Retail RFID technology: All hype or real benefits?

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By: Wise Marketer Staff |

Posted on April 14, 2008

Retail RFID technology: All hype or real benefits?

While many retailers remain hesitant about RFID (radio frequency identification) technology, research from Aberdeen Group has shown that many early adopters have already experienced significant business benefits, and are now building upon those.

The research report, entitled 'RFID in retail: The truth behind the hype', found that retailers are increasingly considering the adoption of RFID-based technologies to help improve both the customer experience and inventory visibility.

Driving business improvement As a follow-up, Aberdeen then surveyed more than 150 retail companies to discover how RFID is being used to increase customer satisfaction and inventory accuracy, among other business benefits. Best-in-class companies reported customer satisfaction increasing by 12% during the past two years, and 78% increased inventory turns by an average of 5.4%.

The study also explored which aspects of RFID technology are currently dominant in the retail market, as well as retailers' future RFID implementation plans, general perceptions of the technology, and best practices for the in-store use of RFID (an area for which consumer privacy is a key issue).

Benefits of RFID The survey found that best-in-class retailers have not only achieved greater customer satisfaction but also that these companies have gained in terms of employee productivity (reported by 94%).

And, apart from increased inventory turns, best-in-class retailers reported that they have also used RFID technology to increase the success and effectiveness of in-store promotions (reported by 69%, compared with only 33% of industry average firms and 0% of laggard firms).

But, perhaps most importantly, the best-in-class retailers reported increased year-on-year same-store sales (reported by 76%) as a result of the adoption of one or more RFID technologies.

Reasons for RFID adoption According to Aberdeen Group, many retailers are now achieving real business benefits that are directly attributable to item-level RFID deployments. Among the top pressures driving RFID adoption among retailers improvements in customer satisfaction and spending less time and money on inventory turns.

Pressure % best in class % industry average % laggards Reduce cost and time associated with inventory turns 44% 36% 31% Improve in-store asset tracking efficiency 44% 26% 24% Derive maximum business value from RFID-generated data 33% 26% 24% Reduce customer wait time at the register and when locating products 33% 19% 14% Figure 1: Top pressures driving implementation of RFIDSource: Aberdeen Group, March 2008

Top retail RFID strategies Strategies for using RFID technology (or not) vary from retailer to retailer, however. The survey found that 44% of retailers currently have RFID deployments in progress, while 40% more have plans to deploy the technology in some way. However, among non-adopters, more than half (53%) still believe that RFID has not matured sufficiently to prove its ROI potential.

Strategy % respondents Justify cost of RFID to senior management 39% Integrate RFID data with other systems 39% Calculate costs/benefits against alternatives 33% Link supply chain and partners to RFID solution 33% Figure 2: Top best-in-class RFID strategiesSource: Aberdeen Group, March 2008

Conclusion According to Aberdeen Group analyst Michael Dortch, "Retailers not yet pursuing item-level RFID initiatives risk foregoing the advantages enjoyed by best-in-class RFID-using retailers. These are benefits no retailer can afford to ignore."

The complete report is being made available free of charge to subscribers of Wise Research's trade journals, The Wise Marketer and Using RFID, until 27th May 2008, after which it will be available for US$399. To download the complete report, click here (PDF document, free registration required).

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