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RFID Enters Early Majority Phase in Retail

Findings from a European study, headed by the University of Parma, indicate that RFID deployments for fashion and apparel companies have passed the early adoption stage and are now poised to expand to omnichannel fulfillment.
By Claire Swedberg

Of the use cases evaluated, the researchers found that 22 percent consisted of proof-of-concepts, 32 percent were in the pilot phase, 27 percent were using a phased deployment approach and about 14 percent had completed full deployments. The largest percentage of tags being used (59 percent) were price labels with built-in EPC UHF RFID tags. Care labels, sewn-in tags and hard tags were each around 6 percent, while for a quarter of the uses cases, the type of tag was unknown.

The group studied the use of RFID for six categories: shop floor management, customer relationship management, marketing and promotion management, logistics, inventory and supply chain, and brand protection. According to Rizzi, the group has witnessed an evolution in RFID since 2001, when initially a small number of proof-of-concepts were under way to improve supply chain visibility, inventory accuracy and shop floor replenishment. By 2012, the number of pilots had increased, while full deployments were under way and the number of applications increased from the original three to 16. This year, RFID was being used to address 18 use cases, including returns, omnichannel retailing and process automation.

Above all other industries, Rizzi says, the apparel retail market may provide the most compelling use cases for RFID technology. The products have a limited sales window, since fashions are seasonal and fast-changing, and the high number of stock-keeping units (SKUs) make the environment complex and, therefore, able to gain value from RFID. Products rarely include metal or liquids, the two materials that pose challenges for RFID transmission.

The benefits for those using RFID have included reduced product processing times, increased inventory accuracy and decreased inventory tracking times. When it came to inventory time reduction, in fact, 41 companies said they have achieved such benefits, while five indicated that the reduction was 90 percent or higher, with others reporting a decrease between 60 and 100 percent. They also indicated benefits in sales due to improved inventory accuracy, with 19 reporting that RFID had reduced shrinkage.

The study will continue in the upcoming years, Rizzi says, adding "This is something we will constantly update year after year." One recent development the group identified was an increased use of RFID for omnichannel sales fulfillment. "What is meaningful, in my opinion, is that in 2015, we saw only eight companies declaring they were using RFID for omnichannel." At present, he says, the rate has increased to 28, and he expects that number to continue trending upward.

Rizzi speculates that the reasons the retail industry is driving RFID adoption include the high number of product SKUs, the dynamic nature of product movement, and fashion changes that require goods to continue flowing to customers in store fronts, as well as for online purchases. The research paper is available here. For those who have yet to deploy RFID, Rizzi warns, "The longer they wait, the further they will be behind their competitors."

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