RFID, or 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 technology, which cost an astounding $1.50 per tag. It was a sparkling new concept, used primarily for inventory accuracy.
Fast forward to today. RFID has fallen dramatically in price, especially when purchased in mass. RFID use is on the rise among retailers. Though its actual user numbers are still estimated to be in the single-digit range, retailers are scrambling to secure a place for RFID in their future roadmap — no one can argue that it's one of the hottest trends to hit the industry.
But remember, like any new technology, know how and why you're going to use it before you move forward. Holden Bale, lead retail strategist for ThoughtWorks, a global consultancy focused on using technology to drive business innovation in retail, noted that, "RFID is meaningless if it's not used as an enabler. If a company buys it without use cases for it, then there's no ROI."
To ensure you receive the most ROI, consider the following pros and cons before investing in RFID for your retail business.
PRO: Inventory control
"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," said Emily Mitchell, COO of password-cracking firm Sagitta HPC, which specializes in breaking authentication and encryption technologies. "Traditional barcodes can only identify products on a basic level, and all products of the same type have identical barcodes."
Better inventory control leads to better customer experience, especially critical in chains with multiple store locations and hitting the expectations of omnichannel fulfillment. Customers want to know what's in stock, and they want to know where they can get it, such as buying something online and choosing in-store pickup. RFID gives retailers a heightened inventory accuracy that makes all this possible.
PRO: Enhanced data and inventory detail
Straightforward inventory control is one thing, but what about descriptors that tell you far more detail than a generic description could ever provide?
Mitchell explained it well: "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. 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.'"
This offers retailers an entirely new way to track trends and gather data — plus being able to know specifics around what's in stock and what walks out the door.
PRO: Smart shelving
Bale sees RFID as the future of customer engagement. Imagine knowing where a product is, in the store, at all times. This works particularly well, he said, with retailers such as Lowes Home Improvement, where customers may struggle to find a niche item like a wrench or faucet. "Lowes 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."
This is an example of a use case scenario using many tools, where RFID enables the entire experience. Without the data points that RFID provides, none of this is possible.
PRO: Cut checkout wait times
"RFID can also help reduce wait times at the checkout as well," Mitchell said. "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."
This is the time-saving advantage of RFID, where entire areas can be scanned in seconds. This applies to inventory, checkouts and to streamlining processes.
"Imagine picking up some items and simply auto-paying as you walk out of a store," Bale said.
CON: Security
For all the magic and customer-enhancing experiences RFID promises to deliver, security remains a top concern among retail industry professionals. As Mitchell illustrates, it doesn't take more than a smartphone to hack:
"RFID tags can be very easy to clone, especially if the chip has no authentication mechanism," said Mitchell. "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."
CON: Privacy and transparency
RFID tracking capability doesn't stop when a customer leaves the store. That is, unless you remove the tags. While RFID is a game-changer in controller inventory and providing precise detail, do customers want you to have the capability to continue that level of tracking once they leave the store?
"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.
CON: Cost and integration
RFID in and of itself does not solve problems or change the landscape for retailers. It's a catalyst for new customer experiences, enhanced data and streamlined operations. These changes don't happen overnight — they require extensive investment, both from a time and cost perspective.
Bale noted that RFID tags are just one cost in the integration matrix; stores will require Wi-Fi for a seamless experience; scanners can range from $3,000 to more than $20,000, and then you must consider how many you need per store. Beyond the hardware, retailers need to consider significant changes in their processes, ranging from staff requirements to training.
The time to explore RFID is now
RFID is not yet taking over retail; it's still in its infancy. But it opens the door for progressive retailers to explore what RFID can do for them, and it challenges retailers to truly differentiate themselves from the competition — with or without RFID.
"The time to experiment is now," Bale said. "Retailers need to build RFID now to experiment and collect data and see what works for them."