Item-level RFID Is Not Dead, It Is Essential

From the Principal’s Office

This is our last newsletter before Thanksgiving, Black Friday, Cyber Monday, Christmas, Chanukah, New Year, my birthday, and the NRF Conference.  To all our clients, friends, colleagues, we extend our wishes for a prosperous holiday season.  We’ll see many of you at the Jacob Javitz Center in New York in January. – Bob Amster – Principal, RTG


Item-level RFID is not dead, it is essential


Mozu recently published a whitepaper about whether or not retailers are ready for the imminent future of retailing.  They stated the following as features/services desired by the consumer:

1. Buy online, pick up in-store on same day

2. Buy online, exchange in-store

3. Same-day delivery

Numbers 1 & 2 require that, in order for the retailer to ‘publish’ inventory information on its ecommerce Web site and ‘promise’ the specific online consumer that the products are available, the retailer must have very accurate, real-time, unit inventory information by SKU within location.  (How much of it do I have now and where is it?)  According to Philip Lassner, president of Overheer Systems, an RFID implementation company: “Shoppers are demanding and craving data from retailers faster than retailers are delivering data.  And the area which is primed for data delivery and mining is inventory data.”  Lassner adds: “Unfortunately, one of the first things I notice in all item-level RFID implementations is that retailers do not know what they have.  To me, retailers who better connect their customers to the data for which they are looking will triumph.”

Retailers are continuing to play catch-up in the e-commerce space as evidenced by incredible year-over-year growth rates of 64% in China (2014) and 14% in the US.

GE Capital Retail Bank published last year that 81% of shoppers research purchases online before heading to the store.

There are two ways for the retailer to maintain and present accurate and timely inventory information:

  1. Rely on associates to accurately record all inventory movement transactions (Merchandise receipts, Transfers-out, RTVs, Destroy) on a timely basis (in this case, near real time) in the computer-based systems already available and in place.
  2. Having implemented RFID across entire product assortment, retailers continuously [near- to real-time] update their inventory availability by SKU within Location, so that the customer can be assured that the desired product will be in the store when the customer arrives, or that the product is available for delivery when promised.  Additionally, in the case of pick-up-in-store, the retailer has to have the wherewithal to ‘reserve’ the inventory so that it is waiting for the customer until the agreed-upon time.

I see RFID as not just an aid to achieve this inventory accuracy, but a necessity.  The implementation of RFID virtually eliminates the reliance on the accuracy and timeliness of the associates involved in processing the inventory movement transactions.

Admittedly, this scenario, however, does not account for processing merchandise returns-to-stock (RTS).  If a customer returns a product, the RFID-based system will increment the proper quantity of the SKU – provided that the RFID tag is still attached to the product – but, if the actual item has not been properly returned to stock for the next potential sale (and left in a ‘to-do’ bin), the next customer may not be able to find it even though the system will think the item is ‘in stock.’  This is an operational issue for the retailer to solve.

A recent article by Retail Touch Points corroborates our thinking.  “Radio Frequency Identification (RFID) enables retailers to achieve a comprehensive view of inventory levels across all channels.”

A whitepaper published this month in Level 10 states: “Real-time inventory visibility is inarguably one of the most critical factors in achieving omni-channel success. Supporting this claim is the majority of retailers who were surveyed for the recent RSR benchmark report, Omni-Channel 2014: Double Trouble.  According to the report findings, 93% of retailers perceive system-wide inventory visibility as the most valuable capability in executing an omni-channel fulfillment strategy. Yet, currently, only 37% of those retailers have actually implemented an enterprise-wide inventory visibility solution…  Aside from the impressive results published by big box retailers, such as Macy’s, Saks Fifth Avenue and Lord & Taylor, Chico’s recently announced impressive results from their pilot program. Their current RFID initiative allows Chico’s stores to maintain 90-95% accuracy every day so associates can easily fill in needed merchandise. The benefits of RFID technology have also provided greater insight into loss prevention—something that has become a significant drain on the retail industry.”

In discussing the topic with RFID veteran consultant Pete Abell, he states: “If you [the retailer] are not doing this in 2 years, you’re shutting your doors.”  Pete is responsible for the successful implementation and eventual deployment of RFID at Marks & Spencer.  The UK-based retailer currently generates approximately 800 MM RFID tags annually.  Adds Abell: “While the price per tag can run as low as 10¢, it will get down to 2¢ – 1¢/tag in 3-4 years.”  Those prices make it affordable to the vast majority of retailers.

Admittedly, the RFID concept does not apply to all merchandise segments of retail.  RFID can be successfully implemented in apparel, footwear, accessories, drug (not UHF), and non-metal furniture.  RFID does not perform well with metal or liquid products.

Those exceptions notwithstanding, RFID appears to be the only solution available today that could enable retailers to achieve a successful omni-channel implementation, and to ‘deliver’ on the two customer requirements stated at the top of this article, achieving the utmost in inventory accuracy by SKU, within location.  I am perplexed by the fact that the industry has not embraced the technology more widely.


About Philip Lassner

Philip Lassner is president of startup software company Overheer Systems.  Overheer developed a unique, cloud-based, item-level RFID application called Reflect RFID.  Prior to Overheer, Philip worked at a retail systems company and a retail labeling company.

About Pete Abell

Pete Abell is founder of Pete Abell LLC, a consultancy with a multinational footprint, focusing on IP & technology driven companies in the areas of Retail/In-store Technology-based marketing services for FMCG and CPG (including Advertising, Promotion, and DB marketing).  His team has combined years of consultative selling into the world’s most powerful retailers: Walmart, Target, Kroger, Ahold, Home Depot, The Gap, JC Penney, 7-11, Sears, Walgreens, CVS, Osco, and others. He has provided services to many of the largest retailers in Europe including Carrefour, Tesco, Marks & Spencer, Tengleman’s, Metro, Auchan, & SPAR.

Prior to his current endeavors, Pete was co-founder of the ePC Group Ltd, providing Consulting and implementations for mandated RFID, in the retail supply chain market, where he structured and implemented EPC RFID capabilities for Fortune 100 retailers, consumer goods and pharmaceutical manufacturers.

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