Report: Significant RFID Technology Adoption Surge in the Retail Industry
Tyco Retail Solutions has announced the results of a new, sponsored ChainLink Research report: Use Cases Driving the Current Surge in RFID Adoption. The ChainLink Research team surveyed and interviewed over 120 retailers from the Americas and Europe to explore the resurgence of interest and substantial growth in the use of RFID in retail. When asked to rank the three top reasons for implementing RFID now, retailers noted:
- Improving inventory accuracy
- Reducing out of stocks (OOS)
- Increasing on-floor availability
The report describes the improvement opportunity, as measured by previous research: When compared to traditional manual bar code scanning, RFID enables cycle counting to be done up to 25 times faster. Frequent, accurate cycle counting improves inventory accuracy, typically by 20% – 30%, allowing a number of retailers to achieve 99% inventory accuracy. This enables replenishment alerts to be reliably generated, which decreases out-of-stocks, typically by 15%-30% and increases on-floor availability. The research revealed that almost all of the retailers that are progressing with widespread RFID rollouts have seen a sales uplift in the categories where they implemented item-level RFID. This was primarily due to a reduction in out-of-stocks, driven by dramatic improvements in inventory accuracy that RFID brings.
According to Ann Grackin, CEO of ChainLink Research, “RFID has come a long way in the last few years. Standards have been established. Prices for systems and tags have plummeted. RFID technology has become much more reliable. Software applications that can be integrated into retailer IT systems and that are user-friendly at the store level are now available. There are many more experienced implementers, technologies have evolved into a complete solutions approach and technology providers and systems integrators have considerably greater experience with retail and integration with operational systems.”
Many of the challenges traditionally associated with RFID have been addressed by advancements in technology. This emphasizes the importance of selecting the right solution and experienced RFID implementation partners who have faced, understand, and overcome the challenges from the ‘physics of RFID.’
The report describes the statistics and details from the survey, including why retailers are implementing RFID now and how they are using the technology. While RFID is primarily gaining adoption for inventory management applications, when retailers were asked to list all the RFID use cases they envision being implemented in their chains in the future, loss prevention and specifically RFID at the store exit, surfaced as the top response. In most cases, this anticipated use of RFID for Loss Prevention is in combination with an RFID for inventory and replenishment. However, results indicate that retailers are investigating how RFID technology can provide item-level shrink visibility not available until now.
As RFID implementations are evolving, the research team also sought to learn more about lessons learned from projects that stalled or were cancelled. When asked why an RFID program was cancelled or halted, respondents cited lack of well-defined use cases, lack of executive support, and other competing business priorities as their top reasons. This finding underscores the importance of selecting use cases and deployment plans that yield the most rapid ROI, so that benefits are large enough to win against competing uses of capital and other initiatives that consume management attention.
One common thread among successful implementations is they usually start with the area of fastest ROI. According to the report, for most retailers, this is a focus on products with “High Mix Complexity,” such as size/color/style -intensive items in apparel and footwear, inkjet cartridges, certain cosmetics, fragrances, and certain sporting goods. What these categories have in common is the need to keep many different variations on display, so that when a customer walks in the door, the right product, and color and size, is in the right place at the right time. The primary driver here is an increase in sales resulting from on-floor inventory availability and out of stock reduction. RFID helps increase inventory accuracy and timely replenishment alerts to drive these results.
“Recently, retailers like Macy’s, Walmart, Saks and others have implemented RFID on billions of items. As a result, they are realizing a sizeable operational, financial, and customer satisfaction advantage over competing retailers who are not using RFID. If you are one of those competing retailers, you should probably be taking a serious look at implementing RFID now,” Ms. Grackin concluded.