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Reflections on the Use of RFID in Retailing

Reflections on the Use of RFID in Retailing

Since the term Radio Frequency Identification (RFID) came into common usage within the retail environment, around the end of the 1990s, it has in many respects been an idea driven more by hope and hype than practical realisation. It is closely linked with the ‘Internet of Things’ idea whereby all manufactured objects have the capability to be uniquely identified and the capacity to do this without the need for line of sight. For retailers it promised a world where supply chains would become fully transparent, with all products identifiable in real time, bringing an end to oversupply and out stocks – the ultimate optimisation tool, allowing retailers to truly deliver ‘just in time’ supply chains tailored precisely to the needs of their customers. In addition, RFID offered other ‘game changing’ benefits such as the end of traditional checkouts and associated queuing for the consumer – products would automatically ‘checkout’ as they left the store, with the consumer’s credit card being billed accordingly. Within the realm of loss prevention, the RFID ‘revolution’ offered much promise. With each item being uniquely identifiable in real time, it was argued shop theft would become a thing of the past as thieves would be automatically identified as they tried to leave the store without paying. Similarly, problems such as returns fraud (where a thief attempts to claim credit for an item they have not actually purchased) would be eliminated as the previous ambiguity around whether they had actually bought ‘that’ item would no longer exist – the product would ‘tell’ the retailer its current status (bought or not bought). Back in the early 2000s it seemed RFID was going to totally transform the retail world – indeed, it was described by one of its earliest advocates in the following glowing terms: ‘as significant a technology as certainly the Internet and possible the invention of the computer itself’.

If we skip forward 17 years, then it becomes very quickly apparent that RFID, as yet, cannot be remotely put in the same category as the Internet in terms of its impact upon the world or more specifically retailing. Arguably, it is a technology that has seriously struggled to match up to the hype heaped upon it at the end of the 1990s and into the early 2000s. It continually floundered on the rocks of physics and economics, with the ‘Faraday Cage’ in many respects proving to be the prison ‘cell’ from which RFID has struggled to escape. But it also struggled to establish a strong foothold because questions about privacy and desirability often remained secondary to delivering the technological utopia of all objects being able communicate with each other and the rest of the world. A such, many of those long in the tooth in retailing have become familiar with the sentence that starts: ‘…in the next five years RFID will…’!

However, the outlook now appears to be changing fast for RFID and what has been seen in the past few years is a much more enlightened, less evangelistic and more realistic approach to how RFID may be able to play a role within retailing, one that recognises its limitations and plays to its identifiable strengths. The technology has also had the opportunity to gradually mature, away from the spotlight of unrealistic expectations, and begin to show how it can be used to help retailers resolve some of their ongoing and growing concerns. This can be seen particularly in parts of retailing that do not have a concentration of products largely made up of metals and viscous fluids, which have traditionally proved highly challenging for RFID to cope with. Retailers focussed on apparel and footwear in particular have begun to use this technology to help them manage their supply chains more efficiently, utilising RFID’s capacity to bring transparency and ease of audit into the retail space. As pressures within retailing concerning competition and growing consumer demands for greater and more accurate availability have increased (particularly with the growth of Omni channel), then some companies have begun to invest in RFID to help them respond. While we are still some way from RFID becoming ‘bigger than the Internet’, it would seem that a more gradual and incremental introduction into retailing is underway, one that recognises its weaknesses but at the same time is beginning to take advantage of developments in the technology. This movement is perhaps beginning to show that while the Internet of ‘all’ Things remains a pipe dream within retailing, the Internet of ‘some’ Things is not only becoming a reality, but that it seems to be making good business sense for some retailers to begin to invest in it.

It is within this context that this research is being undertaken. Back in 2002 the ECR Shrinkage Group commissioned a project to review the way in which RFID might impact upon the world of retail loss prevention – reflecting upon the prospects, problems and practicalities associated with this technology. Since then, much has changed, and this research offers an opportunity to reflect more broadly on its recent use, offering a fresh understanding about how this technology is now being used and what lessons can be drawn from its development, its implementation and its impact on retail businesses. Based upon the detailed experiences of 10 companies that have made the commitment to invest in RFID, the research sets out to answer the following questions:

  • What is the business context within which some retailers decide to invest in RFID?
  • How do these companies begin their RFID journey?
  • What steps do they follow when undertaking a trial?
  • In what ways do they measure the impact of RFID and what have they found?
  • How do they begin to roll it out to the rest of the business?
  • How have they dealt with the key challenge of integration?
  • What role, if any can RFID play in managing loss prevention?
  • What lessons have these companies learnt on their RFID journey?
  • How might they be planning to use this technology in the future?

The final report and the practical deliverables will be shared with the members of the ECR Community Shrink and OSA Group in February 2018.