RFID Adoption Headwinds

By Bill Hardgrave

Retailers that understand three basic issues can sail through their RFID pilots.

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My previous column, Greater RFID Awareness and Acceptance Lead to Accelerated Adoption, examined recent metrics in the U.S retail sector, which showed that, overall, RFID adoption is up this year compared with last year, and the adoption rate is accelerating. But three headwinds could prove to be a drag on adoption in the short term. The good news is that retailers can steer clear of these challenges by adhering to the following guidelines.

Don’t treat RFID as “just another project.” Some retailers view adopting RFID as a project to be undertaken alongside other projects, such as omnichannel enablement—in particular, buy-online-pickup-in-store (BOPIS) and ship-from-store. One retailer, for example, decided to postpone its RFID initiative so it could focus on BOPIS. The irony, of course, is that a retailer must have high inventory accuracy to ensure a successful BOPIS program, and the best way to achieve high inventory accuracy is with item-level RFID tracking. RFID is the foundation that enables many of the projects retailers must undertake to adequately satisfy today’s consumers.

Do plan ahead. Before beginning a pilot, it is important to take good pre-RFID measures of the key indicators, such as inventory accuracy and out-of-stocks, and choose control (non-RFID) stores to compare with the test stores. The RFID Lab recommends taking a matched-pair approach: choose one control store for each test store using a set of matching criteria, such as geographic location, store traffic, sales, size and turnover. If conducted properly, a pre-vs.-post and test-vs.-control approach will provide insight into RFID’s value.

Some retailers have used post-selected or one-to-many control matching, which may not yield valid results for transformational initiatives such as an RFID implementation. They chose higher-performance control stores to match the improved test stores, for instance, rather than comparing a control store with a pre-RFID test store. This approach can provide inaccurate conclusions—for example, there may appear to be no difference between the test and control stores.

Do act on the RFID data. I hear this all too often from retailers: “We installed RFID and now have high inventory accuracy, but our shrink has not decreased and sales have not improved. Why isn’t the system working?” The answer is simple: A retailer must do something—high inventory accuracy and visibility alone will not solve these problems. A retailer must use the RFID data to improve processes, such as replenishment. The information can also be used to expose more inventory to consumers and implement a loss-prevention system.

After many years of retail initiatives, the industry has established best practices for conducting RFID store pilots. All the issues retailers complain about can be avoided with proper planning and attention. But left unchecked, they can swamp an RFID pilot.

Bill Hardgrave is dean of Auburn University’s Harbert College of Business and founder of the RFID Lab. He will address other RFID adoption and business case issues in this column. Send your questions to hardgrave@auburn.edu. Follow him on twitter at @bhardgrave.