RFID in retail stores becomes a reality

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By: Wise Marketer Staff |

Posted on April 4, 2007

The benefits of the adoption of radio frequency identification (RFID) technology - to retailers, suppliers, and customers alike - are beginning to be realised as an increasing number of retailers look to this fast-growing technology for bottom line benefits, more efficient supply chain operations, and better customer service and satisfaction levels.

One such new technology has recently been announced by US-based RSI ID Technologies, which has developed two RFID-enabled retail display units that combine item-level RFID tagging and RFID access control cards, with the idea of reducing shrinkage and providing retailers with better asset visibility.

Improving the sales process
These new Pressiza Jewelry and Pressiza Eyewear displays mean that retailers can more easily account for all items on the sales floor in real-time. Employees can access the displays using an officially-provided RFID access card and, based on the privileges set for each individual, they are either granted or denied access.

When access is granted to the display unit, the employee's ID number is stored in the database and all merchandise removed from the display is recorded against that employee's ID number at the same time. Employees can then release their personal liability by either completing a sale or returning the items to the display unit. Custom-built software can then be configured to track the number of items shown by each employee, the frequency and duration of each item's removal, and the number of sales made as a result.

Improving retail promotions
At the same time, RFID systems supplier OAT Systems has also announced a new Real-time Promotion Execution system for retailers, which boosts the efficiency, management, and end results of in-store promotions, benefiting both the retailer and the consumer packaged goods (CPG) supplier.

CPG companies typically invest heavily in in-store product promotions, using manufactured displays that feature the promoted product. These displays are commonly shipped from contracted manufacturers directly to retail stores, meaning the CPG firm has little or no control (other than through personal store visits by sales representatives or merchandisers) over the timing and physical placement of displays. Indeed, simple operational issues often prevent displays from reaching the sales floor in time for the beginning of the promotional period. Industry statistics show that 15% - 40% of retail stores fail to move displays to the sales floor on time, missing critical promotional windows and (more importantly) cross-selling and up-selling opportunities.

Using OAT's new RFID Mobile Tag system, display manufacturers can apply RFID tags to promotional displays before they are shipped to retail stores. At the store, fixed RFID readers in the warehouse and store front can then query the display unit's tag and record when it is delivered, and when it is put on display on the sales floor. As soon as the display is identified in each location, that information is automatically fed back to the CPG supplier and the retailer's marketing office. CPG companies and their retail customers can intervene promptly when displays fail to reach the sales floor on time. This benefits the CPG company, the retailer and the consumer by ensuring promoted products are where customers expect them to be.

Since the product's launch, Kimberly-Clark has already deployed the system to help improve the execution of in-store product promotions. With the RFID data on hand, Kimberly-Clark and its retail clients can intervene promptly when displays fail to reach the sales floor on time. This directly benefits Kimberly-Clark, the retailer, and the consumer by ensuring promoted products are where they should be, at the right time. According to Kimberly-Clark, the system will also be used to support RFID-enabled stores in new locations, and to conduct RFID proof of concept trials and explore other RFID applications in the retail environment.

Roadmap for a faster ROI
Retailers across the board are showing signs of significant maturation in their approach to RFID technology. While only 6.5% of retailers surveyed are spending money on RFID technology now, twice that many already have a budget allocated to RFID implementation, according to the latest retail RFID research report from Aberdeen Group.

In the report, entitled 'RFID: Roadmap for Retail', Aberdeen reveals that retailers are dropping mandate-driven RFID initiatives in favour of programmes that will address supplier visibility, inventory management and customer service. The value proposition of RFID to retailers can be segmented into three general areas:

  1. Item and case-level tagging for improved inventory management;
  2. Promotion optimization and loyalty management;
  3. Customer-level product information delivery.

"Many RFID initiatives suffer because they are perceived as an IT issue. When the retail CEO taps an operations manager with technical skills to be the RFID 'thought leader' for the organisation and enlists the collaboration of the IT group, the initiative has a much better chance of succeeding," explained Russ Klein, senior analyst with Aberdeen Group's Emerging Technology and Data Management practice. "Innovation separates average retailers from the best-in-class. With the cooperation of IT staff and operations managers, an RFID expert can bring double-digit improvement to virtually all areas of retail. RFID adoption in retail is still in its early stages. The well-prepared retailer has an opportunity to lead."

Cautiously motivated retailers
But retailers are notoriously cautious when it comes to adopting new technology and upgrading core infrastructure. Yet Wal-Mart has almost single-handedly catalysed the RFID industry with its mandates and broad implementation of auto-ID. Some smaller retailers with less influence over their supply chain partners have experimented with RFID; but Wal-Mart's early success is difficult to translate and does not serve as a useful roadmap for them.

In a competitive and cost-sensitive industry such as retail, customer satisfaction and inventory visibility are crucial to profit and growth. Aberdeen's report therefore serves as a roadmap for the rest of the retail community who want to achieve those goals through best-in-class use of RFID.

Figure 1: Top motivators for RFID adoption by retailers
Source: Aberdeen Group

RFID in retail - a competitive advantage
In Aberdeen's research, the best-in-class retailers using RFID technology showed improvement in four main areas:

  • 30% decrease in inventory replenishment time;
  • 42% fewer incidents of theft;
  • 25% less customer wait-time at the point of sale;
  • 25% reduction of merchandise spoilage or price markdown.

Survey results showed that these retailers shared several common characteristics with respect to their RFID implementation strategy. For example:

  • Best-in-class retailers are nearly 4 times as likely as the rest to offer customers a self-service method to query current inventory and retrieve detailed product information.
  • 73% of best-in-class retailers that are using RFID have staff who are familiar with the technology devoted to studying further business process improvement opportunities.

Next steps for retailers
In addition to the many specific recommendations detailed in the report, to achieve best-in-class performance, Aberdeen Group suggests that retailers should also:

  • Integrate RFID data into business intelligence, CRM and inventory management systems to produce holistic, real-time enterprise visibility.
  • Adopt an RFID strategy balancing short-term profitability goals with a long-term strategy of business innovation and consistent, unmatched customer service.

Download the report
The full research report, underwritten by ADT Tyco Fire & Security, and Reva, shows the best practices of RFID applications in retail, along with ways to justify the investment. The report has been made available for free for a limited time from Aberdeen Group's web site - click here (free registration required).

More detailed news and information about RFID technology and its benefits, applications, and suppliers can be found in The Wise Marketer's sister publication, Using RFID (see www.usingrfid.com).

For additional information:
·  Visit RSI ID at http://www.rsiidtech.com
·  Visit OAT Systems at http://www.oatsystems.com
·  Visit Kimberly-Clark at http://www.kimberly-clark.com
·  Visit Aberdeen Group at http://www.aberdeen.com
·  Visit Using RFID at http://www.usingrfid.com