The current pace of RFID retail expansion and its historical roots sometimes reminds me of that age old question that an innocent child always asks on that long car trip - Are we there yet?
Contemplating that question led to the selection of the following as my favorite post from this past week:
- From #KurtSalmon, "Department Stores' New Reality— #RFID" http://ow.ly/d2pKP Key to omnichannel #retail strategies.
First a few RFID retail public announcements from the last four months:
- As written in the Kurt Salmon post above, Macy's saw 50% higher growth rate for products tagged with RFID.
- Apparel Magazine (July 2012) pointed out that RFID is experiencing a recent surge with retailers such as Walmart, JCPenney, American Apparel, Dillard's, and Macy's leading the charge. Leading suppliers such as Levi Strauss, Li & Fung, Jockey, and VF Jeanswear have also adopted the technology.
- Retail Touch Points (June 2012) reported that the RFID market will grow 20% annually and even in emerging market such as Russia some retailers are adopting the technology.
- The web portal RFID 24-7 (May 2012) reported new Frost and Sullivan research that predicted that the RFID apparel market will grow to $1.47 billion by 2017, "behind strong demand for item level tagging by retailers". In August 2012, the same site reported that American Apparel indicated that RFID played a key role in its financial turnaround.
- VDC (May 2012) identified 16 specific retailers in North America, Europe, and South America that have activities underway with item level RFID.
So, are we there yet? From closely tracking four global retail companies and their expanding item level RFID deployments, the answer is that we are finally getting closer to our destination.
Historically, RFID has had some challenges with multiple false starts in supply chain and consumer goods. Today RFID seems to have finally found its "sweet spot" in several retail verticals. To reach Gartner's Hype Cycle Scope of Enlightenment, both retailers and technology companies should keep in mind the following key concepts / trends:
- The "sweet spot" retail verticals for item level RFID are specialty apparel and department stores. The benefits for each of these retail segments in adopting RFID are different. Clear understanding of current / future supply chains, the role of branded merchandise, strategies for online expansion, and initial / expanded categories tagged are some of the critical areas of focus for success. Retailers that stray too quickly away from the current "sweet spots" risk losing momentum as for all its benefits, outside these initial verticals, RFID still has some technology challenges.
- RFID is only a technology, a way to a means of addressing retail pain points in store operations. Focusing on the technology and not the problems that it is trying to solve is a recipe for another false start. Having said this, other peripheral technology trends in the retail industry make this an ideal time for RFID resurgence and growth.
- Changing consumer shopping behavior are reshaping global retail, starting in Western markets. If properly deployed in the store, RFID can deliver key brick & mortar store benefits in dramatically improving the in-store consumer experience. Additionally, successful retailers implementing item level tracking have realized that the blur between a physical store and shopping online will accelerate. Omnichannel strategies that leverage new technologies such as RFID are critical to new business models to deliver enterprise inventory accuracy.
- RFID is ultimately about getting to granularity of consumer products inventory trends and optimizing on shelf availability. Key to retail success is the data warehouse that picks up all that granular information and turns it into inventory intelligence to respond faster to narrowing / evolving consumer attentiveness. Think "Big Data" on steroids in terms of the amount of potential information available from RFID. How that data is filtered at the edge, brought into the data warehouse, and analyzed for inventory and consumer intelligence will determine the future retail winners.
- The recent phenomenon of "showrooming" is only the first example of how a tech savvy shopper will impact physical stores. To enhance customer experiences, retailers will need to collect / analyze a much larger set of in-store data to adapt faster to changing shopping behaviors. At the product level, RFID can be one of those data gathering engines to optimize items available for sale in the store and online.
- RFID is an enterprise changing technology. To make its deployment successful requires that silos inside retail companies be understood and then managed at the CXX level. Merchandising, operations, sourcing, loss prevention, finance are all impacted within a retail company. If you are a retailer, have a clear unified plan at the CXX level that focuses on increasing sales / reducing cost (not the technology). In other words, focus on the ROI and break down all the internal silos to achieve it.
In above, we discussed the readiness of Western retail markets in adopting technologies such as RFID. In the Financial Times (Aug. 23, 2012) this past week, an industry analyst from PWC pointed out that the hypermarket store concept in Europe has had a good 50 year run, but in emerging markets this format will be lucky to make it to 10 years. This statement is another reminder of the accelerating pace of retail change. Technologies such as RFID that drive item level intelligence are critical to both understanding and profitably serving consumers in western stores today, and very soon at the global level.
More on RFID in future posts, but for now "Carpe Diem".