What to Know About RFID for Retail

RFID (Radio Frequency Identification) has come a long way since the early 2000s. At the time, Walmart was the first major retailer to test the new tracking technology, which cost $1.50 per tag. RFID is a bright new concept used primarily for inventory accuracy.

Fast forward to today. RFID has dramatically decreased in cost, especially when buying in bulk. Technology is almost ubiquitous and offers many benefits to retailers. We explore the pros and cons of using RFID to help retailers decide if it’s the right technology solution.

Advantages and Disadvantages of RFID for Retail

As with any new technology, you need to know how you will use it before you adopt it. “If RFID is not used as an enabler it is meaningless,” explained Holden Bale, lead retail strategist for Thinkworks, a global consultancy focused on using technology to drive business innovation in retail. „If a company buys it without using it, there’s no ROI.”

To ensure a better ROI, consider the following pros and cons before investing in RFID for your retail business.

Advantage

Inventory control

Better inventory control improves customer experience. This is especially important in retail chain stores with multiple locations that offer omnichannel fulfillment. When customers buy something online for in-store pickup, they want to know what’s in stock and where it’s available. RFID improves inventory accuracy and enables omnichannel fulfillment.

“RFID is especially useful when it comes to improved inventory control and loss prevention, where RFID can help give you more visibility and more control over your inventory,” noted cyber security consultant Emily Mitchell. „Traditional barcodes can only identify products at a basic level, and all similar products have identical barcodes.”

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Updated data and balance sheet

Direct inventory control is valuable. However, RFID improves inventory control with information that goes beyond common descriptions.

„RFID tags have unique identification numbers and can store modest amounts of data that can be used to identify and track items on an individual level anywhere in the store,” Mitchell explained. „This is especially helpful for clothing, where a barcode might say, 'This is a $300 sundress,’ and an RF security tag might say, 'Someone took something.’ It’s pink. It’s with a little slip, but it’s still pretty; it arrived at the store three weeks ago, and you put it on the rack last week, and now it’s going out the front door.

RFID gives retailers a new way to track industry trends, collect data, and understand what’s in stock and what’s going on.

Smart wardrobe

RFID helps retailers know where a product is in a store at all times. By pinpointing product locations, businesses can easily ship products to customers.

Consider a large retailer such as Lowe’s Home Improvement, where customers may struggle to find a specific item, such as a wrench or a faucet. RFID technology can guide customers to get exactly what they need. „Lowe’s has an app that guides you through the store and directs you to that particular item because you know where the inventory is in real time,” Bale explained.

Shorter checkout wait times

RFID technology can scan parts in seconds and save retail customers time. This means it speeds up checkout lines and helps create a zero-friction approach during sales.

„Traditional barcodes require line-of-sight for scanning, and each item must be scanned individually. An entire shopping cart can be scanned at once, instantly, without any items being removed from the basket,” Mitchell said.

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Long waits frustrate customers. If waiting in person is unavoidable, improve your customers’ waiting experience by offering a pleasant environment and entertainment options, and communicate frequently about where they are in line.

Improved customer experience

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

Smart fitting rooms RFID technology is another way to improve customer experience. By placing an RFID reader and smart mirrors in the fitting room, you can create a personal-shopping experience that recommends additional clothing and accessories and provides customers with information about size availability and color options. Data from smart fitting rooms can be used to know which products are being tried on and how often they are purchased. This data improves the purchasing process, keeps more desirable products and quantities in stores and reduces obsolete inventory.

Even if you reduce overstock with technology like RFID, excess inventory is sometimes unavoidable. You can make money on excess inventory by selling bulk items to other businesses or liquidators.

Cons

Security

For all the magic and customer-enhancing experiences that RFID promises to deliver, be aware that technology can be the weak link in your business’s cybersecurity program. As Mitchell explained, hacking RFID technology doesn’t take much 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, you can go to a low-cost object and read the tag, then go to a high-cost object and write the low-cost object to its tag. That $300 coral pink size 0 sundress can easily turn into a $5 tank top with two quick and fuzzy gestures on a smartphone.

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Privacy and Transparency

RFID tracking does not stop when a customer leaves the store – until the tags are removed. Although RFID is a game-changer in inventory control and understanding, customers may not want you to keep track after the sale.

„If a consumer pays for products with a credit or debit card, or scans a loyalty discount card at checkout, retailers can link the purchase to recorded RFID data and use the information to map the movement of individual customers throughout the store. An entire mall,” Mitchell said.

Although the European Union’s GDPR privacy law does not specify that RFID data is personal data, it does include guidelines regarding the use and privacy of RFID data.

Cost and coordination

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

RFID tags are only one cost of integration matrix. Others include:

  • Stores need commercial Wi-Fi to have a seamless experience.
  • Scanners can range from $3,000 to $20,000.
  • Depending on the size of the store and how many locations there are, you may need multiple scanners.
  • This technology can increase your staffing needs.
  • You will have to pay for software integration and employee training costs.

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