If there are lingering doubts about RFID’s value in retail, it’s time to move past them.It’s clear that retailers can realize significant improvements in inventory accuracy for selected categories, with apparel leading the way.As described in our 2014 report, The ROI for RFID in Retail, inventory counting can be done faster, more frequently and more accurately than traditional barcode-based methods, with significant benefits on the income statement.
The results are striking:more responsive replenishment leads to a double-digit reduction in out-of-stocks (OOS) and improvements in inventory accuracy to over 98%, with some reporting over 99%. In one noteworthy success story, early adopter Marks and Spencer recently reported improving accuracy by up to 50% and reducing out-of-stocks by 30-40% (Wall Street Journal, 4/10/14). Improved on-shelf availability drives revenue: a University of Arkansas study reported revenue uplift of from 1% to 10%.Some have reported uplift in selected categories of over 10%.
Even as RFID drives the top line, it cuts operating costs. RFID inventory counting can be 25 times faster than barcode-based counting, leading to significant labor savings – for a count that requires 2-3 people a full shift using barcode readers, it can take one person a couple of hours with RFID.
Based on revenue uplift and labor cost savings, RFID-based apparel inventory management easily justifies the incremental unit cost for the tags and a small investment in a few handheld readers.
Handheld readers dominate in retail
Most RFID apparel inventory solutions rely on handheld readers for inventory counts performed from every few days to every couple of weeks. Some incorporate fixed readers at receiving, back-room picking and/or POS to enable more immediate replenishment signaling, however, handhelds remain the core of the solution.Start-up costs for solutions relying on handhelds are modest given the measurable benefits. This is true despite imperfections such as error introduced by employee compliance and training issues.
Fixed infrastructure offers additional benefits at a cost
While handheld users true-up inventory perhaps weekly, fixed infrastructure being developed now by several vendors is intended to deliver an essentially real-time view of inventory. Un-sullied by errors due to employee execution, the rich data stream from fixed infrastructure will reveal ways to improve store operations, vendors say.
For example, by analyzing the data stream, retailers will be able to score customer activity levels at merchandise displays. “Activity” happens every time an item is picked up, tried on or carried from one place to another. There is value in differentiating between what’s inactive, what’s active but not selling, and what’s selling. The founder of one RFID data analytics start-up says that his system will provide a “leading indicator of sales,” while sales, in contrast, are just a lagging indicator of past decisions. Using this information, retailers will be able to get out in front of sales, making adjustments to store layout, merchandise displays, inventory mix and other operational choices in time to impact revenue. A prototype of this system is under development now, including live testing in two Southern California American Apparel stores.
Fixed Infrastructure is still expensive
If all you’re looking for is improved inventory accuracy, fixed infrastructure is an expensive way to go. While three high-end handhelds cost less than $10k, the hardware required to install RFID in the ceiling of an 8,000 square-foot space – the size of a large boutique or apparel department – costs $25k to $50k, depending on antenna density. Additionally, the installation of fixed readers can be complicated at the outset and require later tuning to get right.
To address cost issues, multiple reader vendors are developing ceiling reader solutions now that rebalance the price/performance equation. One approach involves installing a smaller number of more intelligent readers in the store. Others are investigating a large number of inexpensive, “dumb” readers. Some of these solutions will be released for commercial use within 12 months.
Shelf-based systems are available now for selected categories
While the overhead model for fixed infrastructure is still in development, commercial systems for shelf-oriented categories like jewelry, eyewear and cosmetics are available now. Many jewelry retailers manually count inventory at least daily, reconciling with POS data every evening. As with apparel, handhelds speed up this process, but fixed infrastructure based on shelf antennas is proving to be an effective alternative. A key enabler has been antenna innovation to create a relatively constrained read-field above the surface of the shelf, thereby delivering meaningful location and real-time activity information. According to one vendor, sixteen feet of RFID-enabled shelving costs about the same as a handheld.
Upcoming report on the economics of RFID
ChainLink is developing a report that will lay out the economics (costs and benefits) of the various RFID hardware options.The report will contrast the economics of handheld and fixed approaches, providing guidance on where users should stay with proven handhelds, and where fixed infrastructure is justified. The report will survey upcoming technology developments that will shift this balance. Subscribers to ChainLink’s RFID service will receive this report as a part of their normal subscription benefit.
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