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Retailers Embrace RFID

Chains that sell apparel now realize radio frequency identification technology is an essential tool for maintaining accurate inventory, improving store execution and selling across all channels.
By Mark Roberti
Aug 24, 2015

About a decade ago, I was walking through the back of a Walmart store with an executive from the retailer's RFID group. He was explaining to me how Walmart was employing radio frequency identification technology to improve replenishment. I asked him if his company had ever considered beginning with apparel, since it was RF-friendly and often out of stock (at least in the most popular sizes).

The executive said that Walmart did not want to push one specific category of suppliers to tag, and that it preferred to treat all equally. Given the additional cost that tagging required and the pushback that might have been received, that approach probably made sense at the time. But it has now become clear to virtually all retailers worldwide that RFID is a great tool for managing complex inventory.

What is complex inventory? It involves product categories in which individual items (and sometimes cases) look the same but are different. Clothing is the most obvious one. A retailer might sell a shirt in 10 different colors and six different sizes, creating 60 different stock keeping units (SKUs) for a single shirt. Ensuring that there are a few items available in each size and color is difficult. Multiply that challenge across dozens of styles, and it becomes nearly impossible to ensure that all items are in stock.

Retailers found that by quickly reading tagged inventory using a handheld RFID reader, they could make sure the correct numbers of items were on the shelves, thereby reducing out-of-stocks and increasing sales. In some cases, the biggest problem with RFID was that it worked too well. That sounds silly, but let me recount a story.

A few years ago, a gentleman from a well-known athletic shoe company came to me and told me about a pilot he'd run in a store in Amsterdam. "Sales went up by 20 percent," he said. I told him that was fantastic, but he responded, "No, it was a disaster!"

How could sales going up by 20 percent be a disaster? "When I presented the results to senior management, they could not believe a 20 percent increase in sales was possible," he explained. "They laughed me out of the room. If sales went up by 3 percent, I could have gotten funding to continue the pilot."

No one is laughing people out of the room anymore. RFID is being adopted by many large retailers, including Bloomingdale's, Macy's, Kohl's, Marks & Spencer, Target, Tesco and Zara.

On Sept. 17, we will be hosting an RFID in Retail and Apparel event in New York, N.Y. (retailers and their suppliers can attend for free if they register before this Friday). I'm pleased to say that a good number of new retailers have signed up to learn how they can benefit from RFID. It's one thing to know that RFID is an important tool. It's another to take the initial steps and begin deploying the technology.

I believe that we'll see the pace of adoption picking up during the next year. Eventually, all chains with more than 20 stores will use the technology to manage their inventory. And then the technology will spread to jewelry stores, sporting goods retailers and other sectors that have complex inventory. Walmart didn't want to push a single category to use the technology, but the categories have a way of deciding on their own when a technology is right.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.

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