RFID (radio frequency identification) has come a long way since the early 2000s. At that time, Walmart was the first big retailer to experiment with the new tracking technology, which cost an astounding $1.50 per tag. RFID was a sparkling new concept used primarily for inventory accuracy.
Fast forward to today. RFID has fallen dramatically in price, especially when purchased en masse. The technology is nearly ubiquitous and provides numerous benefits for retailers. We’ll examine the pros and cons of using RFID to help retailers determine if it’s the right tech solution for them.
RFID technology can identify and track inventory items. Instead of a printed barcode, RFID uses a tiny computer chip called a tag that stores vast amounts of information, including 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. While barcodes must be scanned one by one, an RFID reader can scan hundreds or thousands of tags on a pallet in seconds.
RFID use is nearly ubiquitous among retailers. According to Accenture, 93 percent of North American retailers use RFID in some capacity, and 47 percent have fully adopted the technology. Here are the top retail use cases for RFID technology:
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,” explained Holden Bale, lead retail strategist 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.”
To ensure an optimal ROI, consider the following pros and cons before you invest in RFID for your retail business.
Better inventory control enhances the customer experience. It’s particularly critical in retail chain stores with multiple locations that 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. However, 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 explained. “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.’ 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.'”
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 explained.
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.
“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, instantly, with no items being removed from the basket,” Mitchell said.
Long waits frustrate customers. If in-person waiting is inevitable, improve your customers’ waiting experience by providing a pleasant atmosphere and entertainment options, and communicate frequently about their place in line.
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. If you place an RFID reader and smart mirrors in a fitting room, you can create a personal-shopper 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, putting more desirable items and sizes in stores and reducing outdated stock.
Even if you reduce overstocks with technology like RFID, excess inventory is sometimes unavoidable. You can cash in on excess inventory by selling bulk items to other businesses or inventory liquidators.
For all the magic and customer-enhancing experiences RFID promises to deliver, be aware that the technology can create a weak link in your business’s cybersecurity plan. As Mitchell explained, hacking RFID technology doesn’t take more than a smartphone.
“RFID tags can be very easy to clone, especially if the chip has no authentication mechanism,” Mitchell shared. “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.”
Privacy and transparency
RFID tracking doesn’t stop when a customer leaves the store — unless the tags are removed. While RFID is a game-changer in inventory control and understanding, 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 said.
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 of time and money.
RFID tags are just one cost of the integration matrix. Others include the following:
If your store hasn’t yet explored RFID’s benefits, the time to do so is now. Your competitors are likely already putting this technology to work. Additionally, RFID technology can enable other current and future technologies, including blockchain. In fact, according to the Accenture report, 82 percent of retailers agree that RFID is essential for implementing emerging technologies. You don’t want to be left behind.
Jennifer Dublino contributed to this article. Source interviews were conducted for a previous version of this article.