tag is not free, and this will continue to make its use cost prohibitive for a large class of inexpensive, fast moving goods, which, unfortunately, are precisely those products for which OOS rates are often highest.
There also are inherent technical limitations to RFID-based solutions. Signal separation of 10,000’s of simultaneously broadcasting tags is not precise. We may know how many items are in the store, but not exactly where they are. An item may be in the store, but mis-shelved.
Many other on-shelf problems are not addressed by RFID at all: the shelf contains only damaged or expired products; the shelf tag is inaccurate; an intended promotional display missing or substandard. Each of these problems should be treated as “item not available for sale as intended,” and cannot be detected by RFID-based solutions.
Raising these issues is not meant to argue that RFID technology holds little promise, for it certainly does hold promise. The point is, we need to understand what RFID can and cannot address. Since the cost of tagging all types of products is relatively high, the cost-benefit trade-off needs to be examined carefully in determining the appropriate extent of utilization. Other solutions will be required for classes of products and problems where RFID is not appropriate.
A brief final issue worth mentioning is customer perception. There have been several studies which have found that many customers have privacy concerns over RFID tags following them into their homes. It will be interesting to see what effects currently increasing sensitivity to privacy issues have on customer’s acceptance of the technology.
RFID still feels like an industrial technology that is gradually finding application in the retail merchandising sector.
I see it not as THE solution, but as one important, promising element in the range of sensing solutions. Multiple kinds of sensing (Demand, Items, Messaging, Employees, and Shoppers – DIMES) are needed to create the type of continuous visibility that will drive more informed planning, superior in-store implementation performance management, tailored merchandising, and ROI.
For RFID to take its rightful place in this spectrum it must be delivered with just enough technology to enable business practices that matter, and with an expectation that both tech and techniques are likely to have briefer life cycles. Over-capitalizing is the mind-killer here.
The business case for RFID from an operations standpoint is clear – improved inventory management can reduce stock-outs, which are a significant source of lost income, as well as improved ordering and warehouse accuracy.
From a customer standpoint, improved inventory has clear benefits, of course. You can’t buy what is not stocked in the store. However, additional benefits for RFID from a customer standpoint are not clear – the “creepy factor” is still a barrier to using RFID to customize offers or customer engagement in real time.
Just as with the predictions of the complete death of the supermarket, the speculations were exaggerated. The same is true for RFID. The pontification of its potential has been present for years, always predicting its breakout. It hasn’t happened and 2014 isn’t likely to be the year it explodes to alter retailing either.
The most significant impact could be changing the point-of-sale systems, however, the cost and demand for that innovation hasn’t existed and is likely not to change in any substantial way this year.
2014 will be another year in which retailers review the potential benefits of RFID and collectively yawn. Between the price, systems required, and processes needed to utilize RFID to “improve shelf replenishment, manage price changes, reduce shrink and achieve other benefits” the ROI is questionable. RFID’s ability to divine the location of each product in the entire enterprise was more appealing a decade ago. The challenge for RFID now is there are multiple technologies and solutions with much more potential, making RFID again the 11th most promising technology on this year’s Top 10 list.
Well, if the organization that promotes RFID doesn’t state that, “This will be the year of RFID,” then no one would believe it even has a chance to do well. So, I do understand their motivation to make this claim. However, this RFID technology requires the entire CPG/Retail ecosystem to succeed. Huge retailers and manufacturers have been testing programs for years. Until there are enough participants across the supply chain, and until specific product category challenges are eliminated (certain packaging is difficult for RFID readers to capture effectively), this will simply be another year in the evolution of RFID.
I believe the technology is ready for prime time, however, I think most obstacles have been removed, including the business case justification. I also think that RFID can leverage other technologies to comprise a supply chain-wide program of at least case level tagging if not specific category item level tagging.
“Hyperbolic,” “evangelists” … do I detect just the smallest amount of cynicism on George’s part? But I can’t say that I disagree: I have the same response as Dr. Needel. And in answer to the question of “what’s taking so long?” I think the reason is fairly simple: people are dubious of the technology’s value (a “98% or higher…accuracy level” might sound impressive, but maybe not so much if you already have a 95% rate…or at least think you do); unfortunately the people who control the purse strings – and actually make the decisions – usually aren’t techies, and the benefits to them are anything but obvious.
Just give a shout out to a few retailers who are doing omnichannel right, like say, Terry Lundgren, and you will find that RFID is at the heart of it. Yep, RFID’s day is here!
Anyone thinking of implementing an RFID program better talk with consumers. A little concern that is not addressed can expand into a big problem. Just look at genetically modified foods.