RFID Growth Tagged to Apparel
Much of the hyperbolic speech about radio frequency identification
(RFID) in retailing has been muted in recent years, but use of the technology
continues to grow.
“There are a lot of neat things going on in cold chain and agriculture,
but apparel item-level tagging is driving the industry,” Bill Hardgrave,
founder and director of the RFID Research Center at the University of Arkansas,
told RFID 24-7. “There is just tremendous movement there and we’ll
see substantial quantities by year end.”
Drew Nathanson, senior RFID analyst
and director of research operations at VDC Research Group, sees substantial
growth for both tags and RFID transponders in the next few years.
“Projects are scaling, conversion times from pilot/evaluation to deployment
are decreasing and adoption among new accounts is increasing,” Mr. Nathanson
told RFID 24-7. “Budgets are way up, significant purchase orders
for delivery throughout 2011 are being placed, and RFID is becoming more deeply
integrated. Simply stated, the end user is more committed to RFID than ever
before.”
Mr. Hardgrave agreed. “It seems like almost every week
we’re talking to another retailer moving down that path, and those numbers
are starting to add up. We’ve moved past those phase one pilots and really
now into the next phase, which is rolling out chain-wide or a store at a time
and the numbers are increasing. On the passive UHF side, we’ll see numbers
by the end of the year that we’ve never seen before.”
Charles Vögele,
the largest clothing retailer in Switzerland, is considered one of the retail
industry’s success stories, using RFID with EPC Gen 2 labels from the point
of manufacture to the point of sale.
“We have begun streamlining our operations and supporting our sales in
ways that simply were not possible before. In many ways this marks the beginning
of a retail revolution,” said Thomas Beckmann, VP of supply chain, Charles
Vögele Group, in a press release.
Discussion Questions: What is your assessment of the current state of radio
frequency identification technology in retail? Where are the greatest opportunities
for its application and where does it still face challenges?
It boils down to the business case and the return on investment for the technology. If all that a retailer needs is the price and SKU number, then a traditional UPC code will deliver the results. If the retailer wants to track history of pricing, point of origin, color lot code, and date of manufacture, then the RFID tag can gather and provide that information.
RFID continues to improve every year because of the development of the technology, lowering the cost of the tag and creating new applications. Therefore, the adoption will increase every year. Remember, RFID is bar code on steroids. A bar code will give you the basic info but RFID can provide the pedigree information. Much of the credit for advancement of RFID can be attributed to Mr. Hargrove’s and the University of Arkansas’s work.
I think the great promise of RFID is still the great promise. I am not sure this is as pressing a need to retailers as more effective loyalty, engagement, and CRM strategies are. The dynamics of the multiple new media and communications tools are more pressing in today’s environment.
Item level RFID for apparel retail is huge. It will improve inventory accuracy, reduce shrink, reduce non-selling payrolls, and give insights into the in-store selling environment that have never before been possible. Without it, our systems can tell retailers how many people use their fitting rooms by fitting room by hour, and how long they stay. This is essential information for monitoring and measuring the effectiveness of service and selling strategies, but it doesn’t give insight into what they tried on and what they bought.
My conversations with retailers regarding their fitting room production always begins with the question, “Can you give us conversion from the individual fitting rooms?” My answer is always, “Yes, if you have item level RFID.” As soon as the cost of the tags get low enough, RFID will make a run through apparel retail, I guarantee!
The RFID technology is still striving to meet its initial (hype) promise. Read accuracy still requires a higher price point tag for applications like inventory monitoring or automated checkout where read rates must approach 100%.
Having said that, retailers have learned a lot of ways to use RFID for asset tracking and labor management and the smart ones have begun to upgrade back-end applications to take advantage of serialized item tracking when the tags become cheaper.
It makes sense that fashion retailers would be in the lead. They have higher priced products and the added consumer information that can be gleaned from product movement within the store can drive operating decisions.
Mobile commerce is going to spur more widespread adoption of RFID. When retailers find that they’re losing sales due to out of stocks, they’ll find it easier to justify item-level intelligence.
Discussions about RFID use in retailing should be differentiated along the consumer marketing track and enterprise track. The opinions about RFID will vary widely depending on whether the responder is from Marketing or Supply Chain Management.
RFID will take hold first to support more efficient inventory management and provide alternatives to asset protection technology in place today. Companies which provide theft reduction solutions (Sensormatic) should pay close attention to new competitors which might base a broader based solution on a more open platform to compete with their product offers.
RFID has a longer runway to be incorporated into consumer marketing programs. RFID carries the implication of “tracking” rather than allowing consumers to “opt-in,” which is a condition to success in most cases.
I foresee item-level RFID continuing to grow fastest in categories like fashion, prescription drugs and consumer electronics, where the price points are higher and the velocity lower than CPG. Tagging display fixtures and pallets makes practical sense too. It would be a mistake to regard those little transponders as magic bullets, however.
To attain a balanced perspective on the potential of item-level RFID, one must widen the thought process beyond the supply chain and consider its potential impact upon In-Store Implementation and compliance. Today we have a sparse patchwork of in-store sensing and measurement tools that inadequately illuminate the selling floor for merchants and marketers.
RFID could help. It may soon be one of several key enablers for the emerging ISI discipline. Then again, after 30 years we’re still learning how to capture and put to use the data flows from our POS scanners.
I believe that in today’s world, retailers must leverage multiple lines of communication in order to maximize sales. This is a great example of the need for diversification.