In the second of this series on RFID, Chris Warry take a closer look at why retailers are finally adopting this identification and tracking technology – despite it being around for years.
In my last article, I explained how radio-frequency identification (RFID) technology has grown from a tool used to identify World War II aircraft, to being hailed as ‘the next big thing’ in retail (a tag it retained for over a decade). However, adoption turned out to be slow… until recently.
Here, I analyse the three major factors that are causing retailers to rethink their approach, and finally bring RFID into the fold.
Adoption factor 1 – The rise of the ‘always on’ customer
In our paper Connected and curated – long live the store! PwC revisited the ‘always on’ customer. Consumers now continuously hop through a myriad of touchpoints across a growing number of channels: stores, outlet locations, e-commerce sites, m-commerce sites, social media commerce, pop-up stores and so on. To further complicate matters, the mode of fulfilment for customers cuts across these channels, giving rise to the ‘order from anywhere, fulfil from anywhere’ option.
To successfully offer the ‘order from anywhere, fulfil from anywhere’ option, retailers must have full and real-time visibility and availability of inventory, regardless of where it sits in the supply chain. A more dynamic approach to inventory visibility is needed and lies in the adoption of technology that provides item level tracking and the ability to connect this from manufacturer through to customer.
RFID, supported by the right cloud-based solutions, is proving to be the way that retailers are able to provide this intricate, real-time, end to-end transparency.
Adoption factor 2 – Improvement in the RFID solution and supporting technology
As is the case with all technologies, the performance of RFID has improved over the last decade. The latest EPC Gen 2 chips are more robust as well as being durable in a much broader range of environments. Scan errors of the past have significantly reduced, the chips have longer read ranges and they can transmit data faster than before.
Performance of the technology aside, many organisations simply didn’t have the data management capability in place to deal with the huge volumes of data that comes with RFID adoption. However, in today’s age of big data, organisations have made large investments in order to build their analytics capability, enabling them to capture, store and process large volumes of data.
The real icing on the cake is the financial factor. Hardware costs (both for chips and readers) continue to fall as scale is achieved, and enabling technology in distribution centre, stores and the head office that didn’t previously exist are commonplace today. For example, installing Wi-Fi in stores and distributions centres was a huge cost line in the business case previously; that cost is now excluded for many organisations.
Adoption factor 3 – Proven benefits from the early adopters
Driven by ‘always on’ customer needs as well as advancements in technology, some of the biggest retailers in the world have become early adopters of RFID technology. Each has indicated that they are realising some or all of the benefits as defined in the table above.
- Mark & Spencer
The UK-based supermarket began deployment of Gen 2 RFID tags in 2012 with 100% of clothing and 50% of its homeware items RFID tagged. Marks & Spencer recently announced that it expects to achieve 100% tagging by 2017.
Department store Macy’s equipped all its outlets with RFID technology and deployed tags to count size intensive replenishment merchandise – those products that come in multiple sizes, such as apparel and footwear. It announced an extended roll-out in late 2014, saying vendors had begun tagging fashion items such as dresses and men’s jackets.
The flagship chain store of the world’s largest apparel retailer, in 2014 Zara announced it was implementing an item-level RFID tagging system to speed up the purchasing process and improve availability of popular stock in stores.
- American Apparel
Fashion retailer American Apparel started pilots at its New York City stores in 2007 and has now deployed RFID-tagged inventory to all of its 280 outlets worldwide. Key to its success was a strong pilot approach with a focus of getting the process right before broader roll-out
- Target USA
In May 2015, Target announced that it intended to take its RFID deployment live, with a view to rolling out the technology in all 1,795 of its store locations across the United States in 2016.
Now that the major retailers have blazed a trail, what about the rest? In the final instalment of this series, I look at Australia’s position on the RFID adoption curve. Interested in implementing the technology? I’ll also offer guidelines for navigating your own RFID journey.
Listen below to Chris Warry talk further about RFID on the PwC Retail & Consumer podcast: