RFID — The Basics
RFID allows retailers to automate their entire supply chain. It allows them t identify individual items, cases, and pallets, the same way bar codes let them — but wirelessly, and without the need for line of sight, and with richer data, and with the ability to employ better analytics for bigger Big Data.
The technology has allowed the retailers to become ever more competitive with online sellers,
through “omnichannel” sales that allows retailers to close a sale on the buyer’s terms — whether in store, on eCommerce stores, social media, or through a combination of all of the above.
Retail stores can now be sure that when their website states that an item is in store, it actually is and the retail inventory knows exactly where it is.
The Technology — How Does it Work?
In simple terms, RFID enables frequent inventory counting and hence increases the accuracy of the inventory. It allows a retailer to be more confident about not just store level accuracy, but also at color and size level.
Introduction — The State of RFID
Radio frequency identification (RFID) is a fully automated inventory tracking technology that
generates significant improvements in accuracy, efficiency and visibility of merchandise management at the product level.
Just as the barcode had done a few decades ago and just as the Internet has done in the last decade, RFID is the new technology poised to change the way retailers do business, and engage and retain customers.
Creating a more effective and efficient inventory system until recently was considered as a solution solely suited for wholesale and supply chain applications. RFID has attracted much attention in these quarters, but the scaling of the RFID technology (hardware, software, and data analytics) has allowed the scaling of “knowing what merchandise is available, where, and it moves” beyond warehouses and directly onto the sales floor. As a result, the most valuable and exciting advantage of a real‐time RFID inventory management systems are being realized within the walls of the retail stores.
The RFID ecosystem has come of age and retailers hoping to drive leverage over their competition can improve productivity, completely automate inventory, prevent out‐of‐stock scenarios, boost satisfaction and loyalty, and boost their bottom line.
And the good news is that solutions providers have honed application expertise while software
vendors now provide field proven, retail‐specific applications. Encouraged by the development of
industry standards, major technology companies such as Microsoft, Intel, Oracle and IBM have made significant investments, which puts standard, inter-operable RFID within the grasp of many more users, especially the retailers.
The Retail Problem
Today, most retailers don’t really trust their inventory systems, so they don’t
typically use them to find things in the store.
Managing a selling floor requires constant vigilance: new merchandise constantly arrives and must be processed quickly and accurately, and as merchandise moves out the door, it must restocked near “simultaneously”.
For retailers to maintain the desired “model stock” assortment that is available at all times requires knowing exactly how much stock is available on the floor at any given moment, which items have move from place as customers browsed through the aisles, and in the end what is left in the stock room, and hence what needs to be re‐ordered.
Retailers are further faced with the challenges of monitoring and controlling “shrinkage”, which causes a dramatic drop in either customer satisfaction or else cost‐effectiveness of managing the retail store. This is because as the retail staff becomes more engrossed in restocking the sales floor, their availability for addressing customer concerns when they are on the floor is directly affected.
RFID as a Solution — Overview
Item‐level RFID tagging is the technology solution to increase inventory accuracy and control as well as engaging customers better. It has already proven itself as a way to address all the challenges mentioned previously across a broad range of retail formats — specialty stores,
department stores, club stores, among others. The payoffs of RFID go well beyond reducing out‐of‐stock situations, labor and shrinkage costs. It now includes new ways to serve
customers and enhance their in‐store experience.
This paper provides retail professionals with a basic understanding of how RFID works and how it can help improve day‐to‐day operations and boost the bottom line, highlighting the results that others have already achieved through RFID deployment.
Advantages RFID Can Offer Retail
RFID provides an accurate, automatic, convenient scan that does not rely on “direct line of sight” to read encoded data. This has made it the ideal solution for tracking inventory goods in motion. Initially, RFID systems were embraced for a diverse range supply chain applications, because they delivered dramatic improvements in labor and time needed by retailers to track inventory movement. Recent developments in and scaling of tracking technologies now allows retailers to overcome various
RFID offers the following advantages to retailers:
- Smarter and Faster Sales Floor Stock Replenishment
- Greater Inventory Accuracy
- Greater location Visibility
- Expedited Receiving
- Improved Validation of Shipment Integrity
- Fewer Items Sold at Markdown
- Reducing Internal Theft
- Reduced Shoplifting
- Interactive Retail
- Better Consumer Research
Greater Inventory Accuracy
According to studies, by enabling real‐time inventory at the SKU level, RFID allows retailers to achieve inventory accuracy of 99% or better. Retailers are often relying on “piece count” sales statistics that grossly underestimate the variance between actual on‐hand position and POS‐driven facts.
Smarter and Faster Sales Floor Stock Replenishment
With RFID, the sales floor can be quickly read/scanned and the software can automatically generate lists making it easier and faster to re‐stock the sales floor. RFID analytics can even alert mangers in case too much “put back” merchandise s accumulating in fitting rooms, and hence resolve problems before customers ever notice them.
Greater location Visibility
RFID not only tells you what is and is not in stock, it also identifies where a specific item can be found in the store. This reduces search and stock room trips, hence leaving more time to engage with customers and generate sales.
RFID can avoid the common problem of newly arrived stock sitting for days on end without being
processed. RFID allows reading of pre‐tagged merchandise and hence cuts the receiving time to
minutes. Furthermore RFID can be used to prioritize merchandise e.g. needed immediately on the sales floor. This is crucial for time‐sensitive items such as fashion apparel, new DVD titles, and other seasonal merchandise.
Improved Validation of Shipment Integrity
Retailers often accept merchandise into inventory by simply trusting that the shipment is complete and complete because an open box audit would be too costly in terms of time and labor. RFID allows retailers to validate 100% of their shipments, instantly notifying them of any discrepancies e.g. in-transit theft/loss, or packing errors.
Fewer Items Sold at Markdown
Large number of items only reach the sales floor when they have hit markdowns. RFID dramatically increases merchandise visibility, easing stocking and hence recapturing lost revenue opportunities.
Reducing Internal Theft
RFID allows retailers to regularly count every item in their store. It serves to deter dishonest
employees who may take advantage of the retail’s lack of real‐time visibility. With RFID, the entire
journey of the item till the stock is possible, often yielding valuable clues.
RFID readers at doorways can easily track items brought in and taken out of store by customers.
RFID reader‐equipped “smart” screens and mirrors offer a dual advantage: of allowing a more
interactive customer experience as well as informing the retailer the precise item selected by a
The introduction of display screens and mirrors with RFID readers allows possibility of cross‐selling suggestions about the merchandise held by the customer, increasing conversion rates and boosting cost per transaction, and making retail shopping a more fun and engaging experience.
Better Consumer Research
RFID tags carry unique product numbers. If consumers pay for goods with a credit, debit or shopper’s discount card, retailers can link the purchases to the recorded RFID data and use that marketing information to map out individual consumers’ movements through a store. This sort of data can help a retail store make improvements, for example, by helping to optimize a store’s layout to match typical consumer behaviors.