Will RFID Take Off Now That Tag and Hardware Prices Have Dropped?

Among the objections put up by companies that have chosen not to use radio frequency identification technology (RFID) in the past, particularly at the item level, is the cost of the needed hardware and tags. RFID vendors say costs have come down in recent years. So will that mean greater adoption at retail?

The price of tags has dropped 40 percent in the past year-and-a-half to between seven and 12 cents or less depending on tag specs and the number needed, according to Truecount Corporation, a RFID supplier. Hardware is down more than 30 percent over the past two years.

While there are clearly some retail situations where RFID is not the answer, the technology does have a role to play in higher margin categories such as fashion where reducing theft is an ongoing objective for merchants. According to ChainLink Research, over one billion apparel items were tagged in 2012.

RFID has a critical role to play in retailers’ omni-channel initiatives, says ChainLink Research. Merchants need to be able to find wanted merchandise wherever it may be in their system. Using RFID, retailers can locate inventory from stores, distribution centers, a manufacturer, etc. and move it directly to the consumers.

While reducing out-of-stocks is a common benefit associated with the use of RFID, a tweet by @RFIDinRetail reminds followers that the technology also has a role to play in reducing overstocks, gaining planogram compliance and achieving smarter shelf assortments:

Retail RFID tweet

BrainTrust

Discussion Questions

Have tag and hardware costs come down enough to make RFID more attractive for retailers to implement? What do you see as the most important benefit(s) of RFID?

Poll

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Frank Riso
Frank Riso
10 years ago

The cost of the tags appears to be right for products that have a higher margin such as apparel and consumer electronics. The ability to take an inventory of everything on the sales floor every day or just about every day speaks volumes about the state of a store.

Any store that knows exactly what is on the sales floor, by sizes, by colors, and by styles has the advantage and opportunity for better sales. RFID makes it easier to take more frequent inventory.

Ryan Mathews
Ryan Mathews
10 years ago

George is right, it depends on what kind of retailers one is talking about. Adding a seven cent tag to a can of beans still doesn’t seem to make too much sense.

There are lots of issues with RFID beyond tag and and hardware cost, including the environment and corporate shrink policy.

But the real question is about the defined benefit.

Shrink control is a joke. Literally every week I watch people walk out of stores with stolen merchandise setting off every alarm in the place. Rarely are they pursued. Organized thieves understand most retail workers aren’t really going to follow them out that door, so finding a new way to trigger the alarm is clearly not the answer.

Inventory control up to the shelf? Now, that may be another issue, and one worth exploring.

Camille P. Schuster, Ph.D.
Camille P. Schuster, Ph.D.
10 years ago

Lower prices will help to increase the adoption rate. There is also a chicken and egg issue: retailers do not want to invest in the technology for distribution centers and stores until a good percent of suppliers are using the technology, and retailers do not want to invest in the tags and research to make them work until enough retailers have the reader technology. Lower prices and the promise of sufficient usage rates are necessary for increased adoption.

Paula Rosenblum
Paula Rosenblum
10 years ago

I have always felt that the most dramatic quantifiable benefit of RFID would be the elimination for the need of physical inventories in the store. No one has talked about just how expensive an operation that is…and the counts are never totally accurate. Of course, the ability to find misplaced merchandise can help the retailer sell more stuff—”Where’s that size 7 pair of jeans, again?”

The part I have yet to have fully explained to me is how any of this can be managed until the cost of readers drops enough to provide full store coverage. Until then, I honestly can’t figure out what a retailer would do with the data provided from an in-aisle scan. I’m sure someone has the answer, but no one has yet told me the answer to this: “What do you do with the counts you receive from the selling floor?” Buy more? Update the books? What???? And what will the auditors accept?

Adrian Weidmann
Adrian Weidmann
10 years ago

The most significant benefit for integrating RFID is the ability to track and monitor exactly what and where particular merchandise resides in the brand’s and retailer’s supply and inventory chain.

As retailers and brands begin to understand the value in terms of both brand perception and direct financial benefit of delivering the omnichannel shopping experience to their customers, integrating RFID into select merchandise categories will become more and more pervasive. These benefits along with the reduction in hardware and software pricing will continue to accelerate RFID’s adoption.

Ron Margulis
Ron Margulis
10 years ago

My friend Frank Riso has it exactly right. Sales lift and greatly improved inventory accuracy are what item level RFID provides retailers. He’s also correct that item level RFID is not for every category, but is providing benefits in apparel, jewelry, handbags, shoes, luggage, batteries and several other product groups.

Cathy Hotka
Cathy Hotka
10 years ago

I spend a lot of time with retail IT leaders, and most apparel companies are on board, somewhere along the continuum. The impetus is financial, and improved technologies are encouraging fresh looks. This time next year we’ll be comparing notes on the results.

John Boccuzzi, Jr.
John Boccuzzi, Jr.
10 years ago

RFID was a hot topic 6+ years ago, thanks to Walmart endorsing the solution. That said, it never gained real momentum for all the reasons discussed including cost.

What excites me about RFID technology today is how it could be used to help consumers understand what is available where and for how much.

Example: You are in the mall and you want to find a size 10 New Balance sneaker, but you are not sure who carries it or if it is in stock. With RFID tied to a consumer app, you could help consumers find the right stores that not only carry the item, but also has it in stock.

I look forward to watching consumer applications for RFID hitting the market in the next year or two.

Ralph Jacobson
Ralph Jacobson
10 years ago

When source tagging becomes effective at all of a retailer’s suppliers, then RFID may have a chance. Further challenges still lie in reading capabilities at the case and item level, as confidence varies from product to product. Cost is only one factor in driving widespread adoption of RFID. Strategies need to be developed on the level of penetration, by pallet, case and item, and by depth of category.

I believe RFID (or some technology with a similar purpose) will eventually take hold in retail and CPG, however, this takes a global effort, from source to POS, to work.

James Tenser
James Tenser
10 years ago

RFID is another one of the great “it depends…” issues in retailing:

– It depends on the retail channel under discussion.
– It depends on whether tagging is at the item level, the case level, the pallet level, or the container level.
– It depends on the value of the items being tagged.
– It depends on the unit cost of tags and the total cost of the system required to use them.
– It depends on the scale of the problem the tags are used to correct.

It’s easy to grasp how item-level RFID is smart for flatscreen TVs but dumb for the proverbial can of beans.

Using RFID for store level inventory replenishment at your local convenience store may be as unrealistic as a nuclear mousetrap. Maybe it’s not a bad idea for cigarette cartons, however.

I’d never say never when it comes to RFID, but I am skeptical of those who try to convince us that it’s a panacea for inventory woes. It will work where it works. It just depends.

Mark Price
Mark Price
10 years ago

If you begin with the end in mind, of a fully automated supply chain, then the cost of RFID becomes much less of a barrier. The ability to manage inventory across a chain on a real-time basis will provide savings consistently. In addition, the insight that will come from understanding the ebbs and flows of inventory based on day of week, time of day, the school schedule, weather, etc. will help stores reduce costs and capture lost revenue.

Kai Clarke
Kai Clarke
10 years ago

No. There are still personal privacy issues, implementation issues and of course data security and usage issues which this article does not address. RFID is a technology looking for mainstream usage, which may never come….

Patrick Javick
Patrick Javick
10 years ago

Retailers across the globe have seen tremendous benefit from RFID technology when there’s a strong business case for it. Today, within GS1 US’s Apparel and General Merchandise Initiative, the community is rallying together to determine the real question that our brands and retailers should be asking themselves which is “What processes within our supply chain and stores can benefit from increased visibility?” Retailers and brands that have deployed EPC-enabled RFID, have determined that the technology (RFID) is best suited to provide increased inventory visibility, better fulfillment, improved inbound and out bound operations, improved outbound audit, increased control over loss prevention, greater display compliance, and better asset management, to name a few processes.

For example, if companies determine that they are losing millions of dollars per year due to lost sales, theft, markdown management, and increased labor costs, the cost of the hardware, software and implementation is minimal in comparison to the cost efficiencies that can be achieved through EPC-enabled RFID. What I suspect is that most companies have not done the cost benefit analysis and there’s a real opportunity for retailers to make a business case for EPC-enabled RFID.