RFID in the Consumer Electronics Sector

By Mark Roberti

Nov. 8, 2010—A few years ago, Best Buy ran several radio frequency identification pilots (see Best Buy to Deploy RFID, Best Buy Aims for Item-Level Tagging, Best Buy Eager to Use RFID to Eliminate Checkout Lines and Wal-Mart, Best Buy Spearhead DVD-Tagging Pilot). Managing CDs in smart shelves showed promise, but the retailer was unable to get many other companies—competitors or suppliers—interested in using the technology to better manage items as they moved through the supply chain. That might be about to change.

Last week, I wrote about how apparel companies are beginning to employ RFID at the item level to address a number of problems (see RFID in the U.S. Retail Sector). Electronics firms face many of the same issues, and could also benefit from tracking items with RFID. Let's take a look at some of these issues.


Managing complex inventories: The single biggest benefit apparel companies can achieve from using RFID at the item level is being able to manage complex inventories. It's difficult to make sure the right number of stone-washed denim jeans—which come in several styles and 20 different sizes—are shipped to the warehouse, picked, shipped to the store and put on the shelf when they need to be replenished. Similarly, managing inventories of 20 types of Dell laptops—with different processors, hard drives, video cards and RAM—is a challenge. Looking at boxes in the back room doesn't immediately tell you which specific configurations are missing.

Out-of-stocks: Unlike apparel retailers, electronics retailers do not usually stock a lot of goods on shelves—rather, most display samples and keep stock in the back room to reduce theft. But they do have some out-of-stock issues. Just as apparel-store employees can't look at a wall unit filled with jeans and know which particular styles and sizes are missing, electronic store associates can not view a rack of music CDs or movie DVDs, or a shelf of toner cartridges, and know which items are missing. When customers enter a store seeking a specific item and fail to find it, the result is often a lost sale.

Seasonality: Related to out-of-stocks and managing complex inventory is the issue of seasonality. Consumer electronics, like clothing, have a limited shelf life. Order too many of the new iPod introduced for the holiday season, for example, and you'll wind up with excess inventory that then has to be sold at a steep discount, or written off entirely. Order too few of the hottest electronics products, on the other hand, and you'll miss out on sales. RFID can help manage inventory more efficiently, so that companies can better match supply to demand. For example, knowing exactly what you have on the shelves, in the back of the store and in the warehouse means you can reduce safety stocks, thereby decreasing the likelihood of being caught with overstocks.