Radio frequency identification has finally found its rightful place in the retail IT ecosystem. The rise of omni-channel retailing and shoppers' increased expectation for on-demand information are creating unprecedented pressure for real-time inventory visibility. As a result, RFID is poised to become a critical retail enabler, uniquely designed to provide the insight that retailers need to optimize inventory and store operations. To draw a clearer picture of exactly what is happening with RFID in retail, Tyco Retail Solutions teamed up with Ann Grackin and Bill McBeath, at ChainLink Research, to identify the main use cases driving the adoption of RFID today, and to outline the goals of RFID projects in place among retail executives.
The ChainLink team surveyed and interviewed more than 120 retailers, primarily headquartered in North America and Europe, but many with a global retail footprint. The results of this research underscore the firm belief that RFID technology is the cornerstone to achieving inventory visibility, and that it will help drive store performance in 2014 and beyond.
Drivers for Implementing RFID Today
RFID technology has made huge strides in recent years. The retail user community has conducted pilots, learned many lessons and identified strong use cases. Standards have been established to create interoperability across the supply chain. RFID technology performance has improved greatly, while at the same time, costs have dropped dramatically. The technology promises new insights as retailers transform their business operations. To find out what is driving the current wave of adoption, the ChainLink team asked retailers for their top three reasons for implementing RFID now (see Figure 1).
Not surprisingly, improved inventory accuracy was noted as the top reason for implementing RFID among retailers surveyed. Unlike any other technology, RFID has the power to capture item-level, enterprise-wide inventory data, in order to provide accurate visibility. Without this unprecedented level of accurate visibility, retailers lack the strategic insight to fuel better business decisions. With it, however, they can optimize sales, improve processes and control losses. In fact, RFID inventory-intelligence solutions are proven to increase item-level inventory accuracy to 99 percent, which improves store merchandise allocation, selling floor availability, sales and customer satisfaction. And with RFID-based solutions, forward-thinking retailers are laying the foundation for a successful omni-channel retail strategy, critical to success in today's retail environment.
Figure 1: Click here to view a larger version of this chart.
The Use Cases for Inventory Visibility
Many retailers who reported strong benefits of RFID technology launched their programs with a focus on improving inventory accuracy and visibility. Inventory-management applications were the center of gravity from which additional use cases were added as programs matured. Footwear was noted as an interesting category, with RFID being used to ensure that the correct shoes are on display and are not causing overstock issues in the back room, adversely impacting sales and gross margins. We have seen the results of a successful RFID implementation in the sleek footwear departments at two of the world's largest department stores (see Saks' RFID Deployment Ensures Thousands of Shoes Are on Display and Macy's Inc. to Begin Item-Level Tagging in 850 Stores). With similar use-case deployments, these retailers leveraged RFID-enabled display execution technology to drive high display compliance rates, thus ensuring that all back stock was represented on the selling floor. RFID helped to ensure accuracy and efficiency for what was once a traditionally manual and error-prone process. By relying on RFID, these major retailers realized the immediate benefits of increased sales and margins, as well as an improved customer experience.