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There is so much more to come from RFID technology than we have experienced so far in the past few years. The technology and its implications have transformed rapidly, leading to more interesting use cases for the retail format. Unfortunately, the implementation of RFID can take a lot of time and money. So how can retailers make the most of it? Once implemented, what potential does RFID have for retailers and where can it lead?

What is RFID and how does it work?

Radio Frequency Identification (RFID) technology is a form of wireless communication, using radio waves to identify objects remotely. All RFID objects have their own unique tags for identification, and allow objects to communicate with each other through wavelengths.

To use the technology in stores and in warehouses, retailers will need both an RFID tag, which is usually embedded into the product or on price tags, as well as an RFID reader. Unlike traditional inventory tracking systems that require employees to “point and shoot” the item identifier, RFID readers can capture the information from a broader range, thus saving time when gathering inventory information.

The information captured from RFID readers can then be used to get an overview of the entire operations of the business, enabling companies to make informed decisions about their supply chain in real-time. Following the pandemic, RFID is being considered as an asset again as it can help solve a lot of the various logistics and inventory management issues that have arised throughout pressure tested supply chains.

A comeback for RFID in retail

RFID first became popular in 2003 when Walmart announced that all of its suppliers needed to have their pallets tagged with RFID in under two years. This forced adoption from the major retailer ended up leading to RFID’s demise when the project resulted in the realization that the costs, at the time, outweighed the benefits; and the project was deemed a failure in the retail industry.

According to IDTechEx, in 2019 only 10% of the addressable apparel market has RFID tags. But as omnichannel services increase use cases across retail, RFID has been given another fighting chance to prove its worth in the retail market. RFID technology links physical and digital stores, allowing a mostly accurate picture of where inventory is at any given moment.

In Mango’s new Barcelona flagship, the retailer can harness the technology to know where garments are at all times, whether that be in the dressing room or if they have left the store, allowing associates to make sure that items are available. But that use case is only the beginning, having RFID trackers attached to products and having readers placed throughout the store can also monitor and improve sales by informing retailers of their “hot” and “cold” zones of the stores that lead to the most and least sales. By understanding the store flow and the placement of products, retailers can create a unique customer journey based on what and where products are being sold.

As retailers spend more time and investment in RFID technology and its implementation, they are also trying to expand its use cases to be able to achieve the best ROI possible. RFID can be coupled with endless other technologies, such as the Internet of Things (physical devices that are embedded with technology and can be connected), to be able to offer more unique experiences to customers. According to Accenture, information captured from RFID technology can be used in collaboration with blockchain, supply chain analytics, self checkout, supporting omnichannel fulfillment, reducing stock outs, improving customer engagement with smart technology, and inventory tracking and visibility.

It will take time….

As RFID can offer real-time accuracy of almost 100%, the technology can be leveraged to improve customer experience associated with omnichannel services. The technology allows retailers to know where their stock is at any given moment, which also allows them to guarantee availability across all channels, whether that be in-store or online. The information can also be used to understand where products are located to reduce shipping costs, split shipments, and delivery times. Understanding the location of products empowers in-store pickup options. Levi’s, for example, reported 98% inventory accuracy in stores where RFID is fully operational with inventory counts only taking 20 minutes to conduct. This allows for multiple checks per day, making the real-time data more accurate and strengthens the omnichannel. Having accurate inventory visibility is a revenue factor as well as a customer service factor.

RFID tags and readers allow retailers to understand where their inventory is at all times, whether that is in the dressing room, on the wrong shelf, or in a warehouse. Some retailers like Ralph-Lauren, Rebecca Minkoff, and Puma have used the technology to install smart mirrors in dressing rooms that bring up product information and suggest other clothing items that are similar in style to the ones that the customer chose. This creates a personalized shopping experience while empowering the consumer with all the necessary information to make the best decision based on their wants and needs.

An RFID success story: the Prada example

Prada has gone all in with RFID implementation with 100% of products containing a microchip. This allows Prada to enable connectivity with consumers, not only in stores, but also throughout the life of the products. Embedded RFID brings more transparency to the overall lifecycle of the product, with information that can be used privately by the retailer and information that can be shared publicly with customers. For example, retailers can see when an item was received in a warehouse and the time it took for it to get to a store, and customers can gain visibility about how and where their specific product was made. Prada has even created an app where customers can scan the chips to access images and videos of their specific item moving through the supply chain and get to know the people that help create their goods.

RFID’s shortfalls and substitutions

RFID has the potential to be extremely useful, but implementing it can be time consuming and costly. There are equipment costs, installation costs, tag costs, software costs, ongoing license costs, maintenance costs, and integrator costs (if you use a third-party expert). This might be the reason why Rebecca Minkoff’s store stopped using smart mirrors, the cost of maintaining the service might have outweighed the benefits. And technology does not come without its hiccups. RFID is prone to two main issues: reader collision, when a signal from one RFID reader interferes with another, or tag collision, when there are too many tags and an RFID reader is overwhelmed with too many data transmissions.

One of the major shortfalls of RFID is that it is physical, and now there are a lot more advanced technologies that can cut out the pains associated with implementing hardware into each individual product. For example, computer vision might be a major competition for RFID. The Amazon Go convenience store that allows customers to pick up products and walk out of the store and be charged automatically without using a cash register was rumored to originally use RFID for its touchless checkout tech. But now the retailer uses a mix of RFID and computer vision, and is applying similar technology used in autonomous driving to retail. These technologies allow the inventory management system to identify the customer (via facial recognition, user ID, GPS, or through an app) and recognize which products are in their possession with the help of cameras, sensors, and microphones.

While RFIDs implications are very interesting, the cost and time it takes to implement every single tag into individualized products might make autonomous technologies more enticing for retailers. But even newer technologies like NFTs used by the Aura Blockchain Consortium can be combined with RFID tech to attach information to products, helping anti-counterfeit and loss prevention efforts. This makes the RFID initial investment even more so attractive.

A fully transparent supply chain

The greatest struggles and roadblocks of RFID are quantifying its cost, identifying the right suppliers and partners, and having the ability to train employees. It takes a long time to pilot and implement, but with the right use case, the benefits will pay off in the long run. Once retailers decide to invest, they will need to push through the difficult change management stage to realize the potential and very beneficial ROIs associated with the technology. A successful transformation will require the whole organization’s cooperation.

When it comes to gaining visibility on supply chain operations overall, software companies like Avery Dennison, Kinaxis, E2Open, OracleEPM, and Anaplan offer added insight to inventory management and should also be considered, no matter where you get your data from, to reduce risks and cut costs. These tools can optimize the supply chain and add an extra layer of visibility through what-if simulations from RFID data, giving retailers the control and foresight when unexpected circumstances, like a global pandemic, may arise.

Whether RFID is right for your organization or not will need to be determined for each individual use case, understanding the time and costs that are associated with a calculated ROI. For organizations that have already invested, it could be an exciting time to couple the data output with new software and services to gain more from your initial investment. For organizations that have not yet invested but are considering such a solution, it might be wise to evaluate other emerging innovations as well to ensure the right fit for your strategy and needs.

Credits: IADS (Mary Jane Shea)