Magazine Article | February 16, 2007

RFID's Retail Reality

Source: Innovative Retail Technologies

RFID (radio frequency identification) technology is finding its value proposition(s) in the retail industry, and it’s not all about the supply chain.

Integrated Solutions For Retailers, March 2007

For a time, the only value retailers expected from RFID  was supply chain-centric. How could RFID make the procurement, shipment, and receipt of goods more efficient? How could automating  the movement of goods in the supply chain reduce labor costs? How could the near real-time visibility afforded by RFID help create a more intelligent enterprise? These remain important questions, but those watching the technology mature at the pallet level from a vantage point within Wal-Mart's shadow might have missed a more compelling story. In this month's Retail Solutions Forum, we go one-on-one with Ann Grackin, retail RFID expert and CEO of supply chain consultancy ChainLink Research. Grackin gives us her take on the value RFID brings to the store-level shopping experience.

Most of the RFID action has been in the manufacturing and CPG (consumer packaged goods) space. What are the primary trends or developments in the application of RFID technology in traditional retail? 

Grackin: Customer experience is key. Who cares about logistics? What a bore! Think about what shopping was supposed to be all about. Shopping! It should be fun and interesting. Concierges, personal sales assistants, etc. — don't you love the sound of that?  Self-checkout will definitely be a big play. We are already trained like sheep to wait in lines, grumbling, of course, about the customer with the low IQ in front of us or the poor service provided by associates. But the kinks have been worked out in the airports. Care of the customer is the key.

What do retailers stand to gain by driving RFID initiatives? Where are adopters uncovering the most solid business case?

Grackin: Here it is quite interesting, too. The Holy Grail is an increase in sales, but here are some real benefits of RFID in retail:
n Better in-stock positions from a better inbound supply chain.
n Better promotion management.
n Better locating of inventory in the store.
n Better, less expensive packaging. Don't you hate those plastic cases? Customers hate them, and they take up too much space on the shelves, as well as in the shipping cartons. If you can fix that, you get more yield (aka sales per square foot), as well as more product shipped per carton, significantly reducing logistics costs.
n RFID is an antitheft technology that enables retailers to thwart thieves who rip bar codes off packages and replace them with lower price tickets. This happens every day. RFID can reduce or eliminate this shrink. But you have to be very clever in how you apply the RFID tags.
n Better service to customers, aka increased sales.
n Better labor management and productivity: Price check? No more.

What should retailers (beyond the select few prepared ones) be doing right now to prepare for RFID? What are the steps to adoption?

Grackin: Get a good education! You won't really learn about RFID technology walking around in the conference, though that is a fun thing to do and you can meet a lot of good people and vendors for later on. Instead, build a lab. Many stores have a 'store of the future.' Try many approaches and solutions. Work with strategists who are vendor neutral and constantly researching, doing case studies, etc. Build a series of pilots that leverage various kinds of solutions. What might seem to be useful, might not and vice versa.

How can tier-two and middle tier-one retailers that don't have the muscle power of the largest retailers in the world work with their vendors and suppliers to move toward RFID?

Grackin: Work with a lab, such as Alien Technology's RFID Solutions Center in Ohio. It has so many resources that a small retail organization can leverage. Retailers have at their disposal a store footprint, warehouse, forklifts, the works.

What mistakes are retailers making as they relate to the emergence of RFID?

Grackin: Retailers who are sitting on their hands are making a huge mistake. But more importantly, the lack of customer empathy is astounding. Why don't some consumers shop in certain locales? Because, as they say in New York, the home of retail, the stuff is schlock, and the service is poor. Retailers that are already trying to improve the customer experience are the ones that are moving forward with various strategies. RFID is just one. Seriously, there are many fine organizations that are very conservative. But I say to them, it costs very little to start learning. Take a class, or do some serious reading; it doesn't mean that a large expense is imminent.

What further enhancements can we expect from RFID technology in the near future? 

Grackin: We can expect so many enhancements, including a longer range, much cheaper tags, and more features, and, of course, better sensors. This helps with freshness, as well as potential features for product enhancements. But think of this title: RFID Goes Home. RFID will provide enhancements to the products that consumers will want, especially in consumer electronics, healthcare, etc.