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Sales Are Up and Overstocking Is Down, Study Reports, Due to RFID Use in Stores

A University of Leicester study involving 10 participating retailers, sponsored by GS1 UK and the ECR Community Shrinkage and On-shelf Availability Group, found that all companies realized a return on investment, with sales boosted by between 1.5 and 5.5 percent.
By Claire Swedberg

To achieve the most success, Beck found that retailers are keeping their deployments simple, with an eye focused on just a few clearly identified KPIs and the mechanisms to get them there (such as tracking inventory management to reduce out of stocks) rather than employing end-to-end supply chain and in-store solutions, or using magic mirrors or an alternative to an electronic article surveillance (EAS) system. "Having simple KPIs and avoiding complexity," he says, appear to have been critical for many retailers.

In the future, the participants indicated they were looking into the use of RFID for fitting rooms, broadening the technology's use in the supply chain and furthering integration with existing management software. Some are also considering the use of RFID for check-out-less stores, and said they might use or pilot overhead readers.

One catalyst for growth in RFID has been the need for omnichannel servicing of online and phone-based shoppers. "There's a need for greater visibility of stock for a more demanding customer," Lynch states. As a result, he says, business at GS1 UK has never been busier.

Initially, the study had aimed at a sampling of six to eight companies, but after 10 businesses responded to the campaign, the study was able to be more comprehensive with the greater number of participants. Lynch predicts that the continued deployment of GS1-based RFID solutions can be expected. "Obviously," he says, "we are very enthusiastic about the standards. If you've got a community all using a standard tag, it encourages manufacturers" to apply tags and use the read data for their own purposes as well.

The sales boost of 1.5 to 5.5 percent is significant, Lynch adds, since it means companies can yield hundreds of thousands of dollars, euros or pounds to increase annual profits. "In retail, the margins are wafer, wafer-thin," he says, so any increase is of high value.

"Measuring the Impact of RFID in Retailing" answers many questions regarding how RFID technology has been adopted, Lynch says, and is impacting the business of retailers. The report also explores how much the GS1 standard is impacting the use and expansion of RFID programs. To that latter effort, he says, the authors found that some companies had deployed proprietary RFID systems (20 percent of the group), while most were using GS1-standard RFID, and expansion was somewhat hindered for those who had adopted the proprietary standards.

The growth in online sales will continue to put pressure on retailers in the meantime Broomhead speculates. She cites a European Union study indicating that 86.7 percent of U.K. shoppers do some of their shopping online. Without the use of RFID, meeting the needs of online shoppers is becoming increasingly difficult.

"We're pleased to bust the myths around RFID," Lynch states. "We can say now that it does work, and it's not too expensive. The [RFID industry] is quite mature. So this report will help retailers that are risk-averse," by demonstrating that RFID is affordable and will provide benefit. The full report is available at the GS1 UK website.

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