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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

The participating companies were Adidas, C&A, Decathlon, Jack Wills, John Lewis, Lululemon, Marc O'Polo, Marks & Spencer, River Island and Tesco. The study consisted of 65- to 150-minute interviews with the participants. Three of the largest companies reported that they purchase more than 150 million RFID tags annually, while the smaller responders said they purchase fewer than a million tags a year. In addition, some are global companies with stores and an RFID rollout spanning multiple countries, while others are isolated to a single country. One firm was located in Canada, five were in the United Kingdom and the rest were based elsewhere in Europe.

The results were significant on several levels, according to Gary Lynch, GS1 UK's CEO. "When I first joined GS1 UK sixteen years ago," he says, "the industry was just getting into RFID and EPC [Electronic Product Codes]. What we're finding now, however, is that we are reaching a tipping point."

GS1 UK's Gary Lynch
For one thing, Lynch notes, the study found that companies using RFID, on average, improved their inventory accuracy from between 65 and 75 percent to between 93 and 99 percent. As a result, stock availability rose to approximately 90 percent. Those who reported on their inventory stock said they were able to reduce stock levels by between 2 and 13 percent. In addition, one participant in the study indicated that it also reduced shrinkage with the technology, by about 15 percent. Labor costs, one company reported, were reduced by 4 percent.

The participating companies cited several areas of learning, including the role of senior management. According to the participants, without the active support of senior management, a technology rollout is unlikely to be successful, or even undertaken at all. They deemed it paramount to appoint a project leader for an RFID rollout. From there, a company needs to include the other members of the business in the technology deployment, and ensure that everyone understands the impact that RFID is expected to have.

The greatest challenge that participants expressed was with regard to the integration of RFID data with their existing software. Some said they hadn't planned as well as they should have to make such integration possible. They also tended to prefer handheld readers over fixed models in such locations as portals, the point of sale or store exits. None indicated that they were using overhead readers in their stores. When it came to tagging the goods, they opted to have the tags applied at the point of manufacture.

Key to the study as well, Beck says, was how companies developed their key performance indicators (KPIs) and used them to measure their technology installation's success. In some cases, he says, although they expressed having multiple KPIs in place that the RFID technology met, many of those measurement points did not qualify as KPIs at all, but were simply measurements of how well the hardware and software were able to capture and store data.

Companies are still challenged with understanding what their underlying "intervention mechanism" is in order to enable their KPI. There is a difference, he points out, between aspirations like sales lifts and the intervention required, leveraging the collection of RFID data to accomplish that intended sales lift. Simply capturing data is just the first step, Beck says.

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