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Retail 3.0

RFID enables the trend toward consumer-driven showroom shopping.
By Bill Hardgrave
Oct 14, 2013

According to several retail industry experts, we are well on our way to "Retail 3.0"—a trend characterized as a power shift from the retailer to the individual consumer. Instead of retailers deciding what brands and items to carry in which stores and at what cost, consumers are using the Internet and mobile devices to find the cheapest place to buy what they want, when they want it.

Omnichannel retail is the industry's attempt to capitalize on—and maintain a grasp on—consumer power. As I discussed in my Omnichannel Retailing column, RFID, which delivers real-time accurate inventory data efficiently and cost-effectively, is essential to successfully executing "anywhere, anytime, any product" retailing.

But there's another aspect to Retail 3.0: "showrooming," which puts the consumer in total control. As I see it, there are three types of showrooming: in-store, local and global. Each requires high inventory accuracy that can be achieved only with RFID.

In-store showrooming occurs when the retailer uses a physical location to display its products, typically keeping only one of each item on display, with the remainder of the inventory in the back. American Apparel uses a form of in-store showrooming. Hointer, a new store concept, is the ultimate in-store showroom. The West Coast clothing retailer relies on technology to provide an innovative shopping experience. For in-store show-rooming to work, a retailer must know what it has in the store.

Local showrooming occurs when a consumer sees a product he or she likes at a store, then uses a mobile phone to search for that product at nearby locations. The search is typically prompted by one of two scenarios: The item is out of stock at the first store, or the consumer is looking for a better deal.

Global showrooming is what most people think of when they hear the term "show-rooming": A consumer walks into a store to see, touch, try on or examine a product, only to go online and order it elsewhere, most likely for a cost savings. The consumer is no longer restricted to a physical store or geographic location; the product can be purchased anywhere.

Showrooming presents a challenge for all retailers, whether they have a physical store, an online store or both. Retailers must be able to satisfy a consumer's demand immediately. If you don't have it, or can't ship it in a timely manner, the consumer will go elsewhere. The shopper has already showroomed the product. Where he or she purchases it is now secondary.

What, then, will separate the winners from the losers? An efficient supply chain and the knowledge of what items you have and where you have them. And you accomplish both with RFID.

Bill Hardgrave is the dean of Auburn University's Harbert College of Business and the founder of the University of Arkansas' RFID Research Center. He will address other RFID adoption and business case issues in this column. Send your questions to hardgrave@auburn.edu.

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