RFID for Retail: Know the Pros and Cons

What is RFID for retail?

RFID for retail is a technology that uses radio waves to automatically identify and track products. It enhances inventory management, reduces theft, and improves the shopping experience.

Instead of using a printed barcode, RFID utilizes a tiny computer chip called a tag that stores vast amounts of information, including the item number, inventory entry date, size, location, color, type, origin and price. 

When items with an RFID tag pass through an RFID reader, the reader records and stores this information. Whereas barcodes must be scanned one by one, an RFID reader can scan hundreds or thousands of tags on a pallet in seconds.

RFID vs. barcodes vs. NFC

Today’s brick-and-mortar and e-commerce retailers leverage technologies such as RFID, barcodes and near-field communication (NFC) to improve inventory management, organize operations and ultimately create a better shopping experience. Each technology has different ideal uses. 

• RFID: RFID tags store vast amounts of information, including product details, manufacturing data and tracking numbers. Unlike barcodes, RFID tags do not require line-of-sight scanning; they can be scanned quickly and in bulk. 
• Barcodes: Barcodes store limited information, such as a product’s price, origin and batch details. They are inexpensive and easy to print and scan. However, unlike RFID tags, they require direct visibility to the scanner.
• NFC: NFC technology, derived from RFID, enables two-way communication between devices. (In contrast, RFID is a one-way technology.) While NFC is slower and limited to scanning one tag at a time, it excels in applications requiring secure, close-range data exchange, such as NFC mobile payments.

How do retailers use RFID?

RFID use is nearly ubiquitous among retailers. An often-cited Accenture report revealed that 93 percent of North American retailers use RFID in some capacity. Here are the top retail uses for RFID technology:

• RFID in inventory: Inventory tracking is RFID’s primary retail purpose. The technology pinpoints an item’s location and specific attributes every time it passes through an RFID reader. This reduces the time spent searching for inventory and gives retailers a highly accurate, real-time inventory list.
• RFID for fulfillment: Retailers use RFID readers in delivery trucks and distribution centers to track RFID-tagged items’ movements. This accountability helps to prevent lost and stolen items. In fact, according to Zebra Technologies, 42 percent of retailers plan to implement RFID technology for loss-prevention purposes within the next three years.
• RFID for omnichannel selling: Accurate inventory tracking lets companies sell through multiple channels and helps retailers transfer inventory from store to store. The technology also allows customers to reserve in-store products, buy merchandise via mobile apps, have merchandise shipped from a store, and buy items online and pick them up in the store (also known as BOPIS) to help provide a great customer experience.
• RFID and self-checkout: Retailers like Amazon are experimenting with RFID for completely self-service stores. When a customer with a valid account and payment method leaves the store with an item, the tag is read and the customer is charged accordingly.
• RFID and product recalls: RFID can track when and where products originate at a granular level. Retailers can use this information to identify products that are subject to a recall.
• RFID and spoilage: Retailers can tag perishable products with temperature-sensitive RFID tags to reduce spoilage and foodborne illnesses.

The pros and cons of RFID for retail

As with any new technology, you need to know how you’ll use it before you adopt it. “RFID is meaningless if it’s not used as an enabler,” said Holden Bale, a former principal for Thoughtworks, a global consultancy focused on using technology to drive business innovation in retail. “If a company buys it without use cases for it, then there’s no ROI [return on investment].” 

To ensure an optimal ROI, consider the following pros and cons before you invest in RFID for your retail business.

Pros

RFID can have the following benefits for retailers.

Inventory control

Better inventory control enhances the customer experience. It’s particularly important in retail chain stores that have multiple locations and provide omnichannel fulfillment. When customers buy something online for in-store pickup, they want to know what’s in stock and where they can get it. RFID improves inventory accuracy and enables omnichannel fulfillment.

“RFID can be most beneficial when it comes to enhanced inventory control and loss prevention, where RFID can help give you much greater visibility into and more granular control over your inventory,” noted cybersecurity consultant Emily Mitchell. “Traditional barcodes can only identify products on a basic level, and all products of the same type have identical barcodes.”

Enhanced data and inventory detail

Straightforward inventory control is valuable, but RFID improves inventory control with information far beyond generic descriptions. 

“RFID tags carry unique identification numbers and can store a moderate amount of data, which can be used to identify and track items on an individual level anywhere in the store,” Mitchell said. 

“This is especially helpful for apparel, where a barcode might say, ‘This is a $300 sundress,’ and an RF security tag might say, ‘Someone just walked off with something,'” she explained. “An RFID tag can tell you, ‘This is a $300 sundress in a size 0; it’s coral pink. This is the one with a small snag by the hem, but it’s still super cute; it arrived in the store three weeks ago, you just put it on the rack last week, and now it’s walking out the front door.'”

Smart shelving

RFID can help retailers know where a product is located in a store at all times. When product locations can be pinpointed, businesses can easily direct customers to the items they need. 

Consider a massive retailer like Lowe’s Home Improvement, where customers may struggle to find a specific item like a wrench or faucet. RFID technology can guide customers to exactly the items they need. “Lowe’s has an app that can route you through the store and guide you to that specific item because you know where the inventory is in real time,” Bale said.

Shorter checkout wait times

RFID technology can scan areas in seconds and save retail customers time. This means it can speed up checkout lines and help create a zero-friction approach at the point of sale, thus improving the customer journey. 

“While traditional barcodes require line of sight for scanning and each item has to be scanned individually, an entire shopping cart can be scanned all at once [with RFID], instantly, with no items being removed from the basket,” Mitchell said.

Improved customer experience

By reducing stockouts and overstocks and enabling omnichannel selling, RFID improves the customer experience. A better customer experience means more customer loyalty and lower customer acquisition costs. 

Smart fitting rooms are another way RFID technology can improve the customer experience. By placing an RFID reader and smart mirrors in a fitting room, you can create a personalized experience that recommends additional clothing and accessories and provides customers with information on size availability and color options. 

Then, you can use the data from smart fitting rooms to know which items are being tried on and how often those items are purchased. This data improves the buying process, allowing stores to stock more desirable items and sizes and reduce outdated stock.

Cons

Before you implement RFID technology, consider these potential drawbacks.

Security risks

For all the customer-enhancing experiences RFID promises to deliver, be aware that the technology can create a weak link in your business’s cybersecurity plan. 

“RFID tags can be very easy to clone, especially if the chip has no authentication mechanism,” Mitchell cautioned. “Using practically any smartphone, one can walk over to a lower-priced item and read the tag, then walk over to a higher-priced item and write the information from the lower-priced item to its tag. That $300 coral pink size 0 sundress can easily become a $5 tank top with two quick and inconspicuous gestures on a smartphone.”

Lack of privacy and transparency

RFID tracking doesn’t stop when a customer leaves the store — unless the tags are removed. Although RFID is a game changer for understanding your inventory, customers may not want you to continue tracking them after the sale. 

“If consumers pay for products with a credit or debit card, or scan a loyalty discount card at checkout, retailers can then link the purchases to the recorded RFID data and use the information to map out individual customers’ movements throughout the store, or even an entire shopping complex,” Mitchell explained.

Cost and integration

RFID is a catalyst for new customer experiences, enhanced data and streamlined operations. But these changes don’t happen overnight; they require extensive investments in time and money. 

RFID tags are just one of the expenses involved in implementing this technology. You’ll also need to consider these costs:

• Stores will require business Wi-Fi for a seamless experience.
• Scanners can range from $3,000 to more than $20,000.
• You may need multiple scanners, depending on how many locations you have and how big your stores are. 
• This technology may increase your staff requirements. 
• You’ll need to pay software integration and employee training costs. 

It’s a great time to explore RFID

If your store hasn’t yet explored RFID’s benefits, now is an excellent time to do so. Your competitors are likely already leveraging this technology to gain an edge. Additionally, RFID technology can integrate seamlessly with other innovations, such as blockchain, to enhance transparency and efficiency. Staying ahead of the curve will ensure that your business remains competitive in an evolving retail landscape.

Kimberlee Leonard contributed to this article.