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Avery Dennison Sees Strong Momentum in RFID

The company's CEO says its RBIS division is significantly expanding existing programs with seven major retailers across multiple market segments.
By Paul Prince

"We've had several years in a row now of double-digit growth," Scarborough explained. "I'm going to say 20 percent, 30 percent, is a good average to take over the next few years—that could be on the low end, frankly. We just don't know. But I do feel like this: It's not an 'if RFID is going to happen'—it's 'how fast and what's the rate of adoption going to be.' So I have a high level of confidence that this is going to be a great business for the future."

When asked for additional details regarding the seven major retailers planning new rollouts, whether those firms are using RFID to track both low- and high-priced apparel, and the ROI case for these deployments, Scarborough said there were three important factors that retailers consider.

"One is the price. That's actually not the most important," he responded. "The other one has to do with complexity of the SKU [stock-keeping unit] sets, so think about things like shoes or intimate apparel or jeans, where you have an enormous variety of SKUs that are kind of hard to track. And then replenishment rate. Those three—we actually have a formula, which I won't share, to help retailers understand—are the key factors. What we find that happens, though, is retailers tend to start in certain departments, they get the ROI, and then they get some other incremental benefits in other areas as they move forward. And we've had one major retailer just going wall-to-wall because once [they] started to tag 60 percent, 70 percent of items overall, the retailer is saying, 'Well, I have such good inventory control now; incrementally, that extra cost isn't going to be bad.'"

Near the end of the conference call, Scarborough was asked if RFID patent trolls have had any effect on RFID sales, by causing retailers to throttle back adoption due to fears of being sued (see Companies Back U.S. Bills to Fight 'Patent Trolls'). "Well, certainly, it hasn't in Europe, because it's not particularly relevant there," he replied. "But I think these things tend to get resolved over time, and I anticipate that this won't be an issue for the long run.

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