The Number One Thing About RFID in Retail
Retailers and analysts have been talking about the new age of “mobile” and how customers now have access to all this information while in their stores, so they need to provide very customer specific offers while the customer shops and give their associates mobile tools so they can know and serve those customers, including taking payment on the store floor. Interactive digital marketing with information for consumers to research and see beautifully displayed product “eye candy” is also a new tool many retailers are turning to. This along with all of the other new advancements retailers are being offered is challenging when trying to decide what is most important and how their investments should be prioritized.
I remember years back while I was employed by IBM when everything was about self-service. Automating everything in the store so that a customer practically did not have to talk to sales associates was the next big thing. I believe the concept was based on imitation of the brand new online experience and reduction of labor in one big sweep. Not to say self-service does not have its place today but it is a part of this complex mosaic of decisions retailers are trying to put together to compete and grow sales.
Forward-thinking business owners know that item-level RFID in retail is a great idea and that improving inventory accuracy helps reduce costs, increase sales (by reducing out of stocks) and even provides many opportunities for great omnichannel experiences. What these retailers do not know is “what is this investment going to cost me and what are the immediate and long-term returns.” RFID integrated tags replacing traditional hang tags and stickers costs on average ten cents each as compared to the 1-3 cents it costs today for traditional tags. It is easy to see that this all adds up to millions of dollars combined for tags, software and hardware along with training and business process transformation costs.
RFID in Retail: The Bottom Line
So, the number one thing retailers ask is, “show me the business case in hard dollars and cents.” Retailers are tired of going to their board asking for money for all these new “shiny objects” now available and being pushed at them, then finding out after the purchase that the great returns are just not there. This is not a new phenomenon and my example of self-service where the reduction of employees paying for the investment just did not pan out. In the case of RFID in retail, I also see many vendors shoving all sorts of technology into the store when not necessarily required. Nothing has changed. Buyers beware!
The need for in-store inventory accuracy is an absolute requirement in this new world of retail, and item-level RFID is a proven method of achieving near 100% accuracy. The question is, can you afford the investment without going out of business, and where do I put it in line with all of the other projects? Fortunately for RFID in retail, there is very specific and hard evidence to build a business case to take to your board.
This quote is from Bill Hardgrave of Auburn University, one of the top advisors of RFID in retail. “Solve the fundamental business issues first, and then turn the attention to the customer experience.”
These are the four basic issues RFID has proven to tackle and the stated industry results to date:
- Store inventory accuracy – 99% item-level accuracy compared to 65%-70%
- Out of stocks – Reduction 50% and sales lift 2%-7%
- Loss prevention – 70% reduction of internal shrink
- Locating product – Sales lift 2%-7%
These are proven results from mostly apparel retailers in the US and Europe over the past few years.
Retailers should revisit all of their investments and look for hard evidence and a business case with proven results to prioritize what are the most impactful and important investments they should make in this very competitive omnichannel world.
This is what it means to be a customer-centric retailer! What are you doing?
About the Author
Will Roche has over 30 years’ experience working in IT with most of his experience in retail and hospitality. Will spent 23 years at IBM with 15 years in retail roles developing products and services delivering new offerings for IBM’s retail business. He was responsible for the development and execution of IBM’s first industry distribution channel for retail and hospitality, which served the mid-market.
Will joined Microsoft in 2002 as a founding member of Microsoft’s industry business, with a focus on retail. He left Microsoft in 2012 for the Global Senior Vice President role at Raymark. Will is currently the Vice President of Sales (Americas) for Xterprise (SML RFID).
Will is also the author and curator of the Roche on Retail blog.