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Creating customer value with new technologies by Maciek Sadowski

What are the possibilities of item-level RFID and NFC technologies in apparel retail from the customer value creation point of view? And how do apparel companies see various opportunities of the technologies?

Item-level RFID, and more recently, NFC technology and their benefits have been studied vastly from the supply chain point of view, yet research from the end-customer value creation aspect has been scarce. Therefore, the research ground for this topic is very fruitful. The goal of my thesis was to examine possibilities of item-level RFID and NFC technologies in apparel retail from the customer value creation point of view, and deepen the knowledge on how apparel companies see various opportunities of the technologies.

COMMON CONCEPTS AND DEFINITIONS

The field of customer value creation is fragmented, yet there are some common concepts within the field. The basic definition of customer value is two-fold:

1. A utilitarian outcome resulting from a conscious pursuit of an intended consequence
2. An outcome related more to spontaneous hedonic responses


When discussing the topic further, more detailed elements of customer value arise:  the customer value is defined as a composition of different elements, which range from functional/utilitarian value to hedonic and social value. The modern point of view to customer value creation is, that rather than presenting a value proposition to a customer, a company must be able to create value with the customer, thus co-creating value. Customer value can be considered to stem from various sources of company's operations: information, products, environment, interactions, and ownership/possession transfer. These sources were used in the thesis as cornerstones for identifying the possibilities of new technologies.

Using the theoretical framework evolved from this theoretical discussion, apparel retail companies were approached with theme interviews about plans and current usage of item-level RFID and NFC.

 

FUNCTIONAL HEDONIC NFC CO-CREATION
PRODUCTS Increased knowledge about product locations around the store, availability of sizes due to fast replenishments. Mass customization potential Enhancing the actual product Analysis based on purchasing patterns, more advanced ways of P-O-S analysis. More rapid feedback via NFC-feedback applications or smart screens
ENVIRONMENT Smart fitting rooms with "call an attendant" -function Smart fitting rooms with experimental content, cross-selling, recommendations Smart posters
INFORMATION Interactive kiosks: Product information to educate the customer and reduce psychological risk Interactive kiosks: Communicating company values, strengthening the bond between company and customer
INTERACTIONS Staff more motivated and have more time to serve the customer Personalised marketing communications, interactive content
OWNERSHIP / POSS. TRANSFER

Possibilities of connecting channels; new ways of delivery

Self-checkout increases convenience, if needed

Mobile payment

3 PHASES OF AIM DEVELOPMENT IN RFID ADOPTIONS

Findings show, that the proceedings of a company can be grouped in three phases.

PHASE 1

A company typically engages into item-level RFID with an aim to optimise the logistics processes: increasing stock visibility and accuracy was the key focus area. The visible effects for end-customers in this phase are mainly functional: a shop assistant is more motivated and able to focus more on the customer when the "dull" tasks of stocktaking and replenishment are significantly easier with item-level RFID. Increased information about product locations and availability helps shop assistants to service their customers better. A company gains also knowledge and visibility of their process, making it possible to address possible issues better.

PHASE 2

When the basic benefits are achieved, an apparel retailer seeks to benefit further from the technology. This is where the actual "smart systems" step in: smart fitting rooms, smart shelves, and other solutions that enhance the shopping experience and make new interactions with customer possible. Smart screens or information kiosks equipped with RFID-readers can activate video clips about a certain product, giving product information or enhancing the brand story. Smart fitting rooms may also have a function to call a shop assistant to bring a certain garment, thus increasing convenience and reducing the psychological risk. Smart systems open also possibilities for more efficient cross-selling; a smart screen can recommend accessories or matching clothes depending on the products that are in the fitting room. More interestingly, companies also have the possibility to access more detailed information regarding their customers' behaviour: which clothes are tried on and not purchased; which clothes sell even without trying on; and which clothes from which parts of the shop floor sell best are the kinds of information that is possible to gain with help of smart systems. Smart posters, interactive campaigns and quick feedback are possibilities that are achieved with NFC applications. The information gained from these interactions can make the company more responsive to changing customer needs and thus seeks more possibilities for creating customer value. To summarise this phase, turning information into knowledge is the key motivation for companies to seek these possibilities.

PHASE 3

The third phase looks into the future with creating completely new ways of interaction and value creation. The most important potential is seen in the omni-channel development: merging the e-shop and brick-and-mortar experience and create new ways of delivering goods to the customer. Mobile payment and more interactive marketing potential utilising NFC are something that many retailers look closely The rise of the SoMoLo (Social, Mobile, Local) customer is an important driver of creating new, innovative ways of shopping.  Also the nature of future shops can be seen as showrooms with possibilities of ordering goods home, therefore the experiential content is more important in these contexts.

The research shows there are many possibilities of item-level RFID and NFC for apparel retailers to create value for their customers. From the need to have an accurate view of inventory and process to creating experiences to the customers and gaining more important knowledge from them, new technologies are proven to be a vital source of competitiveness of an apparel retailer.

 

Fashion -POS-based -on -spec -retail -pic _WEB_500x 500

 

If you want to read the whole thesis, contact Maciek Sadowski at majasa@utu.fi or sales@nordicid.com.

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