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Why More Retailers Haven't Invested in RFID

Is it that they don't understand the value of the technology, are afraid to take risks, or have other priorities?
By Mark Roberti
Feb 27, 2018

I recently received a call from a university student who is studying the adoption of radio frequency identification in retail. She was interviewing experts to understand more deeply why the technology has not yet become widespread. It's an interesting question, and it's one that I have thought a lot about. So, I'd like to share my thoughts.

First, let's put the discussion in context. Retailers have been struggling with lost sales due to out-of-stocks since, well, forever. Study after study shows that at least 8 percent of items are out of stock at any given time. But it's even worse: inventory accuracy is only at about 65 percent in many stores, and customers leave stores about 30 percent of the time without finding at least one item they want to buy. Poor inventory accuracy reduces a retailer's ability to show products to online customers.

RFID enables companies to boost inventory accuracy to about 95 percent without having to invest in additional labor. If their suppliers bear the cost of the 7- or 8-cent tag, the retailer only needs to purchase the hardware and software that captures the data, and then train staff members to act on that information.

What is the result of using RFID to boost inventory accuracy? Well, University of Leicester Professor Adrian Beck recently studied 10 European retailers and amalgamated the results for a new report, titled "Measuring the Impact of RFID in Retailing: key lessons from 10 case-study companies" (see Sales Are Up and Overstocking Is Down, Study Repots, Due to RFID Use in Stores). The benefits that these 10 companies discovered are impressive.

According to the report, RFID increased sales. Seven of the 10 case studies shared data showing a sales improvement in the range of 1.5 to 5.5 percent. "For the 10 companies, this could amount to a RFID-driven sales uplift of between €1.4 billion and €5.2 billion," the study indicates. That's US$1.7 billion to $6.4 billion for just 10 companies.

RFID also improved inventory accuracy. Companies typically improved from 65 to 75 percent and 93 to 99 percent accuracy. It also increased stock availability, reduced inventory levels, and decreased shrinkage and staffing costs. All 10 businesses said they achieved a return on their investment in RFID.

USER COMMENTS

Kris Hughes 2018-03-01 07:07:25 PM
Great article Mark. I love and agree with your optimism that "One way or another RFID will be adopted."
Robert Amster 2018-03-13 08:15:25 PM
The remaining question is the following: given all the indisputable benefits of item-level RFID implementation, can we prove to the skeptical retailers that the benefits outweigh the cost of implementation?

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