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Why Isn't Everyone Doing It?

There are four main reasons some retailers have not adopted RFID, and they are all shortsighted.
By Bill Hardgrave
Tags: Retail
Dec 16, 2015

During the past decade, I have spent a lot of time with many retailers, providing information, insight and advice on the adoption and deployment of RFID. In the past year, the number of meetings and conference calls has accelerated. Recently, a major U.S. retailer asked: If RFID works so well, why haven't more retailers adopted it?

This is an excellent question. First, I told him that adoption rates are probably higher than he thinks, because many retailers choose to stay quiet about their RFID activities. A recent GS1 US study showed a 57 percent adoption rate among U.S. apparel retailers, which corresponds with the RFID Lab's estimate of at least 50 percent adoption.

There are four main reasons some retailers are sitting on the sidelines, and they are not unique to RFID adoption. We see them, or a variation of them, when it comes to adopting most new technologies.

Company culture: Some firms are innovators and early adopters. Others belong to the early majority or late majority, and then there are the laggards. RFID adoption is clearly following this technology-adoption curve, with adoption at the early majority stage. Some companies like to let the innovators explore things and then they follow quickly. The laggards wait until 90 percent or more adopt before they make the move.

Retail strategy: Some retailers have not yet determined how RFID supports their retail strategy. Lululemon is committed to delivering an unparalleled customer experience and has discovered how RFID helps meet this goal. A cogent strategy for all retailers is to use RFID to compete—or survive—in an omnichannel world. Macy's, for example, moved to omnichannel and then aggressively incorporated RFID to support this strategy. (Need help developing an omnichannel strategy? See Omnichannel Retailing, Get Hip to BOPIS and Beyond Inventory Visibility.)

Long-term versus short-term goals: Retailers must make a capital investment to properly deploy RFID. How much they invest depends on the size and scope of the project. We have seen payback periods of less than two years, but the up-front capital expenditures can make a retailer's fiscal quarter in which the investment is made look bad. So, many retailers trade off long-term benefits for short-term profits.

Technology development: A retailer recently told me the company was "waiting for the technology to stop advancing." I have heard this before. It's an excuse that often means the organization fears buying something only to have it become obsolete in the near future. Others think "the technology may get better, so I should wait." I can assure you that the EPC Gen 2 UHF RFID standard being used in RFID retail deployments is well established. And if you are waiting for the technology to get better, you will always be waiting, because improvements in the technology are constant.

If you are an on-the-sidelines retailer, I encourage you to consider the reason(s) you have not adopted RFID and address them accordingly. I firmly believe retailers must adapt to an omnichannel world or they will not survive.

Bill Hardgrave is dean of Auburn University's Harbert College of Business and founder of the RFID Lab. He will address other RFID adoption and business case issues in this column. Send your questions to hardgrave@auburn.edu. Follow him on twitter at @bhardgrave.

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