Sales Are Up and Overstocking Is Down, Study Reports, Due to RFID Use in Stores

By Claire Swedberg

A University of Leicester study involving 10 participating retailers, sponsored by GS1 UK and the ECR Community Shrinkage and On-shelf Availability Group, found that all companies realized a return on investment, with sales boosted by between 1.5 and 5.5 percent.


Radio frequency identification is delivering a boost in sales for retailers by an average of 1.5 to 5.5 percent, while increasing inventory accuracy by about 20 to 30 percent, according to a new study coming out of the United Kingdom. But challenges remain for RFID-enabled retailers when it comes to establishing and measuring Key Performance Indicators (KPIs).

Those are some of the findings of a recent study that focused on RFID adoption worldwide in the retail market. The study, titled “Measuring the impact of RFID in Retailing: Key lessons from 10 case-study companies,” was conducted late last year by Adrian Beck, an emeritus professor at the University of Leicester, with sponsorship from the ECR Community Shrinkage and On-shelf Availability Group (a retailer and manufacturer working group) and standards organization GS1 UK.

GS1 UK’s Jacky Broomhead

All ten retailers that participated in the study reported that they realized a return on their RFID investment. Half of the participants shared their data regarding the overstocking of goods or “stock holding” to ensure products do not go out of stock, which they said was reduced by between 2 and 13 percent.

Beck conceived of the study and also went on to conduct and author the research. He says he undertook his first study RFID use cases in retail in 2002, when retailers were still learning about this somewhat-new technology. At that time, he notes, “We were still looking at the potential for RFID.”

After the 2002 report was released, there was a lull in RFID interest, during which Beck worked on other projects, but he decided to revisit it in 2017 after attending last year’s RFID Journal LIVE! conference and exhibition. “I went away from that and wrote a research proposal,” he says, based on indications that RFID adoption had matured considerably since 2002. The 2017 study took advantage of data and real-world knowledge that was unavailable 15 years earlier. “This study was much more grounded in experience and evidence,” he states. “I was interested in understanding what kind of journey these companies [retailers] had been on.”

The recent study involved 10 retailers that shared their experience with RFID. All 10 companies indicated that they had gained a return on their investment and that the deployment was fully justified by the returns. Most said they launched their RFID programs to improve inventory accuracy, according to Jacky Broomhead, GS1 UK’s market-development manager for apparel, footwear and accessories. “Many saw the use of RFID as a competitive advantage,” she adds.

The participating companies were Adidas, C&A, Decathlon, Jack Wills, John Lewis, Lululemon, Marc O’Polo, Marks & Spencer, River Island and Tesco. The study consisted of 65- to 150-minute interviews with the participants. Three of the largest companies reported that they purchase more than 150 million RFID tags annually, while the smaller responders said they purchase fewer than a million tags a year. In addition, some are global companies with stores and an RFID rollout spanning multiple countries, while others are isolated to a single country. One firm was located in Canada, five were in the United Kingdom and the rest were based elsewhere in Europe.

The results were significant on several levels, according to Gary Lynch, GS1 UK’s CEO. “When I first joined GS1 UK sixteen years ago,” he says, “the industry was just getting into RFID and EPC [Electronic Product Codes]. What we’re finding now, however, is that we are reaching a tipping point.”

GS1 UK’s Gary Lynch

For one thing, Lynch notes, the study found that companies using RFID, on average, improved their inventory accuracy from between 65 and 75 percent to between 93 and 99 percent. As a result, stock availability rose to approximately 90 percent. Those who reported on their inventory stock said they were able to reduce stock levels by between 2 and 13 percent. In addition, one participant in the study indicated that it also reduced shrinkage with the technology, by about 15 percent. Labor costs, one company reported, were reduced by 4 percent.

The participating companies cited several areas of learning, including the role of senior management. According to the participants, without the active support of senior management, a technology rollout is unlikely to be successful, or even undertaken at all. They deemed it paramount to appoint a project leader for an RFID rollout. From there, a company needs to include the other members of the business in the technology deployment, and ensure that everyone understands the impact that RFID is expected to have.

The greatest challenge that participants expressed was with regard to the integration of RFID data with their existing software. Some said they hadn’t planned as well as they should have to make such integration possible. They also tended to prefer handheld readers over fixed models in such locations as portals, the point of sale or store exits. None indicated that they were using overhead readers in their stores. When it came to tagging the goods, they opted to have the tags applied at the point of manufacture.

Key to the study as well, Beck says, was how companies developed their key performance indicators (KPIs) and used them to measure their technology installation’s success. In some cases, he says, although they expressed having multiple KPIs in place that the RFID technology met, many of those measurement points did not qualify as KPIs at all, but were simply measurements of how well the hardware and software were able to capture and store data.

Companies are still challenged with understanding what their underlying “intervention mechanism” is in order to enable their KPI. There is a difference, he points out, between aspirations like sales lifts and the intervention required, leveraging the collection of RFID data to accomplish that intended sales lift. Simply capturing data is just the first step, Beck says.

To achieve the most success, Beck found that retailers are keeping their deployments simple, with an eye focused on just a few clearly identified KPIs and the mechanisms to get them there (such as tracking inventory management to reduce out of stocks) rather than employing end-to-end supply chain and in-store solutions, or using magic mirrors or an alternative to an electronic article surveillance (EAS) system. “Having simple KPIs and avoiding complexity,” he says, appear to have been critical for many retailers.

In the future, the participants indicated they were looking into the use of RFID for fitting rooms, broadening the technology’s use in the supply chain and furthering integration with existing management software. Some are also considering the use of RFID for check-out-less stores, and said they might use or pilot overhead readers.

One catalyst for growth in RFID has been the need for omnichannel servicing of online and phone-based shoppers. “There’s a need for greater visibility of stock for a more demanding customer,” Lynch states. As a result, he says, business at GS1 UK has never been busier.

Initially, the study had aimed at a sampling of six to eight companies, but after 10 businesses responded to the campaign, the study was able to be more comprehensive with the greater number of participants. Lynch predicts that the continued deployment of GS1-based RFID solutions can be expected. “Obviously,” he says, “we are very enthusiastic about the standards. If you’ve got a community all using a standard tag, it encourages manufacturers” to apply tags and use the read data for their own purposes as well.

The sales boost of 1.5 to 5.5 percent is significant, Lynch adds, since it means companies can yield hundreds of thousands of dollars, euros or pounds to increase annual profits. “In retail, the margins are wafer, wafer-thin,” he says, so any increase is of high value.

“Measuring the Impact of RFID in Retailing” answers many questions regarding how RFID technology has been adopted, Lynch says, and is impacting the business of retailers. The report also explores how much the GS1 standard is impacting the use and expansion of RFID programs. To that latter effort, he says, the authors found that some companies had deployed proprietary RFID systems (20 percent of the group), while most were using GS1-standard RFID, and expansion was somewhat hindered for those who had adopted the proprietary standards.

The growth in online sales will continue to put pressure on retailers in the meantime Broomhead speculates. She cites a European Union study indicating that 86.7 percent of U.K. shoppers do some of their shopping online. Without the use of RFID, meeting the needs of online shoppers is becoming increasingly difficult.

“We’re pleased to bust the myths around RFID,” Lynch states. “We can say now that it does work, and it’s not too expensive. The [RFID industry] is quite mature. So this report will help retailers that are risk-averse,” by demonstrating that RFID is affordable and will provide benefit. The full report is available at the GS1 UK website.