Investors: Ask Retailers About Their RFID Strategy

Inditex's outstanding first half was due, in part, to its use of radio frequency identification, which is why analysts should be asking more publicly traded retail companies about their use of the technology.
Published: September 23, 2019

I came across an article on a global fashion industry website called MDS about Spanish multinational clothing company Inditex having had a great first half of the year (see Inditex Fights Back Analyst’s Doubts With Best Quarter Since 2017). The article, written by Pilar Riaño, says the retailer’s sales for the first half of 2019 were up by 7 percent, while its profits rose by 10 percent.

Inditex is the parent company of retail chains Bershka, Massimo Dutti, Oysho, Pull and Bear, Stradivarius, Uterqüe, Zara and Zara Home. The group operates 7,000 stores in 96 markets around the world.

The article reports that RFID technology “is the cornerstone of Inditex’s digital strategy. Radio frequency identification is already working in Zara, Massimo Dutti and Uterqüe.” According to MDS, the technology will be deployed across all of Inditex’s chains by 2020 (see Inditex CEO Announces RFID Expansion Plans, Tyco Wins Chain-wide Contract From Inditex and Wall Street Journal Article on Zara’s Use of RFID).

RFID alone is not responsible for the strong financials posted by Inditex, but it clearly contributed to this success. Target has also posted strong earnings in the past few quarters, due in part to its use of RFID (see Target Announces Nationwide RFID Rollout). This raises the question in my mind of why retail financial analysts aren’t asking other retailers about their RFID strategies.

The financial industry clearly hasn’t grasped what a game-changer RFID can be for retail. It’s not a panacea, of course. If your brand is struggling to attract buyers, RFID can’t fix that. But if your brands are popular and shoppers are coming to your stores, then RFID can help to ensure that the right products are on the shelf and available for sale.

RFID can also provide the inventory visibility required to enable “buy online, pick up in store” (BOPIS, or “click and collect”) and “ship from store” business models. Without RFID, companies often need to hide inventory from online customers for fear an item won’t be in the store if their system indicates there are only two or three left. Macy’s is able to show customers every item available in its stores, even if there is only one left, because it uses RFID and thus has confidence in the accuracy of its inventory counts (see Macy’s Launches Pick to the Last Unit Program for Omnichannel Sales).

If I were investing in retail stocks, I would want to know how retailers are using RFID and what their strategy is for merging online and offline channels. Those that utilize the technology will be able to effectively execute BOPIS and “ship from store” strategies. Those that don’t will continue to struggle, disappoint customers and ultimately lose sales.

Mark Roberti is the founder and editor of RFID Journal.