Retailing With RFID
Retailers are experimenting with radio frequency identification’s applications beyond the warehouse.
First Wal-Mart, then the rest of retail.
This might be the trajectory of retailers’ uses for radio frequency identification technology (RFID), according to its advocates.
A few years ago, Wal-Mart started using the radio tags that make the building blocks of RFID when receiving palettes and cases in some of its warehouses. RFID helped Wal-Mart workers more accurately track what was in their warehouses. Since then, the technology has made its way from warehouses to shop floors.
Retailers JCPenney, Dillard’s, Barney’s, American Apparel and Hot Topic have experimented with RFID in stores. As retailers increase technology budgets to improve their supply-chain management and inventory control, RFID vendors are making a gambit for this technology to be a leading contender to track what’s going on in stores and warehouses.
After implementing an RFID program, average inventory accuracy shoots up to 95 percent, according to studies from the Sam M. Walton College of Business at the University of Arkansas. According to the university’s findings the average accuracy of inventory for apparel retailers is 62 percent.
Improve the inventory accuracy and sales will increase because retailers know exactly what is in their stores, what consumers are buying and what they need to reorder, according to Dr. Bill Hardgrave, founder and director of the RFID Research Center at the University of Arkansas. According to Hardgrave’s studies, stores using RFID see sales increases of 2 percent to 15 percent.
If retailers know exactly what merchandise is coming into their stores and where it is located, they also know quickly when something is lost or stolen. “RFID provides unprecedented visibility to both products and the processes used in inventory management,” Hardgrave said.
With RFID, there are several ways to implement it in a shop. Different radio tag manufacturers—such as Motorola, Texas Instruments and Alien Technology—build different styles of radio tags, which are typically no bigger than a pinhead. Some RFID are placed on garments’ hangtags. Others can be sewn into the garments or embedded in an adhesive that can be placed on a garment. Salespeople can track the radio tags with barcode scanner–like instruments. Just the beginning
The future is unwritten for RFID technology, said Jeff Roster, an analyst with Gartner Inc., a technology research and advisory company. “This technology is in its adolescence,” Roster said. “It’s finding its niche. Retailers are beginning to understand what to do with it. They’re beginning to deploy it.”
Customers can use RFID as another tool to help text salespeople when they are in dressing rooms or contact their Facebook friends when trying clothes on, said Kurt Domini, a partner of RFID Enabled Solutions in Dublin, Ohio.
Stores also could use the radio tags to collect information about their customers and what garments they try on at stores. RFID could create information-packed customer-loyalty cards, said Jim Caudill, senior vice president of marketing at Xterprise, a Carrollton, Texas–based information-technology company.
“It can be the enabler of what’s next in the retail environment,” Caudill said.
Los Angeles–based American Apparel has been testing RFID systems from Xterprise and other providers for the past year, according to Stacey Shulman, American Apparel’s director of IT-retail. The company has seen “positive results,” she said. “At this point, though, we are refocusing our efforts and incorporating some lessons learned and finding ways to streamline implementations to drive down our per-store costs.”
The cost of RFID technology has decreased in the past few years. Prices of the radio tags have declined recently from 30 cents to sometimes as low as 9 cents, according to Leslie Hand, the research director for IDC Retail Insights, a market-research firm based in Framingham, Mass.
The cost of purchasing and implementing an RFID system vary greatly and could range from $2,000 to $20,000, Hand said. She said retailers typically recoup their costs in six months to one year. However, for the near future, RFID will be a technology for companies with deep pockets.
“It won’t be ubiquitous until [radio tags] cost a penny, and that is way down the road,” Hand said. “But for apparel retailers with a lot of margin, there are plenty of opportunities here.”
