While many leading retailers are translating RFID technology into real business benefits, many others are still hesitant, often citing objections that reflect outdated or inaccurate views of the technology, according to recent research from Aberdeen Group.
According to ADT, a provider of Electronic Article Surveillance (EAS) solutions, retailers' ongoing experience and repeated successes with EAS systems should actually provide a firm foundation for RFID initiatives.
Drivers of RFID adoption
For The 2008 Aberdeen Report, Aberdeen surveyed more than 1,100 end-user organisations about their RFID adoption plans at their enterprises. Those companies are focusing intently on their supply chain processes and networks, largely to contain supply chain costs and to address requirements created by business growth, acquisition, and divestiture strategies.
Additional drivers of this focus include changing market strategies and increased global business and customer service demands. Indeed, the report points out, the retail market represents a kind of Dickensian dichotomy regarding RFID technologies, experiencing both "the best of times and the worst of times".
Successful pilot schemes
For its March 2007 Benchmark study, entitled 'RFID in Retail: The Truth Behind the Hype', Aberdeen surveyed more than 150 retail companies and found that many retailers are building upon successful early RFID adoptions, even while others remain sceptical.
Aberdeen found that the number of retailers allocating budget to RFID initiatives in 2008 was roughly double that identified by similar research conducted in 2007. More than one-third of the 2008 survey's respondents (39%) said they had already deployed RFID for more than one year, while more 40% said they will implement it during the coming year or at some time in the future.
Best in class performance
Aberdeen used three key performance criteria to distinguish best-in-class retailers from other survey respondents. Based on these criteria, best-in-class retailers reported the following performance improvements as a result of RFID implementations:
- Customer satisfaction has increased over the past two years by an average of 12%;
- 94% have improved employee productivity;
- 78% have increased inventory turns by an average of 5.4%.
Retailers are now using RFID technology for inventory visibility, loss prevention, and an improved customer experience, and many are increasingly interested in the use of RFID both in the store and at the item level.
Among those retailers already using or planning to use the technology, the top business pressures driving its implementation included the need to improve in-store asset tracking efficiency, and the need to reduce the cost and time associated with inventory turns. Close behind these pressures were the need to reduce customer waiting times.
This suggests that, while the focus of RFID usage is still generally centred on inventory tracking and replenishment, customer service is becoming an important factor driving RFID adoption in the retail environment.
Lessons for retailers
According to Aberdeen Group analyst, Michael Dortch, there are several key lessons that retailers can learn. Those currently using or planning RFID deployments, or pursuing strategies for increased globalisation, will need to take a truly global view of the opportunities presented by RFID, along with its business benefits. Based on surveys and interviews conducted with business and IT decision makers, actions and considerations should include:
- Find and go after opportunities now
RFID is being adopted by retailers worldwide as costs fall and integration gets easier, providing a compelling reason for those not yet researching RFID opportunities to get into the game quickly. In many cases, successful EAS deployments can be used as foundations and templates for successful RFID deployments.
- Centralise RFID and other data
To achieve the "one version of the truth" that's essential to business success, companies must start aggregating data into one data warehouse - or at least enable consolidated, actionable information views that are tailored to their various user roles. Retailers should also maximize the business value of RFID-generated data by implementing systems that ease integration of that data with key business analysis, intelligence, and operations applications.
- Be open to change and risk
Innovations such as RFID provide both challenges and opportunities never seen before, but only for those who are willing to take on those challenges and seize those opportunities. Doing so requires sustained commitment, especially from senior executives and business decision makers.
- Choose vendor partners carefully
Partner with RFID solution providers that have local expertise and partners in key geographies, retail- and RFID-specific knowledge, and experience and proven abilities to support such advanced technologies and evolving industry standards. Retailers responding to Aberdeen's 2008 RFID survey cited as their top three sources of RFID information: online resources (67%), vendors (63%) and conferences (57%).
Download the reports
The retail-specific report entitled 'Real-life RFID in retail: The past as a prologue' has been made available for free download from Aberdeen Group's web site - click here (time-limited PDF download; no registration needed).
The March 2008 benchmark study, entitled 'RFID in Retail: The Truth Behind the Hype', has also been made available for download from Aberdeen's web site - click here (time limited; free registration required).
For daily and weekly news about RFID technologies and how they affect retail and business operations, see The Wise Marketer's sister publication, Using RFID, at UsingRFID.com.