Adoption of RFID is spreading widely in the retail sector. As many more retailers are now contemplating where to start, how to proceed and what to expect, we gathered a few tips by experts and early adopters on how to run a successful RFID project.
Author: Carl Michener
Many major fashion retail chains have moved to in-store RFID
with excellent results, unequivocally establishing RFID as a 'must'
technology for high volume fashion retail. It's a technology that
is quickly moving beyond the early adopter phase, with retailers
large and small jumping on board throughout Europe and North
As the technology matures, RFID is experiencing growing pains
including patent challenges. Once we get through those, it will be
full speed ahead. The question that most retailers will have to
answer is: what's involved in getting into RFID? Is there massive
change require, what are the costs and how quickly can an
organization go from zero to fully functional? This article
illustrates some of the requirements, challenges and benefits that
you can expect in making the move.
Fashion and RFID: the perfect
RFID is such a good fit for apparel and specialty retail because
it shines most brightly where there are thousands of SKUs and high
volume sales. At present it's also a key differentiator in an
extremely competitive segment of retail.
What makes RFID ideal for fashion retail is that unlike barcodes,
RFID tags can store item-specific information. Tag information can
be very detailed, including size, colour, price, model number,
batch and other data pertaining to the individual item. In
addition, information can be added along the product's journey-time
in, time out, inspection, modification, etcetera-from point of
attachment to destination. All of this information, on hundreds of
tags, can be read through cartons and from distances of several
metres in a second or two.
"Not needing to rely on line of sight is key to fast access to
goods in a warehouse, stockroom and on the shop floor," says Jorma
Lalla, CEO of Nordic ID, a Finnish manufacturer of handheld RFID
computers. He notes that RFID interrogators can be mounted in
ceilings or walls, and a 3,000 square foot store can be completely
inventoried by a team of two with handheld computers in less than
half an hour. But the big news isn't timesavings: it's increased
accuracy. "You can walk along quite quickly with a handset and read
every tag that you pass with 100% accuracy," says Lalla. "That
makes it easy to know what you have and that it's properly
PRIMARY DRIVERS OF RFID ADOPTION
The consensus among fashion retailers that have
implemented RFID is that a 5% lift in sales is a conservative
forecast. Other benefits include better inventory management on
many levels, a drastic reduction in stock-keeping man-hours and
98%+ inventory confidence-a threshold high enough to make
multi-channel fulfilment and similar options a distinct
These benefits formed part of the impetus for recent pilots
executed by C&A, one of Europe's leading retailers of
affordable fashion apparel. In both the 2012 and 2013 pilots,
however, the primary driver was something else: guaranteeing that
items in highest demand were always on shelves. "Our brand promise
is to make wonderful fashion available to you at a reasonable
price," says Joachim Wilkens, Head of Supply Chain Development with
C&A Europe. "Sometimes the available part was
THE REAL COSTS OF CHANGE
The benefits of RFID are important, but adopting a new
technology is still a big step to take for any retailer, large or
small. According to a 2009 RFID Journal report, retailers were
spending $30,000 on average on a single store pilot, and that
figure didn't account for employee time directed at a non-core
project. That cost has come down in the four years since the study,
and of course cost per store takes a steep nosedive as you add more
locations to the pilot.
But dollar cost is not the big hurdle for many retailers; they
know the ROI is there. What C&A was more concerned with-a
common fear-was the potential disruption that introducing RFID
might cause. "With the first pilot it was a big commitment in time
especially at the store level," admits Wilkens, "but parts of the
daily routine also became much more efficient. So it was a kind of
trade-off." He adds that the initial five-store pilot required a
lot of in-store support, whereas the current 20-store pilot does
not. This is typical of what other retailers like Gerry Weber have
experienced with staged rollouts.
When asked whether significant change was required at C&A,
Wilkens acknowledged that it was, at a sales floor level. "But
staff were very interested in the new processes to see if there was
a benefit for themselves as well as for the company," he adds. He
also noted that there were two distinct attitudes that employees
adopted when faced with the prospect of RFID: a small group of
employees called into question the legitimacy of the numbers that
RFID was producing, while the majority quickly embraced an
intuitive technology that they believed would help them in their
daily work. In both cases, the eventual result was improved job
satisfaction. This was due in equal parts to increased inventory
confidence, reduced out-of-stock-induced frustration-especially at
busy times-and far less time spent performing rote tasks.
The numbers and the ramifications of change worked for
C&A, but before jumping into any kind of RFID implementation
most retailers need some assurance that the technology will work
for them specifically. To help with this, there are several RFID
ROI calculators that demonstrate projected returns on a deployment.
They are based on data collected from actual deployments, such as
those of American Apparel, Marks & Spencer, and many other
retailers. RFID Journal's Fashion Retail ROI Calculator, for
example, was developed in consultation with independent academic
and implementation experts. It shows an ROI of over $33,000 for
each store in a 400-store chain during the first year of
deployment. The ROI increases each year after that, for a total
advantage of more than $25 million after three years.
ROI Calculator focus on in-store RFID deployments because
research and early pilots indicate that's where the greatest
benefits can be achieved. But as two German retailers have proven,
ROI advantages accrue everywhere. Gerry Weber has deployed RFID
end-to-end throughout the entire supply chain, from point of
manufacture to point of sale. They report statistics like 70%
timesavings on warehouse inventories, and up to 10% greater
accuracy of factory picked orders.
For many retailers, improved inventory accuracy-and not
out-of-stocks on the sales floor-proves to be the unexpected lead
benefit after implementation. Professor Bill Hardgrave, Dean of
Business at Auburn University, has found time and again that
without RFID retailers don't have a true handle on their numbers.
"In working with major U.S. retailers, we found that systems
invariably say 1% or so of items are out of stock, when in reality
is it 12% to 15%." Hardgrave ticks off all kinds of benefits that
high inventory accuracy delivers. "Faster optimal reorder cycles,
reduced cycle stock, reduced out-of-stocks, multi-channel
capability and the list goes on," he says.
For a simple RFID implementation, the shopping list is not
long. You will need UHF RFID tags-either reusable or single use-and
at least one mobile handheld RFID computer for receiving goods and
stocktaking. Fixed interrogators mounted under tables or counters
are handy for receiving and for checkout, but can be substituted
with handheld computers. A portal or fixed reader is also really
good to have between the storeroom and the sales floor to validate
that the proper items have been brought to the sales
Unless you integrate with POS-to date, C&A has not-there's
not a whole lot more that's required. Wilkens says that the hardest
part is learning to switch to updating inventory systems with RFID
data and not with POS-calculated data, as in the past. The
vertically integrated private label company approached RFID as
major players do: with a five-store pilot, followed less than 12
months later with a second pilot that added on Germany's twenty
With more than 1,600 stores in 20 countries, one challenge C&A
experienced was how to make RFID work in a very limited number of
retail locations. They decided to handle tagging by printing and
encoding the RFID hang- and adhesive tags at point of manufacture,
and to apply them to certain batches of never-out-of-stock (NOS)
items destined for pilot stores. "Obviously we will eventually send
tags direct to all manufacturers to realize greater supply chain
efficiencies," explains Wilkens, "but with only 25 stores right now
that doesn't make sense."
You will, of course, need some integration work to make tags talk
to readers and readers to transmit data to your computers. But
implementations are getting simpler and less expensive as the
industry moves closer to plug-and-play solutions.
One example of this is an economical RFID solution for retailers
created jointly by Nordic ID and SML Group Ltd, a global brand
identification solutions provider. The out-of-the-box solution
pairs optimized handheld computers from Nordic ID together with
SML's RFID-enabled apparel labels and the company's Vizit cloud
computing solution. It enables storewide inventory counts and
product tracking from manufacturer to point of purchase. "The tags
and readers talk to each other from the get-go," says Nordic ID's
Jorma Lalla. "That's one less integration step required."
IT'S NOT ABOUT RFID
In considering the considerable benefits that RFID is
bringing to C&A, Wilkens is quick to point out that although
RFID is a great technology, at the end of the day it's just a tool.
He believe that what organizations need is a vision, an end-goal
and a plan to get there. "It's not RFID that brings competitive
advantage," he says. "It's our unique selling proposition. If RFID
can help support that, we'll use it."
Given the success of C&A's pilots, Wilkens is confident that
further investment in RFID is on the horizon. "But first we're
going to wait and see what happens with the Round Rock Research
case," he says in reference to the current RFID technology patent
lawsuit launched against major U.S. and international retailers.
"2013 is going to be a very important year for RFID."
No matter what happens in the short term, Wilkens has some advice
for retailers about the inevitable adoption of RFID. "Make sure
that your choices are business-driven and not IT-drive," he
suggests. "And when you're ready to plan an RFID implementation,
engage a consultancy rather than a solution provider. First they
need to understand your business. Then they can decide how to apply
the technology to support it." Wilkens also advises prioritizing
privacy protection. "Whatever you implement has to be 100%
acceptable to the public. Retailers live on public opinion."
Interviewed for the article (from
left to right): Joachim Wilkens is the head of Supply Chain
Development with C&A Europe. Jorma Lalla is the CEO of Nordic
ID. And Professor Bill Hardgrave is the Dean of Business at
Auburn University in Alabama.