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RFID Adoption Will Spread Across Retail Sectors

After apparel, mass merchandise and department store retailers are likely to tag products in four categories, driving adoption into those areas.
By Mark Roberti
Dec 01, 2011—Retailers worldwide are beginning to adopt radio frequency identification—specifically, passive ultrahigh-frequency technology based on GS1's second-generation Electronic Product Code (EPC) standard—to track apparel items. That's because the industry shares a common problem no other technology has been able to solve—poor inventory accuracy, which leads to out-of-stocks and lost sales. Item-level tracking improves inventory accuracy, which in turn improves in-store replenishment, and that can lead to increased sales and higher margins.

In the United States, Wal-Mart ($432 billion in revenue) is tracking men's jeans and basics (undershirts, underwear and socks) in all of its 4,300 stores. Just these two categories account for 250 million tagged items annually. JCPenney ($18 billion) is tracking bras, jeans and shoes in all of its 1,100 stores. The retailer expects to tag all items within four years.

As the major U.S. apparel retailers move steadily toward tagging billions of apparel items, the rest of the apparel sector will follow suit. Photo: Motorola

Banana Republic, part of The Gap ($15 billion), has rolled out RFID to 100 stores. American Apparel ($527 million) plans to have 100 RFID-enabled stores by the end of the year. Macy's Inc. ($26 billion in revenue) plans to begin item-level tagging in its 850 Macy's and Bloomingdale's stores next year. Dillard's ($6 billion), Jones Apparel ($3.7 billion) and others have been running RFID pilots and appear close to moving forward with deployments.

As the major U.S. apparel retailers move steadily toward tagging billions of apparel items, the rest of the apparel sector will follow suit. Suppliers that tag for these retailers will, at some point, tag all their products because that's cheaper than managing tagged and untagged inventories, and this will enable all retailers to adopt RFID technology. Clearly, the apparel sector is on the path to becoming the first industry—from large department store chains to smaller specialty retailers—to move toward widespread use of RFID in the value chain—from manufacturing to point of sale.

The question is, once RFID achieves critical mass in apparel within three to five years, what happens next? How will adoption spread beyond apparel?
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