Is RFID Really the Future of Retail?

There has been a lot of buzz recently about radio-frequency identification (RFID) technologies and their potential to drastically change the retail industry. For those of you who need a quick refresher, RFID uses electromagnetic fields to automate the tracking of merchandise. These technologies give retailers the ability to track items through every point of the supply chain — from the warehouse right to the store shelves.

Using RFID technologies gives retailers a new degree of visibility into their inventory. Unlike the barcode, RFID tags don’t need to be within sight to be read. This means retailers can easily locate products and inventory numbers without having to scan products manually. In fact, these tags can even help retailers track down a lost” item (say, a specific phone model stocked on the wrong shelf at a wireless retailer store location), so that no sale is missed due to misplaced inventory. To some, it would appear RFID has put the barcode at risk of extinction.

But how fast are retailers actually adopting this technology? Is RFID really the future of retail technology?

RFID’s slow start

Given that RFID gives retailers unprecedented visibility into their inventory, you’d think it would already be in use across the industry. However, there have been many false starts for RFID. As far back as 2003, Wal-Mart announced at a Retail Systems Conference in Chicago that they would require their top 100 suppliers to tag their products with RFID tags. At the time, it seemed there was about to be a major shift in retail technologies. Many predicted that RFID would be the next big thing then — and yet it still hasn’t been universally adopted.

There were some main roadblocks: early versions of the technology proved expensive. For relatively cheap products (say, paper towels or laundry soap), tagging products with RFID was the difference between making a profit on sold items or suffering a loss. The success of RFID at the time also depended on other suppliers to use it as a supply tool, which happened a slower rate than many predicted.

RFID seems ready to make a comeback and is poised for widespread retail adoption. While recent studies show that a majority of retailers want to integrate RFID technology into their operations, actual deployment of full RFID systems has yet to get up to speed. Implementation of these systems, including tags, readers, and supporting software, is currently between only 4% and 8% industry-wide. As major companies find new ways of using this technology, this may dramatically change in the coming years.

Big changes in the retail landscape

More companies are beginning to recognize how RFID can be used as a tool to improve customers omnichannel experiences. With RFID, retailers can receive accurate real-time information from any place in the supply chain, and provide this information to the consumer, either through customer service representatives or in-store technologies that allow customers to browse merchandise virtually. For consumers, this means having full access to product information and not wasting time attempting to buy out-of-stock items. For retailers, this translates into increased sales volume. Stores like Macy’s have reported sales volume surges of more than 200% since adopting RFID.

Other big advances may be on the horizon. All eyes are now on Amazon — after the retail giant’s acquisition of Whole Foods, it is expected that RFID technologies will be introduced to the grocery stories in some capacity.

There are many ways grocery retailers will be able to innovate by implementing RFID technology successfully. First off, retailers will have opportunities for more frequent engagement with customers by reminding” consumers of the products they usually buy. With RFID technology, touch points are expanded and grocery retailers will be able to capture each consumer’s personal behaviors and preferences more easily. Paired with omnichannel marketing tactics, this information can be used to better market to individual customers.

The future remains unclear

While it seems very likely that RFID technologies will change the face of retail, it remains to be seen how quickly these technologies will be adopted across different industries. For wireless retailers looking to remain competitive in the retail landscape, RFID systems can help provide all employees with accurate inventory and product information that will in turn improve the customer journey. Though it’s important to note it’s likely not yet suitable for smaller retailers unless they have really high volume as you’d have a hard case to make an ROI argument. However, as more businesses develop sophisticated omnichannel marketing strategies, RFID can help keep both larger brick-and-mortar and e-commerce stores profitable.

Curious to know what else is changing for in-store experiences? Download a free copy of our report on The Role of In-Store Personalization in Omnichannel Success. 

Photos: Shutterstock / Albert Lozano, Shutterstock / dotshock, Flickr / Ian Kennedy