Successful Retail RFID Projects Start With Encoded Converted Tags—But Not All Retailers Get It Right

By Dean Frew

Implementing RFID technology into a business can have huge benefits in the long run and allow a competitive edge, especially as the industry emerges from pandemic-induced disruption.


Radio frequency identification technology is a proven solution to help retailers better optimize their operations, streamline processes and drive greater profitability. Without RFID, some have reported inventory counts on a weekly or monthly basis, and for others, the complexities and disruption of manual stock reviews by barcode scanning have resulted in yearly checks instead—with only 60 to 80 percent accuracy. While RFID offers real-time and accurate inventory visibility, not all retailers get one of the most critical initial components right prior to implementation—the encoded converted tag—exposing themselves to greater challenges down the line.

Without a high-quality RFID tag made with a high-performance RFID inlay, retailers run the risk of much lower read accuracy rates and inhibited capabilities that can make their solution a rather costly but ultimately ineffective one. While identifying the right options can seem too complex or, for some, altogether unnecessary, navigating these challenges strategically and thoughtfully early on will have a much greater payoff in the long run.

Overcoming the Historical Challenges of RFID Implementation
Despite continued double-digit growth in the adoption of item-level RFID in retail, many have yet to have direct experience with implementations or have an ecosystem that is experienced with this technology, greatly increasing risks around implementing this transformational technology. More is at stake today, now more than ever before, because retail is going through a very disruptive change due to essential post-COVID-19 shopping norms, such as BOPIS (buy online, pickup in store) and click-and-collect.

In addition, while item-level RFID continues to drive ROI and profitability for those that pursue the technology, there is still a broad lack of endorsement when it comes to implementation. Project leads must consistently find creative ways to sell any new solutions they want to introduce into their companies, and managing approvals across design, buying, packaging, IT, operations and C-suite teams can prove tricky and lead to eventual setbacks.

The lack of transparency between these project teams can contribute to the red tape as well, making it much easier to minimize the importance of a seemingly small commodity piece like the tag. To combat this, it’s vital that team members who are assigned to coordinate the procurement of tags intimately understand the technology path of the project in both near and long terms, to ensure compatibility between the software and retail operations teams before embarking on the intended journey.

Another common issue is the tag unit itself, and the challenge of fitting RFID inlays into existing labels or tickets. Many of these pieces haven’t been optimized to accept RFID inlays, and changing them requires adding additional resources to make them larger or adjust the accompanying artwork—which is perceived as too time-consuming, costly, and daunting for retailers to tackle.

Top Pitfalls to Avoid
When retailers actually get the green light to pursue RFID technology in a rollout, there are several pitfalls some find themselves up against that others should avoid surrounding converted tags. These include:

Rushed efforts: A common mistake is rushing the process, cutting corners and moving too quickly just to get the job done instead of strategically considering all options and scenarios. For instance, some users attempt to leverage a single type of RFID tag for an “ultra-wide” variety of product categories when the inlay is meant to perform only for small groups—e.g., they’re used on homeware or bath towels when the intended use case is for apparel only. This can cause RFID performance issues down the line that otherwise could have been avoided.

Lack of focus on encoding quality: The quality of stock counts has a number of critical dependencies, and at the top of this list is the quality level of encoding. A 1 percent reduction in encoding quality, achieved by some tag vendors, can result in millions of units in out-of-stock and missed sales. As we at SML have more than 200 million RFID tags being stock-counted every week on our Clarity enterprise software platform, we have a unique perspective on how to measure encoding quality from all tag providers. It is this knowledge that drives our encoding quality standards.

Aesthetic-driven: While aesthetics are important, they shouldn’t be the only driving factor when creating the tag and inlay. In fact, while some may view “smaller” as more visually pleasing, the fact is that some small-form inlays may not provide high-percentage read rates in certain situations, especially when counting densely merchandised items or hard-to-tag items, or when auditing shipments at the pallet or container level.

Leading by costs: Some retailers will select new tag offerings from new suppliers that have little experience with production volumes and quality standards and solely cut costs—only to be met with the realities that the chips are obsolete. While these tags may technically be functional, the performance won’t nearly match what is required to meet the use-case and business-case expectations.

Lack of questions: When considering converted tags, it’s important to ask the right questions. For instance:

  • How is the item normally merchandised and what is its typical packing density for shipping? How is it displayed on the sales floor?
  • Is the product made, or could it be made, by avoiding materials that are unfriendly to radio frequencies (RF)—i.e., proximity with metal foils?
  • How or where will the tags be read?
  • Are system elements like handheld readers, box-level tunnels, overhead readers and anti-shoplifting electronic article surveillance (EAS) systems on the horizon that will require a specific format, inlay type and chip memory to support them?
  • Is a supplier’s proposed inlay up to the job?

By developing a stronger understanding of these types of topics before searching for a converted tag provider, retailers will help streamline the process and secure better inventory accuracy results in stores. In addition, working closely across all departments to discuss the details will better guarantee any tag or chip selections are properly developed and implemented.

Staying Competitive in the New Era of Retailing
Implementing RFID technology into a retailer’s business can have huge benefits in the long run and empower their competitive edge, especially as the industry emerges from pandemic-induced disruption. The promise of 98 percent inventory accuracy, reduced shrinkage, and direct access to data that informs and improves the customer experience is proven to help bottom-line results—but success will be limited if retailers don’t take the right course of action in the beginning stages of the system ecosystem: the encoded converted RFID tag.

Dean Frew is the chief technology officer and senior VP for RFID solutions at  SML Group, and the founder of SML Intelligent Inventory Solutions (formerly Xterprise, purchased by SML in 2013). Dean is responsible for driving SML’s RFID tags and solutions strategy, and he runs the company’s RFID solutions division, based on his 20-plus years of experience delivering RFID solutions to retailers and brand owners around the globe.