By Leslie Hand, Research Director, Global Retail Insights
Retailers, including Dillard's, JCPenney, Bloomingdale's and American Apparel have publically talked about their RFID tagging efforts over the course of the last couple of years, with no particular public attention or concern. But when news was released that Walmart is RFID tagging garments, the media went nuts as claims ran the gamut from concerns about consumer privacy and surreptitious motives to RFID redo circa 2004.
The truth is, the retail giant has never stopped exploring the potential business value of RFID, and has experimented with various use cases, from the pallet and case efforts of a few years ago to DVD tagging to the now well-known apparel tagging efforts. These efforts are all aimed at improving the efficiency by which Walmart does business, thereby reducing the price of goods conveyed to consumers.
Some of the headlines from articles in the last couple of weeks have included:
I put these in order from what I consider absurd distortions of the truth to right on message. Mark Roberti's piece in RFIDJournal did the best job of sticking to the facts.
The facts are as follows:
- Walmart is tagging jeans with passive RFID tags;
- These tags are intended to be read by a handheld RFID reader;
- These tags can be removed easily;
- RFID tags will help Walmart keep the right style, color and size of tagged product on the store shelf;
- The tags will facilitate cycle counting (taking inventory) of products on the sales floor and in the back room of a store;
- These tags could help Walmart correct inventories of stolen articles that have passed through the store exits (if they choose to implement this feature).
Tagging goods at the Item level does not enable retailers to track consumers walking around in their stores, automatically tying frequent shopper or driver's license information to real time store movements, as at least one article claimed. Nor will passive RFID tagged clothing enable anyone to drive by someone's house and identify what the consumer has purchased, as if this would ever make sense — there are so many more sensible ways to keep track or identify consumer shopping patterns.
These ridiculous claims by uninformed writers are precisely what could slow retailer adoption, but I believe they are so absurd that they will not. Unfortunately, these claims do prejudice consumers, who generally do not understand how the tags work, but this can be remedied by the retailers engaged in RFID implementations. Retailers that have adhered to Epcglobal's recommendations, have successfully pushed past consumer and privacy advocate group resistance provide fair notice to consumers regarding the use of tags, educational information to set the consumer at ease and offer alternatives for removing the tag.
Why RFID now? Why these implementations will succeed where case and pallet tagging failed
Walmart's apparel tagging effort is not a redo of 2004 pallet and case tagging at all, for primarily three reasons: the technology, the RFID related vendor community, and the business case.
First, I'll discuss the business case for RFID in apparel. The business case for RFID use in apparel has been well documented. The reliable autonomous collection of inventory data in apparel is truly a game changer for many. See my previous report, Business Strategy: RFID—EAS Never Knew Loss Like This Before (Doc #GRI222746 May 2010) to understand which retailers will benefit most right now. Many retailers are starting to implement or at least pilot the technology because of the significant business value associated with being able to find, count and track apparel without line of sight, including the following:
Reduction in inventory counting labor: This is a no brainer really — when line of sight and individual article handling isn’t required, it is faster and cheaper to count merchandise. Apparel and footwear retailers are consistently reporting inventory counting labor hour reductions of over 25% with RFID. The higher the number of items counted and the higher the frequency, the higher the benefit.
Reduction in inventory: Each retailer will identify the optimal service level for their organization, impacting actual inventory reduction. Reductions of a couple of percentage points are easily achieved, while still improving in stock positions.
Increase in Sales: One retailer told me that they improved sales by 2%. However, initial tests demonstrate that sales uplift of 4-15% is likely.
Reduced shrink / increase in LP accountability: Shrink due to theft can be reduced by as much as 10-50%, depending on the business processes and practices of the retailer. When retailers can see items leave the store that never went through checkout they can make adjustments to inventory levels, assuring appropriate replenishment and continued customer satisfaction.
Next, I'll discuss the technology and RFID industry or vendor community. We can say with confidence that standards, the technology, and the technologists have matured over the years. There has been significant progress in the following areas:
Defined and achievable use cases: The business case has been proven. All that is left for the retailer to do, is to do the analysis for themselves. Having clearly defined and achievable use cases in mind is a prerequisite for successful RFID implementations and is a differentiator for the successful projects currently moving from pilot to rollout. In many of the recent apparel tagging item-level retail success stories, the retailer has control of the supply chain from source to customer or, minimally, already dictates unique source tagging requirements. This enables fast business case evaluations and swift implementations, improving the speed-to-value equation immensely.
Reliable and effective hardware: The RFID technology, including tickets/tags, readers, antennas, and printers, needs to work reliably and be easy to use, implement, and support.
Technology performance has improved dramatically over the course of the past several years: The science of pairing the right technology to each use case has also contributed to project success as technology providers can quickly identify the right technology for each use case.
Well-established and tested standards: Current RFID technologies are based on standards that allow interoperability, security, and buyer choice. These interoperable standards were developed over the course of the past decade through the work of many retailers under the auspices of MIT's Auto-ID Labs initially and then Epcglobal, the auto-identification standards arm of GS1.
Well-architected, highly usable, and configurable application software: The software that underpins and enables the business processes has matured, enabling proven use cases to be delivered quickly. Importantly, this software is highly configurable, ensuring the value of RFID-enabled processes over time.
Emergence of full RFID-enabled system providers: Many seasoned vendors now exist that can offer hardware, software, tags, and system integration, providing one point of contact, and much experienced guidance, reducing the technology complexity and risk for the customer.
In summary, Walmart's' RFID efforts in apparel should not come as a surprise — it is not unprecedented and like other retailers, Walmart has identified strong business reasons to pursue apparel RFID tagging at the item level. Furthermore, consumers need not worry that apparel tagging is somehow linked to "big brother" watching their every move. The RFID tagging efforts are instead, linked to the giant retailer's desire to continue to lower consumer prices, by reducing the cost of doing business.
Leslie Hand is a Research Director at Global Retail Insights and oversees research and business development for the supply chain and demand planning elements of the Global Retail Insights (GRI) product offerings. Prior to joining Global Retail Insights, Leslie was the Director of Global RFID Strategy and the Solutions Center for Ahold, one of the world’s largest grocery retailers. Leslie has spoken at numerous industry events including FMI Marketechnics, FMI/GMA Data Accuracy Collaboration, RFIDLink, Supermarket Executive Summit, RFID Journal Live, EPC Connection, Smart Labels 2007 and the NACDS/HDMA RFID Summit.