Bookseller Introduces Item Level RFID in Stores
The largest bookseller in the Netherlands is done testing radio frequency identification (RFID) in its stores. Selexyz (formerly Boekhandels Groep Nederland) had decided that it is time to roll out the technology chain wide.
“The project was so successful that the company is about to open its second RFID enabled store and has plans to push this out to all our locations in the Netherlands by the end of 2007,” said Jan Vink, chief information officer of Selexyz.
A report on Forbes.com, said the retailer is tagging products with the intent of lowering labor costs, improving inventory management and putting technology tools at the hands of consumers to increase sales.
Kiosks have been designed for the retailer that track books by section and shelf location as well as the ability to order. Customers using the kiosk have increased their purchases by 50 percent compared to what they were buying prior to the technology tool being placed in stores.
Selexyz’ RFID system allows the retailer to track books on an individual basis from the point where a sku leaves the distribution center to the point it is purchased. The system can even identify when a book has been placed in the wrong section of the store.
According to the bookstore chain, it has achieved an almost 100 percent accuracy rate. Errors have resulted when tags were placed in the wrong area on an item or because they fell off.
Mr. Vink told Forbes the company intends to automate returns, increase kiosk functionality and introduce smart shelf technology.
Discussion Question: Is the time right for the use of item level RFID in at least some retail environments in the U.S.?
A bookstore is a perfect place for RFID since a bookstore is no longer just a place to buy books, rather it’s a community location with people coming and going. The more community oriented a bookstore becomes the greater its sales potential and with the use of RFID there is a huge ability to decrease the potential for shrink. Additionally, depending on the extent of RFID in the stores, it could be possible for a person using a self-serve PC to search for a title and be told the exact shelf location with a high degree of accuracy.
The automated returns function mentioned by the Netherlands bookstore has me intrigued. Does this mean that the RFID tag is still attached to the purchased book and has remained viable? And if so, what happened to customer concerns about privacy once they leave the store; and what happened to the technology that’s supposed to “kill” the tags when items are purchased?
To answer the question, of course it’s time for item-level RFID to be tried in some retail environments. How about high-end wine and liquor stores? (How many of us have been in a wine store searching for that special bottle after the owner has said, “I know I’ve got one around here somewhere?”) Heck, 80% accuracy would be just fine. And there are several other reasonable applications. The point is, item-level RFID will not be implemented in one big “whoosh.” Instead, it will appear and be used in trickles, undergo and be refined by those field tests, and finally be ready for prime time.
Obviously it worked for them, so what is the question? Several commentators have mentioned key parameters in the successful implementation of RFID on the retail floor. It is not yet any kind of panacea, but for higher dollar items it can pay its way.
Since the term RFID is used more or less generically, it is important to note that there is both an active RFID, as well as passive. With active RFID, the “tag” is itself powered, and emits a signal, which can be detected at a distance. For passive RFID, the tag can only respond to a relatively high powered detector quite nearby.
I point this out because often people think of RFID as a “tracking” technology. The active version, which is NOT used for item level tagging, is suitable for tracking, but the passive version does not “track” the item, it simply detects its presence adjacent to a reader. The only sense that it “tracks” is that it reports the items location at a single point in time (by the detector); but it says nothing about the item before or after that particularly detector, unless networked with other detectors. On the other hand, the active tag’s signal can be triangulated and more or less continuously located, creating a true “track.”
The cost significance is that passive tags are/will be in the pennies to dollar range, with detectors in the few hundred dollars to low thousand range. Active tags are/will be in the twenty to fifty dollar range (apiece) with the detection system more in the twenty to fifty thousand dollar range. In case you were wondering. :>)
In order to justify the use of RFID over Barcode one has to make use of RFID’s capability to read large groups of items all at once (a case full of books). So far, the read rate is 80% or less, and that just isn’t good enough.
Ok, so you read the story and compare that with your own experience and there is a certain common sense and also some questions.
It is amazing to me, frankly, that book stores don’t all currently have self-service kiosks that allow customers to see what books are in stock. In the larger stores, you have to go to a customer service desk to ask. Well, maybe I don’t want to ask for help to find books on my troubled teenager or finding a job when you’re out of work, etc. So you walk away.
If you can find a book on your own at a library computer e-catalog or at Amazon.com, why shouldn’t you be able to do it at a book store? Crazy.
So, we have to separate the customer service/experience aspect of this from the RFID aspect. My experience is that most large stores can look up and pretty accurately tell you if they have it or not and where it is, though there is some error and maybe a little searching.
The question then is, is RFID needed to do this or not? It can help and this is one case where I think the logistics processes do make RFID especially attractive, and where I do in fact believe enabling customer self-service to find books would in fact lead to a strong increase in sales.
If you had a good system of knowing what specific titles you shipped to each store from your distribution center; a bar code-based receiving system in the stores, at a carton level (not each book level) tied to shipping data; and a POS-based perpetual inventory system in the stores, I think you could support these kiosks quite well without RFID. That said, in this specific case RFID could offer some real advantages and if you achieve the sales bump indicated, the cost of the tags would be pretty trivial in relative terms.
Bookstores are not supermarkets. The number of variables you need to monitor in a supermarket (shelf time, temperature, etc.), not to mention the square footage and inventory issues and the cost of installing readers make the application of RFID much more problematic for food retailers. RFID’s time will come but not until everyone quits jumping the gun.
RFID is not ready for prime time. There are too many issues about personal privacy, recording and reporting of information and RFID reliability which have yet to be addressed. In addition to this, the cost of RFID is tremendous and has yet to be proven in anything but a military model, at best. RFID is a great technology which still needs to mature before being used in any public environment. Here in the USA personal privacy, how a store will record, use and possibly share RFID data has yet to be tested in the courts. More importantly, some of the early pioneers and advocates of this technology still haven’t implemented it (of particular interest is Wal-Mart’s call on this) and their reasons vary from cost to legal issues as well as implementation concerns. Either way, it is still too early to take this technology into the public retail environment.
The timing is right for the implementation of item level tagging of some types of merchandise, however the accuracy and price of the RFID tags are still prohibitive for some retailers. Currently one of the most effective areas for item level RFID tags are big ticket items that are tracked by serial number. Other types of merchandise are becoming candidates for item level tagging as the prices of tags continue to drop and the accuracy improves.
Selexyz uses 2,000 RFID tags/day, at 10 cents each. Assume the labor cost to insert the tags is another 5 cents and the gross margin on a “lost” (title the customer can’t easily find) book is $6. It means that 40 RFID tags remove the profit on a single book. Or another way of looking at it: Selexyz has to sell an extra 50 books a day to beat the RFID tag cost. Since their sales are probably around 1,800 books/day (assuming unsold books are returned to the publishers, with a 10% return rate on purchases), that’s a sales increase of 2.8% to break even.
While the self-service kiosk sales increase may be impressive, self-service kiosks have had a poor response in retail stores worldwide, so it isn’t clear just how many books extra were actually sold. For example, if the kiosk sales doubled to 6 per day from 3 per day, the cost still isn’t worthwhile. And maybe 2 of the 6 would’ve been sold without the kiosk or RFID, since customers in kioskless stores often find things for themselves by walking around.
How many retailers in North America have comparable margins to Selexyz? How many retailers would bet their comp sales would increase another 2.8% with RFID? Many retailers are struggling to get 2.8% comp increases these days, and their gross margins per item are often 25 cents to $2. If Selexyz was a store with gross margin of $2 per item, the RFID breakeven would be a comp sales increase of 8.4%. Would Selexyz sell an extra 150 books per day due to RFID?
Another question: suppose retailers spent half the RFID cost on improved staff training, compensation, and better procedures. Would the payoff be better than RFID? Let’s face it, if a lot of books are lost in the store, isn’t the core issue related to labor? Selexyz is spending $300 per day on RFID. If they spent $150 extra on their staff, could it be just as worthwhile?
For an 18 minute podcast debate on the economic merits and demerits of RFID, go to www.narms.com.