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The “Deflate-Gate” scandal that swirled around quarterback Tom Brady and the New England Patriots cast worldwide attention on the seemingly mundane process of keeping track of game balls. Just a week earlier, another former NFL legend, Emmitt Smith, was at the National Retail Federation (NRF) show promoting a technology that could help: RFID. Smith is founder and chairman of a mobile identification company called PROVA (www.provagroup.com) with a solution called Gametag, an embedded NFC (a form of RFID) tag used to track a ball’s history and protect against counterfeit.
That’s just one of the ways RFID is making a big comeback after the Walmart mandate failed to trigger the expected explosion in retail
supply chain adoption 10 years ago. As Gartner put it, RFID has moved through a long trough of disillusionment and is climbing up the slope of enlightenment. Inventory accuracy through item-level tagging is leading the way, but there are lots of other use cases in retail.
“Logistics benefits exist, but they’re very driven around eliminating errors and fraud,” says Francisco Melo, VP of global RFID for Avery Dennison RBIS (www.averydennison.com). “Those are minor compared with what happens if you improve inventory accuracy from 70% to 95% and up. Item-level really drives value all the way to the consumer.”
Solution providers serving SMBs should take notice. While Tier 1 retailers are leading, that will change rapidly as RFID shifts from early adopter to mainstream. Big retailers will push suppliers to source tag RFID into their merchandise, until it becomes cost effective for manufacturers to tag everything. This means more manufacturers needing help with compliance tagging, followed by infrastructure to make use of the tags themselves, in addition to more tagged items in the supply chain and more retailers feeling competitive pressure to implement RFID. Now is the time for solution providers to gain RFID expertise while preparing for the inevitable transition from bar code to RFID.
Ready for Primetime
RFID adoption is being fueled by technology maturity. Passive tag prices dropped to the .50 to .10 level while improving in size and performance. GS1 standards for tag formatting are widely adopted. IP fights are settled. Reader protocols have standardized, reader performance and battery life has improved, and sleds make even smartphones into handheld RFID readers. Antennas are off-the-shelf.
Even as solutions become more sophisticated, RFID software masks a lot of its complexity. Cloud-based solutions enable easy communication of tag data, with easy-to-use dashboards and more manageable financing. “Medium and small retailers are much more likely to adopt RFID with SaaS, while large retailers run RFID internally,” says Phil Morrow, senior director, product management for OATSystems Inc., a division of Checkpoint Systems (www.oatsystems.com).
“The advancements are phenomenal,” says Fred Kresal, systems engineer and RFID expert with Quest Solution (www.questsolution.com), which focuses on closed loop solutions. Because solutions are easier to integrate, he says, they install faster
– though the sales process remains long.
Killer App: Item-level Tagging
The main drivers for RFID’s retail resurgence are inventory visibility and omnichannel fulfillment through applications such as in-store cycle counting, replenishment, receiving and product look-up and locator. Reducing out-of-stocks not only saves the sale, but ensures customer satisfaction and the highest possible margins. Early adopters report inventory accuracy rates above 95%, and sales lift of 3% to 15% after installing item-level RFID, as well as improved labor productivity.
“RFID technology is really the only way to ensure nearly 99% inventory accuracy, which is critical to enabling omnichannel capabilities in the store,” notes Jamie Kress, director of store performance solutions at Tyco Retail Solutions (www.tycoretailsolutions.com). All channels rely on inventory availability, and that quantity must be correct. Kress points out this means inventory on-hand through all selling channels, including brick mortar, web, mobile, social, and call center, must be accurate. “If a retailer promises an item to a customer for purchase, pick-up or shipment, and fails to fulfill that promise, the retailer risks shopper disappointment and potential loss of a loyal customer. With accurate item-level inventory visibility for omnichannel, the retailer has laid the strong foundation for driving sales and a positive customer experience when shopping through any retailer selling touchpoint,” he asserts.
RFID also provides valuable data about the store. “We’ve become addicted to data in ecommerce, and want the same data from stores,” says Larry Arnstein, VP of business development for Impinj (www.impinj.com).
After ROI analysis, most projects start as store-level item-level tagging pilots for limited quantities of goods, then expand to more categories and stores, because that’s where about 60% to 70% of the value of item-level RFID lies. As the retailer’s store-level RFID project matures, tagging may move to retail DC, then to manufacturer DC, and finally to manufacturing production. Tagging costs get lower as you move upstream. Right now RFID source tagging is on a tag, but someday it will be embedded in products themselves, like Emmitt Smith’s footballs. Some retailers choose reusable tags, so they can detach at POS and reactivate them for new items.
Vertically integrated mid-tier apparel companies such as Inditex group, in its Zara apparel chain, and Marks & Spencer have led the way in item-level RFID, particularly in Europe. In the U.S., multi-brand department and discount retailers such as Macy’s, Kohl’s and Walmart are the leaders. RFID is in place today in thousands of stores, with billions of items tagged.
“Currently the main adopters are top tier department stores and specialty apparel retailers,” commented Tyco’s Kress. “As additional use cases surface proving even broader adoption, we’ll see higher ROI in the store.”
Many apparel and footwear suppliers are supporting large retailers’ programs by attaching RFID tags to their merchandise. “I’d venture to guess that almost all major national brands are source tagging to support customers,” says Impinj’s Arnstein. “There is movement to verify and validate the quality of tagged items.” Suppliers see tagging as a margin amplifier since it connects consumers with merchandise in demand, which means RFID incorporated into material handling equipment and production and warehouse management software.
High-value and non-metallic, non-liquid goods are the items most likely tagged, given the cost of tags and the physics of RFID. But “for most apparel retailers, it makes more sense to tag everything than pick and choose,” notes Impinj’s Arnstein.
Cost remains the biggest barrier to RFID projects. Another barrier: “The idea the RFID can do more than it actually can do, like reading everything within a 60-foot radius with a hand-held reader,” says David Bissonnette, EVP for Zebra partner Strategic Systems & Technology Corporation (www.sstid.com). Customers need to be educated on real-world applications.
Other Retail RFID Use Cases
Item level dominates, but there are many other retail applications for RFID.
1. Closed loop asset tracking:
Optical Phusion (www.opticalphusion.com), a solution provider focused on store-level solutions, is seeing success in RFID
tagging associate- or customer-facing mobile devices to prevent loss and track employee productivity. The device itself can be programmed to remind the holder that it is the property of the store. “The ROI is remarkable – well under one year,” says Scott Arnold, president.
Similarly, Quest Solutions’ market includes the bakery industry, which was losing up to 12,000 reusable trays a year; the solution also helps track goods on trays for inventory management, billing and recall purposes.
2. Smart fitting room:
Portal gateways installed on the ceiling recognize products as they enter, displaying product imagery, features and benefits, available sizes, mobile downloads, and more on interactive mirrors to create an interactive customer experience.
3. Display compliance:
RFID can help ensure the right products are on display in support of promotion and merchandising plans. Related applications include floor sample tracking and seasonal merchandise tracking – ensuring short-term goods are replenished while they still have market value, says Strategic Systems’ Bissonnette.
4. Manned/Self checkout:
“RFID-enabled checkout is coming as an add-on to item-level inventory implementations,” says Dan Dalton, senior director of marketing and new product development for Fujitsu Frontech NA (www.fujitsufrontechna.com). Some issues still need to be ironed out however, such as ensuring only purchased items, and not nearby items, are read during checkout.
RFID-enabled checkout is part of the initial implementation for many users of RF Keeper (www.rfkeeper.com), which serves fashion retailers. Its end-end-end, plug-and-play solutions include reusable tags that are automatically read at the POS for fast and accurate checkout, then detached for reuse, says Amir Ben-Assa, VP marketing and business development for RF Keeper.
5. Electronic Article Surveillance (EAS):
Some retailers are pairing EAS and RFID on the same tag: one signals the theft, the other details what was taken. Others use RFID as the EAS technology. This is a good strategy if the retailer has a big shrink problem, and to future-proof for new construction stores, says Checkpoint’s Morrow. Obstacles include the need to make tags difficult to detach and the cost of upgrading from EAS to RFID-EAS pedestals at store exits.
6. Authentication:
The solution Emmitt Smith and others are promoting enables manufacturers to authenticate branded goods such as sports collectibles, luxury and consumer goods. Customers can check if branded goods are authentic via a smartphone app.
RFID and the Channel: What’s Different
Many solution providers dropped RFID when early hype proved to be just that. But there is real need for more channel partners to get involved now, vendors say. Monty Cook, VP sales and marekting for Globe Ranger (www.globeranger.com), a Fujitsu company, says retail domain expertise is often even more valuable than technical skills, which solution providers can acquire, to succeed.
“We see RFID as a bright spot for VARs,” says Nick D’Alessio, global practice leader, retail, at Zebra Technologies. He recommends that solution providers align themselves with software partners to gain the training and tribal knowledge needed to be successful.
“The time is right to call in some more VARs,” says Impinj’s Arnstein. “The market is really exploding now.” VSR
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