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Should retailers add RFID to their marketing toolbox?
Radio frequency identification (RFID) technology is once again being viewed as a solution for item-level inventory tracking, but its side benefits in marketing, analytics and research are also gaining attention.
Potential applications in the past included automatic reordering of basics such as orange juice or razor blades as RFID chips inside products indicate when quantities are running low.
Brendan Witcher, vice president, principal analyst at Forrester Research, however, recently told Advertising Age that RFID would more likely be used for marketing in stores since they’re already outfitted with readers.
Stores could use RFID to see what items are being loaded in shopping carts together and send promotional offers for related items. Retailers could track a shopper’s path and gain insights on how picking up one item or being exposed to an offer influences the rest of their shopping journey. The tech could also help accelerate the implementation of automated, touchless checkout.
A McKinsey study last year likewise noted several “last mile” advances involving RFID that “can attract customers looking for dynamic new experiences, drive revenue and yield valuable behavioral insights.”
RFID, for example, could support “smart” fitting rooms, where shoppers get customized information about other sizes and colors in stock, learn how to style a garment and receive personalized recommendations to complete their look, according to McKinsey.
Reports arrived last year revealing that RFID use in North American retail had significantly gained adoption as stores implemented their use to improve in-store inventory accuracy when fulfilling online orders for pickup or delivery. Retailers employing RFID tend to have in-store inventory accuracy of approximately 95 percent or higher compared to about 65 percent for those without, according to RFID Lab, Auburn University.
Increased adoption has also been led by a significant reduction in the price of RFID chips over the last decade as well as improved read accuracy and range.
Johan Stenstrom, supply chain developer at Stadium AB, the Swedish sports chain, told WWD last year, “Trying to keep a customer happy with 70 percent accuracy is just not possible.”
- Walmart Mandates RFID Tracking For Home Goods — Opening Up Potential Marketing Opportunities – Advertising Age
- Why RFID is a ‘Must-Have’ Technology for Today’s – RFID Journal
- RFID’s renaissance in retail – McKinsey
- Has RFID at retail finally passed the long-awaited tipping point? – RetailWire
- A new era for RFID in retail – Accenture
- How Item-level RFID Provides Significant Value for Retailers by Improving Inventory Accuracy – WWD
Discussion Questions
DISCUSSION QUESTIONS: What’s your view on RFID’s potential benefit to marketing, analytics and customer research? Has it changed since the initial RFID hype arrived? Do you see a bigger at-home or in-store benefit for marketers?
Poll
Loading …BrainTrust
Ananda Chakravarty
Vice President, Research at IDC
Ryan Mathews
Founder, CEO, Black Monk Consulting
I remember when RFID was the rage 10+ years ago. Checkouts were going to be a breeze as a basket of groceries could be scanned in seconds. Then crickets. I believe there remain security and privacy concerns with RFID that still need to be addressed or were concerns early on.
The holy grail of retail is real-time inventory and RFID is a major tool to reach that goal. Imagine all your inventory talking in real time. Store sales, eCommerce and catalog all in sync, where you could sell down to the last item without safety stock, find product in-store by leveraging a Geiger counter, eliminate hard tags on merchandise, just-walk-out technology, and drop-and-go returns creating a frictionless customer journey. These are all a reality as the tag price has dropped and the price of people has skyrocketed.
Meanwhile, I predict the iPhone 14 will have an RFID chip reader as a feature, then other phones will follow. They already have LIDAR for 3D scanning and space mapping. RFID is the key to creating the Matrix for shoppers. Will they step into it? Based on recent history regarding privacy/benefit tradeoffs, most will take the blue pill.
Of all the “ancillary” applications mentioned in the study, the one most likely to make an impact is the use of item-level RFID in the “smart dressing room,” in combination with the “magic mirrors.”
RFID and similar digital tools are here to stay. Track and trace, real-time visibility of inventory and transparency throughout a product journey is becoming more important than ever.
From a sustainability perspective, RFID can be used to help better understand the product journey and its impact to the environment. From a loss prevention perspective, RFID can help keep more products in the store. The possibilities are endless and all roads lead to better understand the customer.
I’m not sure about the impact on marketing, but the requirement for real-time inventory is a pretty commanding reason to implement item-level RFID.
Retailers have made major investments in RFID to this point but the technology does have its limitations. There are also new Bluetooth-based alternatives coming to market that may have a lower cost of entry than going the RFID route. We came across some in our NRF Show-related discussions and they appear to hold promise. Only real world vetting will prove that one way or the other.
For nearly 30 years, we have been excited about RFID and how it could transform retail and improve efficiency. Over that time, more and more uses have been identified helping to improve the return on investment, but it is still a difficult one to justify until the cost of the technology falls further. As more retailers take up RFID the price of the tags will fall further. The technology around the accuracy of reads has improved markedly and is now in the very high 90s, making it a realistic proposition.
The use of this technology for marketing can only improve its ROI and as usual marketing seem to have greater influence in technology spending so it is likely that this may make the critical difference. There is no argument from people in supply chain if marketing generate the demand for RFID as supply chain will really be the big beneficiaries with greater inventory accuracy and information on shopper behaviour and movement. Could it be that we are finally close to RFID delivering its full potential?
Many retailers are now taking a more serious look at RFID, as the multiple business use cases are extremely compelling. RFID enables inventory accuracy and marketing intelligence on product affinity patterns which drives upsell promotional opportunities. RFID has been cost prohibitive for many products, but now the lower cost tags are making it a viable option and we may see a much greater adoption in the next couple of years.
Today’s lower chip costs are essential for brands to adopt RFID standards for system-wide success. In the past, RFID tagging was too cost-prohibitive for manufacturers to willingly get on board.
RFID offers timely solutions by reducing out-of-stocks and boosting efficient checkouts. Personalized recommendations and understanding the relationships among products can also yield marketing insights that drive growth.
The question is not “should retailers add RFID to their tool box?” The question should be “why haven’t retailers added RFID to their tool box?”
Sadly, I’m old enough to remember that last, “RFID Will Save Retail Campaign.” Not only have none of the original problems with the technology been solved, but sensor technology and AI/ML interfaces have moved on. I’d be more interested in seeing SmartDust being tested in-store. The problem with RFID was always the chips themselves and their reaction to humidity, variable temperatures, etc., etc. and the ditto with the readers. I’ve seen betas of SmartDust so sensitive you can spray it on a lamp post and it will tell you the general health of people walking down the street. Are we “there” yet? No. But, we aren’t that far away. Retailers and CPG companies need to get ahead of new technologies in a much more aggressive way before they are lapped by new competition and the consumer.
Having installed RFID readers at several of one of our customer’s locations, and collecting inventory every 24 hours, they have told us that not only are they in-stock better than previously, but they learned more about their customer’s buying behavior in the first three days of implementation than they had known before. This has made their marketing decisions easier and more accurate than the times without RFID. RFID has collected the data, and the data accuracy and frequency has provided benefits to store sales and marketing with relatively simple analytics.
The marketing value has definitely changed since the initial uses of RFID to just track inventory. Retailers have started to figure out the marketing and sales value that comes along with analyzing the RFID data.
The value of the at-home benefit has grown as websites have begun using the RFID collected inventory counts to show the consumer the number of items in-stock in real-time so if they Buy Online and Pick Up in Store (BOPIS), they know their item will be at the store when they arrive. This value will grow over time as consumers use BOPIS more (500% increase in BOPIS orders since 2019).
RFID is still an adoption-based tech. Not only do retailers have to adopt the tech, but so do the suppliers up and down the chain. This has contributed to the slow adoption. Add to that the additional costs, it becomes a non-starter for products like grocery or convenience. The value, however, is tremendous with a much clearer picture of inventory, marketing information inside the store, and more. The RFID implementations still have challenges when it comes to execution as mentioned earlier, and without broad adoption of chips and standards, we’ll continue to see slow adoption.
What is interesting is that AI and computer vision tech may end up replacing some of the capability of RFID — where just a visual of the product is sufficient enough to track products in warehouses, stores, and even identifying products at home. Add in an extension of bar codes and QR codes capabilities such as storing product sourcing information, sustainability and more, it will be clear that the future will be a mix. It will be interesting to see the overlaps change over time. Smart retailers will experiment with all these capabilities to find the right mix and balance.
In-store marketing? I’m not convinced, but as a marketer, building trust in your brand is huge. That includes inventory trust. If you oversell and have to cancel an order, will the customer shop with you again? Or go elsewhere?
RFID isn’t perfect. It doesn’t work well on all products. But when it does, the boost it gives to product availability accuracy before the buy button is huge.