The model that drove RFID in the retail supply chain will flip-flop at the item level.
At the pallet and case level, big retailers forced CPG (consumer packaged goods) manufacturers to adopt RFID (radio frequency identification) technology. That happened what seems like a decade ago. A lot about RFID has changed since then. Most notable and relevant to us is the adoption of RFID at the item level, specifically by retailers and brands that enjoy the control afforded by a closed-loop manufacturing and sales model. Companies like American Apparel have benefited most to date, realizing unprecedented (99% is not unheard of) inventory visibility. This visibility has given these retailers a significant leg up on the competition in terms of knowing what is selling, where, and when.
I recently spent some time with Scott Clements, VP and GM at Sensormatic Retail Solutions, at ADT headquarters in Boca Raton, FL. ADT, which recently acquired retail RFID middleware provider VUE Technology, remains at the leading edge of retail RFID solutions. Clements shared many anecdotes with me about the successes his company is realizing in item-level retail RFID. ADT currently has nearly a dozen retailers in pilot and early adoption of RFID solutions for inventory management and visibility. While he confirmed that closed-loop manufacturing models in apparel are providing the most relevant return on RFID today, he pointed out that improving standards are driving adoption in general retail, as well.
This Time, Manufacturers To Pressure Retailers
I'm predicting that in 2009 we'll see the next big stride in retail RFID adoption, and the forces behind it will not be the retailers, but the manufacturers. As standards have improved and the cost of RFID hardware and tags have come down, apparel manufacturers that make and sell their goods have eagerly adopted the technology. So have electronics manufacturers. But many of them sell their brands primarily through retail chains and department stores. As these brands recognize the inventory visibility and traceability benefits of RFID in their closed-loop manufacturing and selling environments, they'll push to realize those benefits with their selling partners, as well. Therefore, it's only a matter of time before apparel brands are leveraging their selling power with department stores like Macy's, Nordstrom, and Neiman Marcus to 'persuade' them to invest in RFID infrastructure. I think that time is fast approaching.
On The Web: Research the retail value propositions of RFID at ismretail.com.
IDTechEx corroborates my expectation. It says item-level RFID tagging will rocket from $0.16 billion in 2006 to $13 billion in 2016 for systems including tags. It predicts that by 2016, drugs, apparel, consumer packaged goods, and books will account for nearly half that volume.
Retailers should pay close attention to the RFID initiatives undertaken by their suppliers, and they should begin now to budget for RFID infrastructure. The benefits of the technology will work both ways, provided retailers and manufacturers are willing to share their newfound intelligence.