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Survey Shows Half of U.S. Retailers Have Already Adopted Item-Level RFID
For respondents that have not yet implemented item-level RFID within their operations, 48 percent of retailers indicated that they are seriously considering piloting the technology in the near future, while around 14 percent said they currently have no plans to deploy RFID. The study also found that for the majority of suppliers utilizing the technology, retailer requests were driving the adoption of item-level RFID—80 percent reported having adopted it in order to satisfy the requests of customers (retailers).
Moreover, of the 48 percent of suppliers that have not implemented item-level RFID, only about 17 percent said they are seriously thinking about piloting the technology in the near future, while approximately 56 percent indicated being cautiously optimistic about RFID but waiting to see more progress in the industry.
One key concern, Beverly says, remains tag cost. The cost of passive EPC Gen 2 ultrahigh-frequency (UHF) tags themselves is decreasing steadily, though the largest decrease occurred in 2009; at present, tags cost about 33 percent less than they did in 2008. The typical price of an EPC inlay (a chip and an antenna mounted on a substrate) is slightly higher than 10 cents, says George Kraev, senior analyst of security and ID at ABI Research). Despite the low tag price, Beverly says, "we saw that folks felt it [cost] was one of the biggest barriers to RFID adoption. As much as we would like to say that's behind us, it's still front and center on the minds of respondents." In fact, he notes, the cost of tagging and of hardware were most often cited as challenges facing respondents' item-level RFID programs. Therefore, the authors say, as tag price continues to fall, broader RFID adoption will likely ensue.
What's more, Beverly says, the study also finds that concern regarding the technology's maturity is low, for both retailers and suppliers—ranking ninth and seventh, respectively—below costs and organizational challenges, for example. This, he says, is another sign that RFID adoption can be expected to increase.
Furthermore, the report provides a rate calculation of sales lift required to break even on an item-level RFID investment. Assuming a total tag cost (for tag materials, plus labor) of 30 cents, and a unit profit margin of $1 for the item being tagged, a sales lift would need to be 30 percent in order to break even. However, for an item with a unit profit margin of $20, the sales increase would only need to be 1.5 percent to reach the break-even point. Naturally, that break-even figure drops with a lower total tag cost. For example, assuming a total tag cost of 20 cents and a $1-per-unit profit margin, the increase in product sales would need to be 10 percent in order to break even, while a product with a $20-per-unit profit margin would require only a 0.5 percent sales increase to cover RFID investment expenses.
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Moreover, of the 48 percent of suppliers that have not implemented item-level RFID, only about 17 percent said they are seriously thinking about piloting the technology in the near future, while approximately 56 percent indicated being cautiously optimistic about RFID but waiting to see more progress in the industry.
One key concern, Beverly says, remains tag cost. The cost of passive EPC Gen 2 ultrahigh-frequency (UHF) tags themselves is decreasing steadily, though the largest decrease occurred in 2009; at present, tags cost about 33 percent less than they did in 2008. The typical price of an EPC inlay (a chip and an antenna mounted on a substrate) is slightly higher than 10 cents, says George Kraev, senior analyst of security and ID at ABI Research). Despite the low tag price, Beverly says, "we saw that folks felt it [cost] was one of the biggest barriers to RFID adoption. As much as we would like to say that's behind us, it's still front and center on the minds of respondents." In fact, he notes, the cost of tagging and of hardware were most often cited as challenges facing respondents' item-level RFID programs. Therefore, the authors say, as tag price continues to fall, broader RFID adoption will likely ensue.
Furthermore, the report provides a rate calculation of sales lift required to break even on an item-level RFID investment. Assuming a total tag cost (for tag materials, plus labor) of 30 cents, and a unit profit margin of $1 for the item being tagged, a sales lift would need to be 30 percent in order to break even. However, for an item with a unit profit margin of $20, the sales increase would only need to be 1.5 percent to reach the break-even point. Naturally, that break-even figure drops with a lower total tag cost. For example, assuming a total tag cost of 20 cents and a $1-per-unit profit margin, the increase in product sales would need to be 10 percent in order to break even, while a product with a $20-per-unit profit margin would require only a 0.5 percent sales increase to cover RFID investment expenses.
