As I discussed in an earlier blog on the evolution in the use of RFID in retailing – it is a technology that has been on a ‘long burn’ and only now after 20 plus years since it was first proposed as a way to enhance the efficiency and profitability of retailing, is it becoming mainstream. It undoubtedly suffered from being over hyped in the early days of its development, compounded by the technology being relatively immature and the sheer complexity of its use being considerably under played. However, we now have a growing number of retailers around the world that have implemented the technology and not unlike many other types of technology, different degrees of maturity can now be found in the way it is being used. Both of the recent ECR Reports (2018 and 2021) on the use of RFID have charted the various ways in which the technology has been deployed and used in retailing, with the latest study developing the Maturity Model presented below. As can be seen, the model proposes four stages of maturity – Basic, Developing, Established and Leading Edge. These stages are characterised by a number of different RFID indicators: Data Collection (the general location of where RFID tags are typically read); SKU Coverage (the proportion of products that have an RFID tag attached); Tag Reading Capability (how and where tags data is collected); Tag Type (how the tag is applied to products); Tag Application (where the tag is attached to the product); and Data Utilisation (to what purposes is RFID-based data put to use).
While it is likely that some retailers may well straddle modes of maturity when measured against some of these key indicators, overall, it is hoped that the model provides a useful overview of the various stages of RFID utilisation.
Basic and Developing Utilisation: By far and away most of the companies participating in the ECR research were located between these two categories – the Plateau of Productivity can be found in the utilisation of RFID in physical stores for the main purpose of improving inventory accuracy and increasingly delivering omni channel retailing. Tagging is mainly done at the point of manufacture, applied to products via stickers and swing tickets and read primarily using handheld readers.
Established Utilisation: The ECR research found that far fewer retailers had reached this level of maturity thus far, where use of the technology can be found both in retail stores and the supply chain. A significant proportion of SKUs are tagged (95%) and may in the right circumstances be sewn into the product as part of the manufacturing process. Tags can be read at various stages including at the Point of Sale and various points in the supply chain. RFID data is used for an expansive range of use cases, including forecasting, audit purposes, identifying refund frauds and facilitating a range of E-commerce processes.
Leading Edge Utilisation: Perhaps not surprisingly, the ECR research found few retailers had reached this stage where 100% of all products are reliably tagged and can be read through a range of automated readers, including overhead readers, robots and drones. The tag is firmly embedded in products at the point of manufacture or in the raw materials prior to manufacture. Tags are used to enable self-checkout, manage all forms of product returns, product provenance checking and can be used by manufacturers, retailers, and the consumer. For several sectors of retailing, especially those selling apparel, the business case for adopting a Basic/Developing utilisation of RFID seems relatively clear, particularly if omni channel is part of the consumer offering. As detailed in the 2018 ECR Report, the ROI is good, making investment in RFID technology a sound business decision in the right circumstances. Moving to a more Established RFID Maturity phase requires a higher degree of innovation and integration, necessitating a more nuanced reflection upon organizational context and the possible ROI for each additional use case being considered. Making the step-change to Leading Edge would seem suitable for a relatively small number of larger retail businesses that have the commitment, capacity and context to achieve this level of engagement with the technology.
It is worth finishing by recalling the central premise of what RFID technologies can deliver to retailing – the provision of data that provides greater visibility of stock inventories. The cost of obtaining that data needs to be assessed against the value that it will bring to the business. The history of RFID in retailing is littered with inflated promises and disappointed adopters. What seems clear is that many of the retailers making the decision to invest in RFID do so with a very clear eye on the ROI – does the use case make financial sense or not and is it the most appropriate way to deliver the intended objective? No doubt as the technology and its capability continues to develop and evolve, the use cases will become more persuasive, but the overarching philosophy of keep it simple and make it pay still seems a sensible position to adopt when deciding whether to invest in RFID-based systems and how they will be utilized.