On The Rise: Item-Level RFID

In a retail environment, individually tagged items can provide both security and visibility benefits for the store floor. According to a recent Aberdeen Group research report, retailers are increasingly considering RFID adoption to improve not only the customer experience and inventory visibility, but also item-level security. Thus, there is a need to show retailers why they should implement and use item-level RFID technology to reduce shrink. But will every retailer benefit from item-level RFID?

Is Item-Level RFID The Answer For Your Store?
RFID is poised to become the preferred technology in item-level apparel retailing, because RFID will become the prevalent loss prevention (LP) technology. For example, an RFID-enabled smart shelf combined with digital CCTV (closed circuit television) video can send a theft alert with captured digital video to a store manager when multiple items are taken off the shelf at once. "Item-level RFID tells retailers exactly what item left the building as opposed to a one-bit anti-theft technology, such as an EAS [electronic article surveillance] tag that only tells you when an item left the building," says Tom Racette, director of RFID market development at Motorola, a developer of technologies, products, and services for mobile communications. "RFID may be the preferred technology in item-level apparel, but it is not ubiquitous throughout the retail industry. EAS is still common throughout the industry. Two primary companies make EAS technology — Sensormatic, which makes acousto-magnetic [AM] EAS technology and Checkpoint Systems, which makes radio frequency [RF] [not to be confused with RFID] EAS technology. AM and RF EAS technologies are going to be around for a while, just like bar codes are going to be around for a while. But RFID is definitely the next big thing, and I assume that by 2011, we will see large North American retailers roll out item-level RFID." Item-level RFID will evolve quicker with closed loop retailers, such as American Apparel versus department stores. This is because closed loop retailers own their entire supply chain. It will be easier to roll out RFID in that type of environment, because only one system is used.

In addition to security, RFID can also provide enhanced visibility on the retail store floor. A major problem commonly faced by many retailers is the difficulty of manually tracking large quantities of high-value products in the stores. As a result, high opportunity cost is common particularly when the retailers are unable to respond quickly to the need for competitive repricing, product recall, and promotional stock clearance. Indeed, item-level RFID can provide a view into an end user environment such as a supply chain or store floor, affording companies with granular visibility. This level of visibility is particularly useful for retailers of high-value goods since there is a greater risk of theft and diversion, such as the jewelry industry.

RFID Tracks Your Products And Your Employees
Smaller niche markets, particularly luxury and high-value item verticals such as high-end jewelry are adopting RFID at the item level to satisfy track and trace requirements. "Item-level RFID within the jewelry industry is critical for both security and visibility purposes," says Larry Chandler, VP business development at 5Stat, a retail technology solutions provider and the technology division of its parent company, Store Kraft. 5Stat's Smart Jewelry Solution is designed to provide jewelers with security and inventory management as well as business intelligence (BI). "The jewelry industry is based on aesthetics — every item must be optimally displayed," says Chandler. "For instance, if an item hasn't been shown to a customer, perhaps lighting is an issue. Item-level RFID provides important historical data, which is information the jewelry industry never had before." Chandler states that only about 5 % of the jewelry industry has adopted item-level RFID because of tag size. "Some jewelers don't like to put price tags on their merchandise for aesthetics purposes," says Chandler. "Those that do require the price tag to be inconspicuous. The RFID passive tags are getting smaller and smaller, and because of that, a larger portion of the industry will adopt item-level RFID."

Item-level RFID allows jewelers and retailers alike to scrutinize every case or shelf's merchandise over time (i.e. the past 7 days, 15 days, etc.) If an employee determines certain pieces are not regularly shown to customers, he can replan that case to attempt to elicit a different consumer behavior. In the jewelry industry, RFID can be used to open cases digitally so management can track which employees open which cases at which time. Employees do not use regular keys to open cases, but rather digital keys, or an RFID badge. "RFID provides behind the scenes BI — what employee opened which case and when. Because management can tie the jewelry to an employee, from a BI standpoint, we determine exactly what merchandise was shown and when."

Item-Level Security, The ERP Advantage
Some retailers tag products that come in a variety of colors and sizes to ensure they have adequate amounts of each type available in the store. From an ERP (enterprise resource planning) perspective, the ability to locate individual items is useful in the backroom as well as on the store floor. Employees will be able to determine if a product is available in a particular size as well as whether or not something has been placed on the wrong shelf. If a retailer had a way to ascertain that a large amount of one product was in inventory, it could take a number of actions. It could return the product to the company from which it was purchased for a credit. If the retailer had multiple branches, it could send the product to a branch that may have run low. Or, at the very least, the retailer would know to order smaller quantities in the future. "An ERP system is only as good as the data on which it sits," says Racette. "RFID helps keep the data more accurate by seamlessly capturing its movement within the store and the entire supply chain. Therefore, RFID allows you to remove much of the human element. For example, you can take RFID pedestals and put them at various checkpoints with the supply chain. As that material moves through those checkpoints, it seamlessly captures when data is transmitted so you're less likely to have errors."

In the competitive retail industry, item-level security can help keep inventory costs down and increase inventory visibility. Depending on your area of retail, item-level RFID could be your next money-saving solution.