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RFID and Data-Driven Retailing

Businesses run on data, and RFID allows retailers to collect a wealth of information cost-effectively, enabling them to better manage their operations.
By Mark Roberti
I don't know what is under the Impinj simulator's hood, so I can't state for certain how accurate it is, but Arnstein says his company will work with retailers to test assumptions and accurately model their store so that the simulation will be accurate. This means retailers can forecast the impact of using RFID on operating profit, inventory accuracy, unit sales and other metrics. According to Arnstein, this is akin to an aerospace manufacturer simulating stresses on a plane before ever building one.

That's great—but imagine what a retailer might be able to simulate once it had RFID data from live operations. For example, it will be possible, in the future, to collect sales information by location and fixture within a store. This will make it feasible to test how well an item sold at one location versus another at a different store, and to optimize a store's configuration in order to maximize revenue. Retailers do some of this now, but their store configurations are often based on selling price, or on mere guesswork.

It might turn out that jeans sell better on rounders at the front of one store, for instance, and not as well in another. With hard data about an item's location and sale price, the amount of time that product spends on the floor, and other data that an item-level RFID system can supply, retailers will be able to simulate different store configurations and forecast sales. This, in turn, will enable them to make better, more informed decisions.

That's a huge benefit. And having real data regarding shipping accuracy, replenishment times, pick accuracy and so forth will allow companies to measure—and improve—their performance. But that's not the only benefit. The frequency at which RFID data can be collected allows retailers to correct mistakes.

That's one of the things that Arnstein says he learned from using the Store Performance Simulator. "I ran a scenario comparing a store using RFID with a replenishment accuracy of only 80 percent against the same store using RFID with a 90 percent replenishment accuracy," he explains. "The impact on on-shelf availability, front inventory, unit sales and even operating profit is minimal. That surprised me, but it makes sense. If you miss an item today, RFID lets you catch that a day or two later, and to fix the problem."

And that proves that if you can measure it, you can manage it.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.

USER COMMENTS

Tilak Dias 2012-06-22 01:45:19 AM
RFID and Data-Driven Retailing Hi, I find this interesting. However, I think the real potential of RFID tagging in apparel is when the RFID chips are fully integrated into the textile structure in an unobstrusive manner; i.e. within the fibres. Is this feasible. Thanks.
Jessica Saila 2012-06-27 02:15:16 PM
Definitely the 2nd phase of item-level RFID Mark, thank you for starting the discussion on this aspect of RFID! I agree 100% with the level of information available and in fact spoke to a number of retailers about this aspect already. A recent study by the Turku School of Economics suggests that the first phase of item-level RFID implementation aims to serve the SCM as well as selection / inventory related matters and the second phase is driven by the use of data gathered and the turning of data into knowledge. The third phase, with only a handful of retailers so far in it, is likely to hold a lot of marketing / consumer interaction apps as well as new channel structures. I found what you said here very much in line with that study. Br, Jessica @ Nordic ID

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