According to RFID solutions provider SML RFID, the apparel market is still in the earliest steps of a long race toward universal RFID tag use. In fact, the company estimates, apparel market penetration is a conservative 4 to 8 percent thus far. This is considerably less than indicated on some reports, such as one from GS1, which estimate the adoption percentage at more than half.
SML’s growth estimate comes from an analysis that the company initially conducted 18 months ago, says Dean Frew, SML RFID’s CTO and senior VP of RFID solutions. The analysis, he says, was intended to help the company identify where it should focus its marketing strategies and planning, such as the geographic location of service bureaus that can quickly provide encoded tags, and what business requirements were emerging across different segments.
The intent to deploy RFID, or the testing of the technology, is significantly different than an actual permanent deployment, Frew says, but in some cases, statistical results can be confusing. For instance, if a large company were to conduct a pilot at a single store, that would indicate its interest in RFID, even if the sheer volume of tagged items were low.
What that means for the RFID industry, Frew explains, is plenty of room for growth—something he says the company’s sales are proving. According to Frew, SML’s RFID technology sales have been up 50 percent annually for the past three or four years. “We’re seeing significant growth year over year, and it looks like 2017 and going forward is going to be no different than that.”
Much of that growth results from the pressure of online sales that is prompting retailers to offer omnichannel purchasing for customers who can buy a product from the nearest store or online, or purchase that item online and pick it up at the nearest store. This omnichannel model requires that every store maintain a highly accurate inventory count.
However, Frew adds, at the expected growth rate, it may be a decade before RFID installations—including software, tags and readers in use at apparel stores—become ubiquitous. “When you define adoption,” he states, “we’re looking at it from the bottom up.” That means counting the number of actual RFID tags in use, and the number of stores using the technology.
The number of actual deployed RFID systems—including tags, readers and supporting software—for which retailers are experiencing measurable results and a return on investment (ROI) is considerably less than some estimates have led the industry to believe.
According to SML, RFID tag volumes sold by it and other global tag suppliers will be between 35 and 37 billion in the next 15 years. The number of stores using RFID is still small, and Frew predicts that approximately 200,000 stores dedicated to apparel and footwear sales in the United States and Europe will adopt the technology in the same timeframe.
The RFID company came to its numbers by analyzing public information about units sold among apparel and footwear retailers in Europe and the United States. SML is now collecting and reviewing data related to apparel retailers in Asia.
The evolution of RFID deployments in retail was rocky during the early stages. Early adopters of RFID technology were, in some cases, surprised at the installation’s cost when compared against the early benefits. According to Frew, the technology adoption was also sometimes hampered by an inability for companies to align behind its deployment and integration with enterprise data.
Frew says he quickly gains a sense for when a customer’s RFID adoption will be successful during the engagement process with that customer’s steering team. “You can tell whether they’re going to succeed based on who’s sitting around the table,” he states. Companies with successful deployments include managers of all departments, with the leadership acknowledging that ther inventory accuracy has room for improvement. “The steering teams need to be unanimous that there’s an inventory problem,” he says. Where the RFID investment fits on a company’s priorities list is another issue that can determine whether an installation will succeed or disappoint.
Apparel and footwear growth is taking place primarily among brands with their own outlets, as well as chain vertically integrated specialty stores. Department stores that carry merchandise from a wide variety of brands are seeing less immediate benefit from RFID deployments.
“We believe we’re on the other side of the chasm,” Frew says, when it comes to RFID adoption. He predicts that in the next five years, about one third of apparel and footwear retailers will have adopted RFID technology. “I don’t see anything that’s going to slow adoption.” He notes, however, that in order to provide useful solutions to retailers and brands, RFID technology providers need to offer simple solutions that match users’ needs and drive a rapid return on investment.
“I’d say that industry, as a whole, is making this too complicated for retailers,” Frew says. “We see customers want to simplify,” without wanting to learn the details of how the technology itself works. “We should extract customers from the details of how a tag talks to a reader, as we are well past that now.” Instead, he adds, offering best-in-class products and software, applying tags for necessary pilots, and using the cloud to manage data all make installations more palatable for end users and generate a proven ROI.