design:retail - April/May 2018 - 12

the connected store

012

Why More Retailers
Haven't Invested
in RFID

RECENTLY RECEIVED A call from
a university student who is studying the adoption of radio frequency
identification (RFID) in retail. She
was interviewing experts to understand more deeply why the
technology has not yet become widespread.
It's an interesting question, and it's one that I
have thought a lot about. So, I'd like to share
my thoughts.
First, let's put the discussion in context. Retailers have been struggling with lost sales due
to out-of-stocks since, well, forever. Study after study shows that at least 8 percent of items
are out of stock at any given time. But it's even
worse: inventory accuracy is only at about 65
percent in many stores, and customers leave stores
about 30 percent of the time without finding at least
one item they want to buy. Poor inventory accuracy reduces a retailer's ability to show products to
online customers.
RFID enables companies to boost inventory accuracy to about 95 percent without having to invest in
additional labor. If their suppliers bear the cost of the
7- or 8-cent tag, the retailer only needs to purchase
the hardware and software that captures the data, and
then train staff members to act on that information.
What is the result of using RFID to boost inventory accuracy? Well, University of Leicester
Professor Adrian Beck recently studied 10 European retailers and amalgamated the results for a
new report, titled "Measuring the Impact of RFID
in Retailing: key lessons from 10 case-study companies" The benefits that these 10 companies
discovered are impressive.
According to the report, RFID increased sales.
Seven of the 10 case studies shared data showing a
sales improvement in the range of 1.5 to 5.5 percent.
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"For the 10 companies, this could amount to a
RFID-driven sales uplift of between €1.4 billion and
€5.2 billion," the study indicates. In U.S. dollars,
that's $1.7 billion to $6.4 billion for just 10 companies.
RFID also improved inventory accuracy. Companies typically improved between 65 percent to
75 percent and 93 percent to 99 percent. It also increased stock availability, reduced inventory levels,
and decreased shrinkage and staffing costs. All 10
businesses said they achieved a return on their investment in RFID.
So the question, then, is this: With these kinds of
benefits, why isn't every major retailer in the world
using RFID?
One possible explanation is ignorance. A lot has
been written at RFID Journal about the value of RFID.
Most retail magazines have given some coverage to
the value that the technology has been delivering, but
I've read several research studies about the changes
retailers face, and most do not mention RFID. They
simply stress the need to improve inventory accuracy
without explaining how that can be done.

GLOBALSHOP.ORG

MARK ROBERTI
FOUNDER & EDITOR
RFID JOURNAL

Another reason is that new technologies simply take time to be widely adopted.
There is a process that almost all new technologies follow, according to Geoffrey
Moore, the author of "Crossing the Chasm"
and other books on the technologyadoption lifecycle. It begins with the birth
of a new technology. Then, there is a wave of
optimism about what it can do, followed by
the realization that it can't yet deliver on its
potential. Slowly, the technology matures into
a solution to particular problems, and then it
takes time to build critical mass, after which
the technology crosses the tipping point. At
that stage, adoption accelerates rapidly. RFID
currently is in the process of building critical mass in retail, and I believe it will do so within
three years.
That being said, I believe that one key reason
RFID has not been more widely adopted among
retailers, particularly in the United States, is an
aversion to risk. Investors punish companies that
fail to consistently hit their numbers, which makes
CEOs leery of investing in any new technologies.
Ironically, if a technology is transformational, as
RFID is, it becomes more risky to the CEO trying to
hit his or her number for the next quarter.
One way or another, however, RFID will be adopted. If existing retailers are unwilling to deploy
the technology, new ones will enter the market
with new business models that use RFID and other
technologies to seamlessly merge online and physical channels, and that will compel conventional
retailers to adapt. The only question is how long it
will take.
MARK ROBERTI IS THE FOUNDER AND EDITOR OF RFID JOURNAL.
TO READ MORE OF MARK'S OPINIONS, VISIT RFIDJOURNAL.COM.

Vector image by LIFEKING/SHUTTERSTOCK

http://www.RFIDJOURNAL.COM http://www.DESIGNRETAILONLINE.COM http://www.GLOBALSHOP.ORG

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