April 2, 2007
RFID and Retailers: Will It Ever Be Perfect Together?
By Faye Brookman, special to GMDC
Most of the nation’s major retailers agree RFID is paramount for their futures, especially as a method to put pilferage in check, streamline the process of getting items to the shelf and reduce out-of-stocks. There is another application cropping up too – RFID for payments.
However, implementation remains slow for many chains. There are many questions swirling around the topic and many were addressed at RFID World, a meeting held in March in Dallas. Does RFID really cut down on out-of-stocks? Is there an adequate return on investment? Is there a threat of the invasion of shoppers’ privacy? Many vendors are introducing products they hope cure the ills of RFID.
Target, Albertsons and Wal-Mart have been singled out as leaders in retail adoption. Wal-Mart, in fact, has put pressure on its vendors to be RFID equipped.
However, on the other hand, the retail giant had hoped to have 12 of its distribution centers using RFID by the beginning of last year, but to date the company reports five are up and running.
Like UPC codes, retailers are waiting for leaders such as Wal-Mart to do all the homework and then others will follow. The biggest problem, according to several chain executives, is learning how to harness the RFID information. One chief executive officer equated this to the implementation of scanning. At first, chains merely used it to move people through checkouts faster, until they understood how to manage and use the wealth of data.
A study by the Retail Systems Alert Group shows that 44 percent of manufacturers have developed timelines to implement RFID. Only nine percent of retailers have done the same.
Another obstacle has been security fear. Recently, a security expert cracked into passport information in the United Kingdom via RFID used to store personal information. In stores, RFID signals can be picked up 20 feet away, opening up the threat that people’s personal shopping habits could be invaded. There have also been reports that RFID viruses could be developed making tags vulnerable.
Some RFID suppliers are so frustrated with retail’s adaptation of the technology that they are looking for other avenues for growth. Some are pursuing other industries, such as travel; others are adding features for retail, such as payment options. RFID-enabled payments are expected to grow and retailers are on the lookout for roadmaps to integrate the systems. According to a study from the Aberdeen Group, there are more than 20 million RFID-enabled American Express, MasterCard and Visa credit and debit cards in the U.S. Studies of retailers accepting this form of payment said it shortens checkout time, but like scanning in early days, the data captured is not being used to analyze shoppers. The study found almost 60 percent of retailers said they plan to add this form of payment within the next 24 months.
Discussion Questions: What is the future for RFID? Will it deliver on its promise? Will enough retailers implement it to make a difference? What are the obstacles?
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RFID’s #1 obstacle: return on investment. RFID saw a big commitment from IBM and Wal-Mart in the early 1990’s. It’s now a dozen years later and RFID’s retail penetration for inventory management is minimal. There’s a lot of publicity and big promises and bluster, but if the ROI was clear, the adoption would be overwhelming. Every retailer would love the solve the problems RFID promises to solve.
Most new technologies with any reasonable ROI take off like a rocket. They don’t require a dozen years of publicity, tests, seminars, conventions, panels, webinars, podcasts, articles, consultant time, bullying, advertising, and promises. Did e-commerce take a dozen years to become commonplace? Did YouTube? Did Google? Did personal computers? Did cell phones? Did POS equipment? What about client server architecture? E-mail? Debit cards? ATM’s? Let’s face it, some technologies sound great but don’t have wide-ranging ROI, even when they function just fine.
Remember when kiosks first became practical? Their enthusiasts said they’d be in every store imaginable. Well, it’s many years later, and there are many kiosks, but the technology certainly isn’t everywhere and it isn’t used for everything. There’s a return on investment in very select applications, like airport check-in and self-checkout. So far, RFID’s had a similar journey. The adoption’s been very selective because the ROI isn’t great for every theoretical application.
I remain an RFID skeptic and will remain so until and unless thought leaders in our industry deliver business models that properly leverage the technology. Based on experience to date, the RFID declarations and deadlines set a couple of years ago by Wal-Mart and others now appear rash and rushed.
Apparently we can’t just snap on some RFID tags and suddenly revolutionize our businesses. This technology is too fundamental. It require a re-thinking of the way we sell and the way our customers shop. We’ve barely a clue yet about how RFID affects the shopper experience, except for some hypothetical worries about privacy.
A perspective that may be worth considering: RFID is a communications technology. Retail stores are communications environments. To understand and manage RFID’s impact we must analyze it from a media ecology perspective. ROI is necessary, yes, but hardly sufficient.
The problem with RFID is that so far, it is too expensive to tag every item–where the real business case is. So people started out tagging pallets and cases, based off of business cases that really need item level. Tagging pallets and cases doesn’t add a significant amount of visibility to the supply chain–it really doesn’t. In fact, there is tons of data out there in transactional systems and EDI messages that could give you nearly as much supply chain visibility without the application of a single tag. So shock and surprise, all of the fantastic benefits of tagging cases and pallets hasn’t really materialized.
However, I think we need to get over the idea that we have to tag everything at the item level before we can get a return out of RFID. The most compelling business cases that I’ve seen on RFID involved a specific application to a specific set of inventory–promotional displays in grocery and high turn items in consumer electronics. But RFID wasn’t there to “eliminate stockouts” in either case. It was there to help diagnose process issues, and ultimately it was process changes that eliminated stockouts.
RFID doesn’t solve problems, it identifies them. And then it takes time to identify the right process changes or technology solutions that will solve those problems. This is partly about understanding the right questions to ask against RFID data, but it’s also about solving problems at the most contentious intersection in retail: between manufacturer and retailer as product moves between them and into the consumer’s hands. RFID won’t solve those problems. People will.
As it is the goal of retailers and manufacturers to become more consumer centric, so should be the goal of RFID applications. Make it useful, provide a positive experience to the consumer; that’s the direction RFID needs to go. Automatic checkouts is a good idea–automatic checkouts with a DISCOUNT on each item is a better ticket.
Until manufacturers and retailers agree to a system such as this, no ROI will really be recognized.
RFID tags are generally a positive development and a extremely useful technology. Retailers will be able to reduce inventory levels and control theft. RFID tags provide economic benefits and when it’s all said and done, consumers will have more choices at possibly lower prices. At some point in time, consumers can take what they need from the shelves, leave the store, and be billed on their RFID credit card. How nice! But the potential privacy threat to consumers is after consumers leave the store, and I believe this will be the issue that retailers will need to deal with when explaining to consumers how RFID impacts the post-shopping experience. It’s my understanding that RFID tags can be disabled at the check stands if the consumer wants to “opt out,” however, the public today is becoming increasingly skeptical about privacy issues.
RFID (alone) can’t possibly deliver against its expectations because–once again–we’ve set our expectation bar so high no technology can clear it. ROI can’t be demonstrated until a whole list of other things is is in place such as: scaled adoption; standards; readers; new packaging; information management systems, etc, etc., et. al. We keep waiting for that magic bullet to solve ALL our problems and folks, the truth is, it just doesn’t exist.
RFID still sounds like a technology in search of an application. It’s been around long enough that we should expect to see detailed ROI projections showing its value. That we haven’t suggests it is either not something that is going to generate much ROI, we haven’t figured out how to improve its ROI, or we haven’t created the uses for it that would generate a good ROI.
I agree with Mark’s comment, above. RFID just hasn’t proven its ROI. As history has shown over and over again, technology doesn’t go far unless there is a specific value-add that can be traced right down to the bottom line.
One way I think RFID may gain steam again is with some emphasis on data management. This is where business intelligence systems can come in handy…especially for supply chain management.
RFID will take off when it adds value. The value to the supply chain is not viewed because RFID is UPC code on steroids. UPC codes are sufficient. Where RFID adds value to retailers is in the back room. If you tie the RFID history, (lot number, delivery status, how long it’s been in the back room, serial number, etc.) to the POS scanner and location of the product in the back room, you reduce stock outs tremendously. Numerous times, consumers shop a store to purchase an item and the shelf is empty. No one can tell you where the product is in the back room. Recently, I went into a Home Depot for an item…nothing on the shelf…the associate looked it up on the system and said, “Oh we have twenty four of them, but where, we don’t know.” The concentration for RFID has been with the suppliers but retailers have an wonderful opportunity in the back room!
No technology has ever, on its own, produced an ROI. It takes users to do that. To be sure, RFID holds the promise of reducing out of stocks. But most retailers are still heavily involved in numerous other initiatives to improve their service levels. Notable among them is simply becoming informed when stock levels are either out or dangerously low.
Most retailers still must pour through stock status reports to inform themselves of stockouts. Others must be prescient and have sufficient time to make a query. Across the industry buyers and allocators are focused on the new and the fresh. And stockouts are pervasive, especially in fashion and seasonal lines.
What is needed is a business intelligence infrastructure that informs and measures the stockouts. And once informed about stockout, both new and imminent, the responsible party needs to be empowered to take remedial action. Too often, retailers have placed many road blocks in the way of remedy.
Once this is in place and working brilliantly, then the RFID technolgy has a chance of making the case for an ROI on reducing stockouts.
Well, I am a little late on this one but it seems the way to bring comments out of woodwork is to bring up a nascent technology that has been over hyped and whose full benefits are still unclear.
First of all, let’s understand what the potential is for RFID. All it really does is support “serialization” of items that are not easily distinguishable. So we no longer just know we have a “coffee maker,” we now know which coffee maker we have, the one with serial number xxxxxxxxx. So how much is it worth to know this? The fundamental impediment for RFID has been the laws of physics. The cost of the technology and the inability to get accurate read rates at low radiation levels have been real problems.
Even if tomorrow, some new printing technology all of a sudden produced an RFID tag that cost less than a penny and sent a signal hundreds of feet, not everyone would convert at once. Our business processes, computer systems, and employees are going to be working in a mixed environment for the foreseeable future. There will be untagged merchandise, there will be tagged merchandise that is tracked by lot or version number, and there will be tagged merchandise that is tracked by specific serial number. That last variety will likely be due to government edict for things like track and trace on prescription drugs, etc.
I think there are a lot more opportunities for using serialization that are yet to be explored and would really help in store operations. We’ve talked about shopping carts, but just think of all the equipment you have in the store. Think of the confusion that starts whenever an over zealous employee moves a piece of equipment from one store to another. What about lost equipment or equipment that goes into the dumpster inside an emptied box? Yes, RFID would detect stolen and or missing equipment.
To some extent, the naysayers for RFID are accurate in their assessment that things are not moving along as expected (or hyped). It is a challenge, but I think it is too early to give up. The fundamental goal here is to figure out a way to get an accurate picture of the physical world inside the network in a parallel virtual world. RFID seems to be the only option for achieving this. We have to give it some time….
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RFID’s #1 obstacle: return on investment. RFID saw a big commitment from IBM and Wal-Mart in the early 1990’s. It’s now a dozen years later and RFID’s retail penetration for inventory management is minimal. There’s a lot of publicity and big promises and bluster, but if the ROI was clear, the adoption would be overwhelming. Every retailer would love the solve the problems RFID promises to solve.
Most new technologies with any reasonable ROI take off like a rocket. They don’t require a dozen years of publicity, tests, seminars, conventions, panels, webinars, podcasts, articles, consultant time, bullying, advertising, and promises. Did e-commerce take a dozen years to become commonplace? Did YouTube? Did Google? Did personal computers? Did cell phones? Did POS equipment? What about client server architecture? E-mail? Debit cards? ATM’s? Let’s face it, some technologies sound great but don’t have wide-ranging ROI, even when they function just fine.
Remember when kiosks first became practical? Their enthusiasts said they’d be in every store imaginable. Well, it’s many years later, and there are many kiosks, but the technology certainly isn’t everywhere and it isn’t used for everything. There’s a return on investment in very select applications, like airport check-in and self-checkout. So far, RFID’s had a similar journey. The adoption’s been very selective because the ROI isn’t great for every theoretical application.
I remain an RFID skeptic and will remain so until and unless thought leaders in our industry deliver business models that properly leverage the technology. Based on experience to date, the RFID declarations and deadlines set a couple of years ago by Wal-Mart and others now appear rash and rushed.
Apparently we can’t just snap on some RFID tags and suddenly revolutionize our businesses. This technology is too fundamental. It require a re-thinking of the way we sell and the way our customers shop. We’ve barely a clue yet about how RFID affects the shopper experience, except for some hypothetical worries about privacy.
A perspective that may be worth considering: RFID is a communications technology. Retail stores are communications environments. To understand and manage RFID’s impact we must analyze it from a media ecology perspective. ROI is necessary, yes, but hardly sufficient.
The problem with RFID is that so far, it is too expensive to tag every item–where the real business case is. So people started out tagging pallets and cases, based off of business cases that really need item level. Tagging pallets and cases doesn’t add a significant amount of visibility to the supply chain–it really doesn’t. In fact, there is tons of data out there in transactional systems and EDI messages that could give you nearly as much supply chain visibility without the application of a single tag. So shock and surprise, all of the fantastic benefits of tagging cases and pallets hasn’t really materialized.
However, I think we need to get over the idea that we have to tag everything at the item level before we can get a return out of RFID. The most compelling business cases that I’ve seen on RFID involved a specific application to a specific set of inventory–promotional displays in grocery and high turn items in consumer electronics. But RFID wasn’t there to “eliminate stockouts” in either case. It was there to help diagnose process issues, and ultimately it was process changes that eliminated stockouts.
RFID doesn’t solve problems, it identifies them. And then it takes time to identify the right process changes or technology solutions that will solve those problems. This is partly about understanding the right questions to ask against RFID data, but it’s also about solving problems at the most contentious intersection in retail: between manufacturer and retailer as product moves between them and into the consumer’s hands. RFID won’t solve those problems. People will.
As it is the goal of retailers and manufacturers to become more consumer centric, so should be the goal of RFID applications. Make it useful, provide a positive experience to the consumer; that’s the direction RFID needs to go. Automatic checkouts is a good idea–automatic checkouts with a DISCOUNT on each item is a better ticket.
Until manufacturers and retailers agree to a system such as this, no ROI will really be recognized.
RFID tags are generally a positive development and a extremely useful technology. Retailers will be able to reduce inventory levels and control theft. RFID tags provide economic benefits and when it’s all said and done, consumers will have more choices at possibly lower prices. At some point in time, consumers can take what they need from the shelves, leave the store, and be billed on their RFID credit card. How nice! But the potential privacy threat to consumers is after consumers leave the store, and I believe this will be the issue that retailers will need to deal with when explaining to consumers how RFID impacts the post-shopping experience. It’s my understanding that RFID tags can be disabled at the check stands if the consumer wants to “opt out,” however, the public today is becoming increasingly skeptical about privacy issues.
RFID (alone) can’t possibly deliver against its expectations because–once again–we’ve set our expectation bar so high no technology can clear it. ROI can’t be demonstrated until a whole list of other things is is in place such as: scaled adoption; standards; readers; new packaging; information management systems, etc, etc., et. al. We keep waiting for that magic bullet to solve ALL our problems and folks, the truth is, it just doesn’t exist.
RFID still sounds like a technology in search of an application. It’s been around long enough that we should expect to see detailed ROI projections showing its value. That we haven’t suggests it is either not something that is going to generate much ROI, we haven’t figured out how to improve its ROI, or we haven’t created the uses for it that would generate a good ROI.
I agree with Mark’s comment, above. RFID just hasn’t proven its ROI. As history has shown over and over again, technology doesn’t go far unless there is a specific value-add that can be traced right down to the bottom line.
One way I think RFID may gain steam again is with some emphasis on data management. This is where business intelligence systems can come in handy…especially for supply chain management.
RFID will take off when it adds value. The value to the supply chain is not viewed because RFID is UPC code on steroids. UPC codes are sufficient. Where RFID adds value to retailers is in the back room. If you tie the RFID history, (lot number, delivery status, how long it’s been in the back room, serial number, etc.) to the POS scanner and location of the product in the back room, you reduce stock outs tremendously. Numerous times, consumers shop a store to purchase an item and the shelf is empty. No one can tell you where the product is in the back room. Recently, I went into a Home Depot for an item…nothing on the shelf…the associate looked it up on the system and said, “Oh we have twenty four of them, but where, we don’t know.” The concentration for RFID has been with the suppliers but retailers have an wonderful opportunity in the back room!
No technology has ever, on its own, produced an ROI. It takes users to do that. To be sure, RFID holds the promise of reducing out of stocks. But most retailers are still heavily involved in numerous other initiatives to improve their service levels. Notable among them is simply becoming informed when stock levels are either out or dangerously low.
Most retailers still must pour through stock status reports to inform themselves of stockouts. Others must be prescient and have sufficient time to make a query. Across the industry buyers and allocators are focused on the new and the fresh. And stockouts are pervasive, especially in fashion and seasonal lines.
What is needed is a business intelligence infrastructure that informs and measures the stockouts. And once informed about stockout, both new and imminent, the responsible party needs to be empowered to take remedial action. Too often, retailers have placed many road blocks in the way of remedy.
Once this is in place and working brilliantly, then the RFID technolgy has a chance of making the case for an ROI on reducing stockouts.
Well, I am a little late on this one but it seems the way to bring comments out of woodwork is to bring up a nascent technology that has been over hyped and whose full benefits are still unclear.
First of all, let’s understand what the potential is for RFID. All it really does is support “serialization” of items that are not easily distinguishable. So we no longer just know we have a “coffee maker,” we now know which coffee maker we have, the one with serial number xxxxxxxxx. So how much is it worth to know this? The fundamental impediment for RFID has been the laws of physics. The cost of the technology and the inability to get accurate read rates at low radiation levels have been real problems.
Even if tomorrow, some new printing technology all of a sudden produced an RFID tag that cost less than a penny and sent a signal hundreds of feet, not everyone would convert at once. Our business processes, computer systems, and employees are going to be working in a mixed environment for the foreseeable future. There will be untagged merchandise, there will be tagged merchandise that is tracked by lot or version number, and there will be tagged merchandise that is tracked by specific serial number. That last variety will likely be due to government edict for things like track and trace on prescription drugs, etc.
I think there are a lot more opportunities for using serialization that are yet to be explored and would really help in store operations. We’ve talked about shopping carts, but just think of all the equipment you have in the store. Think of the confusion that starts whenever an over zealous employee moves a piece of equipment from one store to another. What about lost equipment or equipment that goes into the dumpster inside an emptied box? Yes, RFID would detect stolen and or missing equipment.
To some extent, the naysayers for RFID are accurate in their assessment that things are not moving along as expected (or hyped). It is a challenge, but I think it is too early to give up. The fundamental goal here is to figure out a way to get an accurate picture of the physical world inside the network in a parallel virtual world. RFID seems to be the only option for achieving this. We have to give it some time….