For a long time, the barrier for item-level RFID has been the tag cost. Since 2001 or so, the industry has discussed, waited, wanted, hoped and believed that the changing point is when the cost hits $0,05.
Interestingly, now that we have practically come close to that
mark, the discussion has shifted towards "the tag should cost $0,01
instead". A demand well understood, yet I feel I must
challenge this discussion.
Would you compare the cost of a
barcode with the cost of silk paper wrapping or Swing
Not everyone uses an expensive swing ticket finished with golden
trims, but many do. I never hear anyone question the price of a
nice swing ticket or hang tag that is made to support the brand.
Yet such tags may often have triple-the cost of the magic 5-cent
RFID tag. And even very price sensitive brands and labels do carry
such beautiful tags.
Some retailers have a fantastic service of wrapping my new
clothes or accessory in beautiful pink, red and white silk papers
once I've bought the items. A lovely gesture, but honestly - not
the reason I go to the store. In the end, most people do not buy
items from a particular store due to the beautiful wrapping. The
silk paper is appreciated, yet it has little value to the consumer
and the actual wrapping of the items is time consuming for the
store staff. I'm not saying that silk papers should not be used -
quite the contrary. All I'm saying is that such service offers
little extra to the retailer.
The above examples support the brand image and create a feeling
of luxury. Yet from the Return-on-Investment point of view they may
Fixing O-O-S offers lucrative ROI,
yet everyone discusses the TAG price
But what really matters to consumers the most? A widely
researched topic in the academic world is retail out-of-stock
situations and their impact to consumer behaviour. Gruen, Corsten and Bhadradwaj (2002,
Retail out of Stocks) suggest that retailers lose almost
one-half of the intended purchases when consumers face out-of-stock
For many RFID still means a barcode, just with a different
technology behind. But barcode technology alone cannot help fix
O-O-S situations. The only technology that offers a cost efficient
way to significantly reduce out-of-stocks, reduce inventory
carrying costs and achieve 99% inventory accuracy is RFID. More
researched benefits of RFID are found on the table below (Published
in Retail Info System News, page 3,
original source ABI Research)
By the way, a tag can be bought at $0,05 even today. At least if
you believe Kevin Ashton, the cofounder and executive director of
the Auto-ID Center and this article by him in RFID Journal.
But, no matter the cost of $0,05 or $0,07 per tag, the early
adopters of item-level RFID constantly show better inventory levels
and sales growth in comparison to their peers. And as for all of
the industry, everyone believes that the more retailers decide to
go RFID, the more the tag price will drop.
Amazingly fast ROI; 6 months / store: Read
more from an interview of American Apparel's VP of Technology,
Stacey Schulman in RFID Journal.
Download Gruen, Corsten and Bhadradwaj 2002,
Retail out of Stocks: A worldwide Examination of Extent, Causes and