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How Could IKEA Use RFID?

Posted By RFID Journal, 01.15.2015

How might furniture and home-furnishings retailers benefit from the technology?

—Name withheld


There have been no studies yet conducted to assess the return on investment (ROI) for this retail category, to my knowledge, so it would be difficult to know for sure how radio frequency identification could benefit a retail chain such as IKEA. Based on my experience, IKEA does not have an out-of-stock or inventory-accuracy problem as serious as that faced at most apparel retail stores. This is because the inventory is not as complex. A fabric armchair might come in a single color or a couple of colors, but shirts often come in five sizes and 10 colors (creating 50 separate stock-keeping units that must be managed). So the ROI at a store like IKEA would likely be different than for a store like American Apparel.

RFID could probably help IKEA with an omnichannel strategy. The inventory visibility RFID delivers would enable it to confidently sell items online for pickup in-store, because it would know for sure that items are available at a particular location. RFID might also be able to reduce the amount of inventory held in the store and free up more retail space. By tagging high-value items, such as sofas and wardrobes, at the point of manufacture, a furniture and home-furnishings retailer could gain visibility of goods at its distribution centers and stores, enabling it to reduce safety stocks and thereby free up space to stock and sell more items.

In other words, if a retailer is not out of stock because it over-ships items to hold as safety stocks, RFID can reduce the level of safety stocks without risking an out-of-stock situation and a lost sale, since workers can view which stocks are running low and replenish more quickly. RFID might also reduce the number of products that are left over and need to be marked down, because the retailer is better able to match supply to demand at individual stores.

Of course, to fully understand how each retail category can benefit from RFID, it would be necessary to study the issues in that category, ascertain if and how RFID might address them, and then assess the potential benefits.

—Mark Roberti, Founder and Editor, RFID Journal

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