In the first of a three-part series, Chris Warry explains the history of RFID technology – and why, despite being around for decades, it has only recently commanded the full attention of the retail sector.
It had been touted as one of the ‘next big things’ in retail supply chain since the mid-2000s. But, with seemingly minimal advancement or adoption, in more recent times radio-frequency identification (RFID) appeared to have lost the attention of the retail and consumer industry.
Lately, though, the ‘noise’ surrounding the use of RFID in retail in Australia is getting louder and, if the regular stream of enquiries about RFID coming our way is any indication, then the technology is making a comeback in the minds of some of the industry’s major players.
Why is RFID back on the agenda? In this three-part series I explore the context of the retail sector here in Australia, looking at the factors that are driving RFID steadily along the adoption curve.
RFID in retail:
As its name suggest, radio-frequency identification (RFID) is an identification system and takes the form of an RFID tag. Similar to a barcode, the chip contained within an RFID tag can record and store data (such as a serial number, product information and price of purchase record) with the tag then attached to objects (single items, cases, pallets or containers). However, unlike barcodes, RFID readers wirelessly send and receive radio frequency data to and from the tags via antennae, delivering automatic and contactless identification and tracking of tags attached to objects.
RFID tags can also be read from greater distances and at a faster rate than barcodes, are capable of carrying larger volumes of data, are reusable and more sturdy.
Since its invention in the 1940s and use in World War II to identify aircraft, RFID has been applied across a range of industries – particularly transport, health, aerospace and mining. When you drive on the M4 in Sydney or EastLink in Melbourne, for example, an RFID chip within your electronic tag identifies you as you pass through the RFID reader better known as a toll point. The airline bag tag that synchronises your details on your Qantas card with your baggage? You guessed it: RFID technology.
In retail, extreme early adopters had a go at RFID in the 1990s, followed by Walmart’s big bang attempt in the early 2000s, in which all suppliers were required to tag merchandise pallets and cases. However, adoption more widely in the retail sector has been slow, for the most part because of the impact of RFID implementation on margins, both in terms of the cost of the tags themselves and the supporting infrastructure.
However, adoption has spiked recently, with a growing number of retailers joining heavyweights like Marks & Spencer, Macy’s, American Apparel, JC Penny, Zara and Target USA who have moved through their testing stages and are now adopting full-scale RFID rollouts. (I analyse these efforts in part two of this series.)
In fact, market research1 suggests the retail sector will become the biggest user of RFID technology by 2024, estimating that its spend will increase from 5% of total global RFID spend today to 27% by 2024.
There are three major factors driving the increase in adoption for retail:
- The need for real-time, 100% accurate stock visibility to meet the demands of the connected customer.
- Improvement in the RFID solution and supporting business technology.
- Benefits demonstrated by early adopters.
1 ‘RFID Forecasts, Players and Opportunities 2014-2024’ report, IDTechEx
Listen to Chris Warry discuss RFID adoption in the PwC Retail & Consumer podcast: