Is Item Level RFID The Joke That Won't End?

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 25^th 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.