Retailers Recognize the Problem—Not the Solution, Part 2

By Mark Roberti

A study conducted by Retail Systems Research indicates that retailers see the value of visibility, but don't recognize that RFID can deliver it.

In July, I wrote about a May 2012 report titled "The 2012 Retail Store: In Transition," from Retail Systems Research (RSR), indicating retailers have a lot of problems that radio frequency identification can solve, such as lost sales due to store out-of-stocks. But RFID was not mentioned among the top five technologies that retailers feel can deliver value within a store (see Retailers Recognize the Problem—Not the Solution).

RSR's July 2012 report, titled "Executing on the Promise: Retail Fulfillment 2012," paints a more bizarre picture. About two-thirds of "winners" (retailers that are improving execution) and 60 percent of laggards say consumers' expectation that they provide a seamless omni-channel shopping experience is a business challenge. They also cite erratic consumer demand and competitive pressures to shorten the customer order-to-delivery cycles as business challenges.

Winners and laggards both cite a number of inventory challenges, including excessive out-of-stocks in stores (65 percent and 41 percent, respectively), inaccurate inventory levels in stores (47 percent and 55 percent) and overstocks (29 percent and 73 percent). The solution to these problems is visibility.

The report states: "Asking retailers if they want 'real-time inventory visibility' is like asking someone if he or she wants to be a millionaire; the answer is invariably 'yes' until what it takes to achieve the goal is made clear. Nonetheless, such a broad concept needs more clarity, and so we asked the questions."

Nearly 90 percent of retailers said "system-wide inventory visibility" would deliver a lot of value, but only 44 percent said they actually have such visibility. Nearly 80 percent reported that having visibility into store inventory levels would be very valuable, versus 48 percent who said they have it. More than half indicated that having shelf-level inventory visibility would be very valuable, while only 20 percent said they have that.

The authors asked retailers about a variety of technologies, including whether they see a lot of value in these technologies, are rolling them out or are evaluating them. A full 86 percent saw great value in "cross-channel inventory optimization," while 83 percent said they saw a lot of value in "enterprise-wide inventory visibility."

These seem more like concepts than technologies. You might be able to buy software that allows you to optimize inventory across all of your channels, providing information about inventory throughout the enterprise. But the question is this: How do you get good data into the software? You can't deploy an army of people to scan bar codes on individual items each time they move from the DC to the back of the store, to the front of the store and to the point of sale.

The shocking part of the report is that while RFID can provide the visibility retailers know they need, only 3 percent are rolling out item-level RFID systems. About a quarter of survey respondents said they are evaluating the technology or have budgeted for a rollout. While it is disappointing that so few retailers recognize the value of item-level RFID, what is encouraging is that they recognize the value of having visibility. Hopefully, they'll learn from some of the successful deployments currently under way that RFID equals enterprise-wide inventory visibility.

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.