Many leading brands and retailers around the globe are adopting RFID technology. But, in the meantime, many hesitators wonder what they get from it. How about you? Are you currently questioning whether you should invest in RFID?
October 7 2022
Specifically now, in times of uncertainty, retailers have to prioritize. As a result, the list of projects and tasks to finish is long. Is one of the reasons why your organization has not implemented RFID yet one of the below?
'We currently have other priorities internally.'
'The company has no internal resources or ownership to run this project.'
'We don't clearly understand the full benefit of RFID to the business.'
'That's great that other retailers are doing it, but how do we know it will work for us: we're different.'
'RFID has so many touchpoints, so where do we start?'
COVID-19 has obviously pushed online shopping adoption ahead by around four to five years. Retailers aCOVID-19 has pushed online shopping adoption ahead by around four to five years. Retailers are betting on reinventing the in-store experience and reacting by widely adopting omnichannel services. In this context, they realize that it is necessary to improve stock file accuracy since every piece of merchandise counts when leaner inventories are the rule of the day.
Clear visibility of what is in stores and the supply chain is a fundamental foundation to ensure merchandise availability - physically (in-store) and digitally (online).
Why retailers don't invest in RFID
Looking into the adoption of RFID in retail, we see that it varies greatly. For example, according to a study from Kurt Salmon, Part of Accenture Strategy, with 110 global retail executives in 2018, the adoption in North America is at 92%, while it is only 30% in Europe.
RFID is a technology that means a change in actual organizations. And change comes with effort, friction, and investments. But the substantial benefits are widely proven in the industry. Still, some retailers hold back on implementing RFID.
Defining an RFID roadmap
RFID can get complex quickly. So it's essential to start small, take a pragmatic approach, and scale smart on this over time. Once you have the basics of an accurate stock file as a foundation in your business, you can map out the RFID roadmap and phases.
Implementing RFID is a strategic choice that allows you to leverage other investments to provide further insights.
More accurate inventory tracking can drive sales growth by providing associates and customers the ability to find every piece of merchandise down to the last unit available
Typically, retailers may perform an audit on their stock once or twice a year. However, starting on the very first day after the audit, the accuracy of the stock file declines up to the next audit date. The internal teams are already available to explore RFID further within a retailer, as these tasks are already being performed regularly.
Starting with a basic, simplistic, and focused approach, a retailer can deploy RFID with a lightweight team led by a project manager. With the support of the right RFID partner, a business case can be built that then lays down the blueprint for the future direction.
Proofing value of RFID is a numbers game
Retailers considering whether RFID suits their business have decided based on a focused business case comparing invested capital against the benefits of selected use cases. What does improved stock file accuracy look like when exploring RFID?
Better accuracy leads to better product availability, which leads to increased sales. Sales increases are delivered because retailers have a much better size range available across all represented styles. Based on various proof of concepts with global retailers, we can see the following trends concerning accuracy and sales uplift in the table below.
RFID Accuracy %
Uplift in Sales %
1.4% - 10.4%
Maintaining stock accuracy is a real challenge for retailers not using RFID. Inaccuracies accumulate from theft, faulty deliveries to and from the DC, processual mistakes, and incorrect labeling. Retailers who don't have RFID typically have the worst stock accuracy when they most need it (peak trading). This is often immediately amended after the audit in the new year and when consumer spending often drops off.
If we look at never-out-of-stock items, they have a much more significant impact on sales when they are replenished more frequently using RFID. Retailers using RFID through peak trading can quickly adjust discrepancies, providing customers with a complete product offering at the most critical times.
Inaccurate inventory costs twice (at least)
The cost of inaccurate stock data accumulates over time, increasing stockouts and order cancellations. Ultimately, this leads to missed sales, but more importantly, it can also cause disappointed customers.
Retailers who use RFID for their stock management report that a 3-4% increase in stock file accuracy correlates to a 1% increase in sales. If you couple this up with retailers not using RFID during peak trading, these accuracy differences cost even more in lost sales potential.
RFID and omnichannel readiness
RFID is the enabler for omnichannel services. Better stock visibility is the foundation for rolling out omnichannel services, such as Click & Collect (BOPIS), Click & Reserve (BORIS), or Ship-from-Store.
Recently, we can see a direct relationship between the adoption of RFID and how retailers see the technology impacting their omnichannel strategies. Not implementing RFID would mean that retailers miss out on the following:
Lower thresholds for safety stock (more available stock to sell online)
BOPIS versus Ship to Store
Slow Moving Inventory First
RFID is going to be a critical enabler in order for us to create a fully connected marketplace for NIKE products across both our own stores and our strategic partners
Matthew Friend, Executive Vice President and Chief Financial Officer at Nike
Upstream benefits in retail supply chains
Eventually, one can also use RFID upstream. The obvious one is the benefits in the DC as the RFID labels allow you to do efficient in and outbound scans of your goods. For example, tracking goods to wholesale partners or franchisers ensures these are not traded via grey market channels.
In short, you can trace back an EPC you find in an unapproved location. But even better, you can go upstream more and have your manufacturers make direct shipments to your wholesale channel. This cuts out the logistic costs of having them in your DC first.
Also, customers benefit from broader supply chain data, such as checking a product's provenance. For example, they can pick up a product and check its sourcing, authenticity, materials, and its entire lifecycle based on RFID tracking data.
Boosting customer loyalty by making products simply available
RFID allows retailers to have complete visibility of their supply chain and shows in detail which products are available in which stores. So they can ensure all sizes are represented on the sales floor for their customers to purchase.
So, long story short: without RFID, retailers will continue to work with inaccurate stock files. The "price of an inaccuracy" is manifold. However, these are only the starting losses for not using RFID. As the technology becomes embedded into an organization, further operational gains can be opened quickly, whether through the supply chain or by providing more services with confidence to the customer.
Closing remark: I have teamed up with my colleagues Adam Sheppard and Nick Markwell for this blog post. They supported me with valuable insights from various customer projects over the last few years. We were asking ourselves why some retailers still hold back with an RFID implementation and if we could calculate the costs of this missed opportunity.
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Stock visibility along the whole supply chain is essential for retailers to make merchandise digitally available. Driven by the reality we are currently living in, shopping behaviour is rapidly changing......