I was directly involved with RFID in my early days at
Microsoft in 2003. We were convinced RFID was going to take off in retail and
in short order and so much so we invested in an RFID server built on BizTalk. I
wonder what happened with that server?
Wal-Mart was mandating RFID tagging from their suppliers which
would then make RFID ubiquitous in only a few years and life would be beautiful.
I lost track of RFID for a number of
years after that simply because none of what was envisioned ever happened, at
least not on the projected scale. I moved on to this concept of
customer-centric retailing with the focus on clienteling and analytics. That
was the next big thing, the customer! I have always believed in the concept of
item level RFID, but unfortunately the ROI must not have been there or more
retailers would have implemented.
Let’s take a look at where we are today. Yes item level RFID
still has a pulse mostly in high valued goods and items requiring traceability,
but short of that “I don't see the dogs eating the dog food”! So why has item level RFID adoption been so slow?
To quote Patrick Javick, vice president of industry engagement at GS1 US, “Many
of the benefits are now quantifiable: up to 99 percent inventory accuracy,
inventory labor productivity increases by 96 percent, out-of-stock reductions
of as much as 50 percent, and sales increases have been documented from 2
percent to 20 percent.” In the summer of 2013 “within a span of six weeks, two
of North America’s three largest mid-market department store chains made big
announcements regarding the pace of their chain-wide rollouts of RFID. And the
aftershocks are still being felt, both domestically and abroad.” John-Pierre Kamel,
Principal at retail consultancy RFID Sherpas LLC. Aftershocks, really? I guess it is not slow after all with aftershocks and tsunami's happening all around us.. Larry
Arnstein, vice president of business development for Impinj states, “it is well
established that store inventory accuracy typically hovers between 60 percent
and 80 percent.
Okay so for me it is starting to make sense depending on how
all the quantifiable and non-quantifiable costs/benefits add up. First it
appears that apparel and high fashion is the best suited retail market for this
solution. American Apparel has deployed and even touted their results in their
2012 SEC filing, “..RFID (solution).. Increase sales, reduce costs and increase
liquidity.. also RFID (deployments)..have allowed us to reduce our unit
inventory levels..”! In 2013 American Apparel CEO, publicly stated. “June represents
our 25th consecutive month of positive store sales growth. I am
excited with the 7% increase in comparable store sales in June particularly
since it is on top of the 19% increase achieved in June of 2012. Others are
apparently implementing item level RFID like Macy’s, Kohl’s, Lord and Taylor who
have been identified in the press.
There is a case for simple math to take over and help guide
this decision or is there? After you add up all the RFID costs and then subtract
them from current sales (I conservatively assume flat revenue) and projected savings in inventory from better planning, logistics, and store level stocking you end up with a
number either positive or negative. Alright I did discount the notion of
increased sales by not having out of stocks, so add that too if you like.
Where
I see the real driver of need for RFID item level tagging is with serving the demanding
omni-channel requirements. How are you going to be customer focused providing
great experiences with an inventory accuracy of 60 to 80%? I see many
opportunities for retailers to turn well-meaning customer serving initiatives
into customer satisfaction issues. You must have near 100% accuracy of your
inventory if you are expecting to source from your stores for your omni-channel
experience. If you say you have it in the store and I drive over to get it and
you do not have it in your hand waiting for me you are toast! This need for
knowing real-time what you have and very specifically where it is may be one of
the biggest underpinnings of being a successful retailer in this new
customer-centric world.
One more point, I know that item level RFID is a very
complex discussion starting from source and through consumption. I hope to
receive much dialog and feedback! This is customer-centric retailing.
