Oct 21, 2002Oct. 21, 2002 -- Peter Abell, director of research for AMR Research's retail practice, recently returned from Europe where he met with some of the firm's leading retail clients. He says several major European apparel and footwear retailers are planning to purchase upwards of 3 billion RFID tags each for implementations that will begin next year. He recently spoke with RFID Journal Editor Mark Roberti about why European companies are ahead of their U.S. rivals when it comes to adopting RFID. Below are excerpts from their conversation.
RFID Journal: Are the apparel and footwear companies planning pilots or actual implementations?
Abell: These firms have been using RFID in a closed-loop supply chain situation. They are now looking at widespread implementation, even before the Auto-ID Center's standard is fully adopted. I believe it will truly give them a competitive advantage because they can learn and drive costs down while extolling consumer benefits.
RFID Journal: Why are European retailers moving more quickly to adopt RFID than those in the U.S.?
Abell: In general, logistics is a much bigger problem in Europe than it is here. Typically, you have smaller stores and often it's not full truckloads going to stores. It's easier for smaller shipments to be sent to the wrong place or to have goods stolen. These factors have made RFID an attractive technology.
RFID Journal: Why the apparel industry?
Abell: Retailers believe RFID can increase sales, which is hard to achieve right now. It can decrease theft, which is particularly important in Europe. In an apparel or footwear store, you have a lot of expense in physical inventory taking, and that goes away. And one in four items is returned. You need to manage returns and reduce fraud associated with returns. Plus, companies like The Gap control all of the product coming in. They can tell their supplier here is the tag you will use and here is where you will place it.
RFID Journal: Many people believe item-level tracking is many years away. You are saying some European companies will start tagging items next year?
Abell: The apparel and footwear people are looking at [item-level tracking] because it solves a lot of their problems, and they have control over their own supply chain. The Gap saw more than a 1- percent increase in sales as a result of knowing where to find the right color and right size. That more than pays for the RFID system.
RFID Journal: Aren't the tags still too expensive to be put on individual items?
Abell: If you are buying 3 billion tags, you will probably pay about 30 cents today. At 30 cents, it makes sense for cases and even for items that cost $10 or more. A lot of retailers are waking up to that fact because they know they can get a competitive advantage if they can do more for the consumer. You won't hear a lot about these projects until they suddenly spring because no one wants to give away that they are trying to gain competitive advantage. But it's only a matter of time.
RFID Journal: Are you getting a lot of questions about RFID from your retail clients?
Abell: Absolutely. And not just from CIOs, but also CEOs. It obviously percolates down. The vendors are being called in so budgets can be put together so purchases can be made in a timely fashion. A lot of demo kits are going out right now, and major purchase orders are in the process of being given out for next year.
RFID Journal: Are there other industries, besides apparel and footwear, that are looking at RFID?
Abell: Companies that make music CDs and DVDs have very good reasons to do it. You can bet that the EMI's of the world are looking at how to embed it in DVDs to prevent counterfeiting. And if you think about a store with 200,000 titles in it, how do you manage which ones are selling and which ones aren't without sending someone out to count disks?