Is RFID our best bad idea for in-store fulfillment?
Through a special arrangement, what follows is an excerpt of an article from FierceRetailIT, a digital publication covering the latest retail technology news and analysis.
The role of the store is changing in the new omni-channel order, but the technology needed to fuel it is still underutilized. Case in point, RFID and in-store fulfillment for online orders.
There’s a scene in the movie "Argo," where the characters played by Ben Affleck and Bryan Cranston are explaining their plan to rescue six U.S. diplomats from Iran as the hostage crisis played out. The plan is ridiculous — to pose as a movie crew looking for exotic locations to film a sci-fi flick — while the group hiding at the Canadian ambassador’s home is spirited away.
A few other plans, including riding bicycles through the mountains in winter, were explored but the movie crew was the one pushed. The conversation went:
"There are only bad options. It’s about finding the best one."
"You don’t have a better bad idea than this?"
"This is the best bad idea, sir. By far."
I was reminded of this exchange after spending a couple days with supply chain executives and vendors, where the main topic of conversation was how to handle online orders fulfilled at, or returned to, physical stores.
For retailers, the complications and potential disruptions around Buy Online, Pick Up In-Store (BOPIS) are many.
Imagine the scenarios. A shopper accesses item availability in the store’s inventory through the digital tool. She places the order, effectively reserving the item, and heads out to the store to pick it up. Before it can be picked and packed, another shopper buys it. Maybe it was in the checkout line at the time she clicked "buy."
Or maybe there was an internal system error, or the item was lost to shrink. And what happens if the item is reserved by two people online, and the orders get crossed?
What about staffing? How do stores allocate labor to pick and pack orders? Who gets credit for the sale, and who gets dinged for the return?
Many solutions are being tested and in some cases implemented, but one keeps coming up: RFID.
So far, the costs of chain-wide implementation paired with vendor compliance benefits of RFID have outweighed much of the benefits. But the needs of BOPIS may finally tip that equation in RFID’s favor.
RFID tags and readers will make finding an item ordered online easier, reducing store labor. The accuracy will reduce the risk of dissatisfied customers, and the replenishment options reduce out-of-stocks, overburdened systems and human error.
One thing is for sure: BOPIS is here to stay. Using stores as fulfillment centers offers retailers a way to utilize existing resources to capture incremental sales. RFID may well be our best bad idea.
Discussion Questions
What do you see as the most difficult execution challenges around BOPIS? Could RFID help retailers overcome many of the complications and hurdles around BOPIS?
Back at Circuit City, we did pretty well with BOPIS without RFID. The key was excellent inventory visibility, strong in-store execution and not over-promising. Even with RFID, it’s impossible to know the exact state of every item at any time, but 99 percent accuracy is good enough.
I see RFID use for BOPIS being deployed at stores selling higher-priced items like consumer electronics and appliances, maybe at toys and auto parts retailers or even department stores, but not grocery or housewares. Retailers need to look at the potential benefits for the entire enterprise: Inventory management improvement, display control, customer engagement, etc., as well as order fulfillment in determining whether or not to implement the technology.
RFID could help solve a variety of issues surrounding BOPIS and other inventory-related issues. However as David pointed out there are other potential solution that may not require the investment RFID requires. As retailers become more aware of the issues that BOPIS creates they will find ways to adjust their internal processes, including how inventory is monitored, BOPIS items picked, stored, etc.
I have seldom used BOPIS but my latest experience with Best Buy was straight forward. The item I had purchased was locked up in front of the store at the customers service desk. Within less than a minute I had my item and was on my way.
The idea of using RFID only for BOPIS may not have a good return for the retailer. However using RFID for inventory management as well as for BOPIS would have significant returns. Each item marked with an RFID tag is unique in that each tag is a unique number. So by reserving a specific numbered item, the retailer can keep track of an item placed on hold for pick-up. If the customer does not pick up the item within a period of time, say, a day, the item goes off hold and is available for anyone to purchase it.
The same can be true for managing items that have been purchased. If an item is purchased online and returned to a store, the proper credit can be assigned to the online sales, and likewise if purchased in a store then returned to another store or sent back via the mail.
In the fashion retail segments this would work just fine. It may work just as well for consumer electronics, hardware stores and most major general merchandise stores, but not at all for food and drug stores. At least not yet!
The article does a great job of describing the pitfalls of BOPIS: An online consumer making a purchase, only to find the item gone by the time she reaches the store. BOPIS will become a cost of doing business, but how much will it cost retailers who have to look at their businesses through totally different lenses? Suddenly the store becomes a fulfillment center. RFID may be the best way to manage inventory and handle online orders, but it is not a panacea.
I’m going to go off the reservation here in my response about the most difficult execution challenge. First, I agree that RFID is the best bad idea for all the reasons listed to help store associates find inventory rapidly for BOPIS customers. What I do see as the biggest challenge of BOPIS, however, is the negative impact on the in-store customer experience.
If I’m standing in front of an associate in a store who has received notification of an online order and is “head down” filling that order for customer pick up, I’m not feeling too good about my decision to come to the store to shop. I’m actually feeling foolish and disrespected as I stand waiting for my turn.
Retailers that require their associates to fulfill online orders and service customers, risk losing the far greater opportunity of the customer who has made the trip to the store. It’s been proven that customers who shop in-store buy more and return less. Making them feel like second class shoppers is definitely not a loyalty builder.
If retailers are going to use their brick-and-mortar stores for online fulfillment they must staff for that function and not jeopardize the in-store experience.
I’ve actually warmed up to RFID after it was suggested as a tool for inventory visibility.
There are numerous complications with using it to take an actual physical inventory and booking the counts (it’s not an accident that it never comes out of pilot, a decade after it was first touted), but for finding a product “in the vicinity?” I love it. Not nearly as costly as a full roll-out either.
The product the customer wants may well be in the store, but finding one item in the middle of a department store is like an Easter Egg hunt. Sending a clerk around a department with a handheld reader is interesting to me—and I think it reduces costs a lot.
So I think it would work, for sure.
It is all about excellent inventory management and retail execution. RFID won’t help the issue of someone in-store buying the last one while someone online reserves it for pickup in store. This is more the exception than the rule. The real issue is inventory integrity and by far this is the best-worst idea.
My own true and false:
Ensuring inventory availability between the time a customer buys an item and when they come to pick it up. Knowing exactly how much of an item is in store at any one moment is a challenge 80 percent-plus of retailers don’t manage exceptionally well today.
Absolutely RFID can help, but there has to be a business case with a reasonable cost-benefit for the retailer. RFID should also be able to help with in-store location so thinking outside of the box could help further justify the investment here.
True, an item may be in another customer’s cart/hands somewhere in the store while someone else is reserving it online. This could happen whether you’re using RFID or not. There are ways around that challenge. However, the whole point of omni-channel is to save the sale. You then get the item the customer wanted to purchase to them as quickly as possible and in the way they want to receive it.
Maybe I haven’t been in retail long enough and am a little naive, but from what I have seen, the numbers are there to support RFID and a pretty quick ROI (at least for higher volume retailers/chains). Or maybe I haven’t been in retail long enough and because of that am more open to changes and newer technologies.
If RFID is a topic you feel you know a thing or two about, but you don’t know who Mark Roberti or Dr. Bill Hardgrave are, then you should do some more research. 🙂
I understand that RFID is not a cure-all, but it certainly does hold many benefits and can be extremely effective for any retailer and their operations, BOPIS included.
I would advise barcode stickers over RFID tag/stickers. We are in the 21st century and this is not your parents OCR/laser scanner technology. Cameras with OCR software at 29 frames per seconds or lasers can pick up multiple 1D/2D barcodes simultaneously, faster than RFID that can only pick up a few tags at the same time.
Barcode tags can be printed with unique coding for the IDs (UPS/FedEx does this) so a series that begin with 4xxx is BOPIS AM or 5xxx is BOPIS PM while 6xxx is ship to customer, and so on.
Once again, today, I am going to go a little off point. One of the main downsides mentioned here is the cost. How ’bout we look at RFID use that has saved sales, kept a customer from exiting in frustration, etc.?
This brings to mind the early days of RFID when retail was talking about it, but not ready to act because of the cost of implementation. Some smart retailers took another look at RFID and figured out particular instances that would be beneficial.
My favorite early implementation was the shoe department. Having served as a shoe lacky in my earlier years, I could share countless stories about customers who simply did not wait for me to appear from behind the curtain with their shoe. Then there were those who would get frustrated because I guessed wrong when we didn’t have the size or color. Early implementations had the sales associates armed with devices that could look up exactly what was in the back room and could even request that the selected shoes be brought out.
Sometimes you just need to think outside the box when dealing with cost issues.
And that’s my 2 cents.
It’s hard to classify something as “bad idea” when RFID has proven itself time and time again to be the critical enabler of not only BOPS, but all omni-channel type fulfillment. Not only are there academic studies to prove this, but RFID adoption is growing this year because companies are seeing solid results. Macy’s has said it is absolutely foundational to their omni-channel success, HBC has said it is the key to gaining a single view to their inventory, and suppliers like PVH Corp. have stated that RFID equals integrity of accuracy and inventory flow in their supply chain operations.
The truth is that nothing else is going to prove to be as collaborative and interoperable as RFID because it helps retailers understand two inventory essentials for omni-channel success “what do I have?” and “where is it located?” RFID brings item level visibility that helps the retailer make successful matches between their product offerings and consumers, regardless of channel.
Although RFID has been around for decades, I still think there is hope for its widespread adoption in the industry … IF a true standard is embraced globally. Hmmm… let’s seeee…. maybe there is NO hope for it, on second thought. 😉
BOPIS can be done without RFID and I am not sure RFID will work because even that is not 100% and without manpower actually pulling the item out of stock or shelf, there is still risk of the item being sold in the store. Any store manager would fulfill the customer in front of them before an internet order, unless it is already pulled into the delivery cage. Also, the cost of RFID tags means it works for luxury items where it doubles as an authentication mark, but I can’t see RFID tagging a sixpack of soda.
Buy online, pick-up-in-store…It’s interesting because it brings up the old story of RFID. But is it practical?
BOPIS only requires dedicated in-store personnel that check on product, pull the product and then hold it for customers. The cost of this is just one or two dedicated workers (or department workers with dedicated smartphones that tell them to pick a product in their department when an order is processed). This is not an RFID solution, but instead an inventory/logistics one. Current in-store inventory systems are reliable enough. Consumers would be warned when placing an order what the current inventory level is (just like when booking seats on airplanes, in movie theaters, or with rooms in hotels), and that their product might not be available. Consumers would simply wait until they were alerted that the order had been filled before driving to the store to pick it up. Simple, easy and no expensive RFID.
RFID by now should be fully implemented. It’s unfortunate this hasn’t been the case. Others have already indicated how useful it is for inventory control.
That said, I don’t think the problem has been framed correctly. The real question is if BOPIS is even appropriate. I had a bad experience with shopping online and keeping a basket going while continuing to shop and once I went to purchase the item was gone.
So to expect to reserve a product online without paying for it until I got to the store is a foolish wish to begin with, knowing how bad stores are at doing anything with customer service these days much less fulfilling an order for me to pick up that I haven’t paid for yet, expecting it to be completely fulfilled.
Better to just insist on payment online from the get-go, and forget whether RFID and its poor implementation is the answer for BOPIS.
I will be so bold as to say that RFID is the only technology to make BOPIS successful and meet the fulfillment needs of every consumer in this omni-channel world. Many studies done by the University of Arkansas RFID Research Center (now at Auburn University) show that POS systems are typically only 60 to 70 percent accurate in their picture of the actual inventory in a retail store. Every consumer has a story about the item they wanted being OOS even though the POS showed units in the store due to this large discrepancy. Fast forward to today with stores like Macy’s and HBC who have moved the store inventory accuracy to the 90 to 95 percent accuracy level using handheld RFID readers to gather inventory on a daily or weekly basis. The opportunity to accomplish BOPIS fulfillment has gone up dramatically with the improved store inventory accuracy.
But at 90 to 95 percent accuracy, the likelihood of an OOS for a BOPIS order still exists. A customer does not care about the improved inventory accuracy if the item she has ordered is not available when she gets to the store. In today’s retail world, she expects the item to be available if the online purchase system says it will be there. Fulfillment failure at the store can have long-term implications for her shopping with that retailer in the future.
How to deliver the highest level of inventory accuracy at the lowest cost? Collecting RFID-based inventory with autonomous readers connected to SaaS servers, an architecture of the Internet of Things (IoT). We are collecting data at a 99.5 percent accuracy rate for one of our customers using such technology. At this level of inventory accuracy, BOPIS fulfillment can be almost guaranteed. RFID data collected autonomously is not only the best bad idea, it is the only way to insure BOPIS fulfillment works for the retailer and the consumer.