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Momentum Is Growing for Item-Level Tagging, Survey Says

The Aberdeen Group finds that 57 percent of retailers using or planning to deploy RFID prefer to employ the technology at the item level, and that many are utilizing the technology to improve inventory accuracy, as well as for a range of other applications.
By Claire Swedberg
Jul 16, 2010While RFID in the retail world once conjure up images of tagged boxes and pallets in store rooms and warehouses, the technology has come a long way since then, according to a survey conducted by research firm Aberdeen Group. A report, entitled "Item-Level RFID Tagging in Retail, Improving Efficiency, Visibility Loss Prevention and Profit," based on a survey and underwritten by Checkpoint Systems and Motorola, finds that a sizeable number of retailers are using—or soon plan to deploy—RFID tags at the item level. The primary incentive, they state, is inventory accuracy—knowing what is in stock, and ensuring customers do not leave a store empty-handed because an item they want is missing.

"That's the killer app—inventory visibility and accuracy," says Russell Klein, Aberdeen's VP of IT research and one of the report's co-authors. The changing behavior of shoppers, he says, as well as the benefits RFID technology provides in inventory visibility, are what the study's respondents cited as their motivation to adopt RFID solutions.

Russell Klein, Aberdeen Group's VP of IT research
The Aberdeen survey included 125 executives, managers and other personnel working for retailers that all had some level of interest in—or had already adopted—RFID technology, but that fell into one of three levels of maturity in terms of RFID adoption, based on a score derived from specific performance criteria: Best-in-Class (the top 20 percent of performance scorers, with a mean inventory system accuracy of 92 percent, defined as the percent of stock-keeping units in the inventory system whose on-hand item count matches the actual item count in the story), Average (the middle 50 percent, with a mean inventory accuracy of 71 percent) and Laggards (with a mean inventory accuracy of 41 percent).

The companies come from North America, Europe and Asia, Klein says, and represent retailers of apparel, furniture, jewelry and pharmaceutical products, as well as operators of big-box stores. These firms responded to a questionnaire, while some also participated in follow-up interviews with Aberdeen researchers. The study finds that sellers of apparel and footwear lead in adoption over other retailers, with fast-food restaurants (which could use RFID to manage first-in, first-out semi-perishable food), leisure/entertainment and hospitality companies lagging the furthest behind.

The two overriding factors driving RFID adoption for inventory visibility, Klein says, are shoppers' behavior and the technology's lower price and higher performance. When it comes to shoppers, he notes, it is more important than ever that retailers avoid out-of-stocks. Today's consumers often order products online, then drive to the nearest store to pick up their purchase. More than ever, in that scenario—in which a retail store has committed to having a particular item in stock—having an item missing from the shelf due to inaccurate inventory counts loses a store its customers. "There is just no room left for distortion in inventory counts," Klein says. "You can measure it in soft dollars as customer loyalty," he adds, noting that the competition is finding ways to be more accurate in their own inventory. What the respondents told Aberdeen, he says, is that, "inventory accuracy is what it's all about."

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