by Camille Chin | March 4, 2024
RFID systems are experiencing a renaissance. More fashion retailers are leveraging the decades-old technology to oversee global supply chains, track omnichannel inventory, accelerate in-store checkout and account for shrink.
The rebirth of radio frequency identification (RFID) systems is largely due to lower prices. According to McKinsey, the average cost of RFID tags has dropped by about 75% in the last few decades and the cost of RFID readers has dropped by about 50%. Reader accuracy has doubled and range quintupled, meaning less devices are required for large spaces. No wonder experimentation by retailers is up — and we can only expect to see more.
Zebra’s 16th Annual Global Shopper Study released in October 2023 revealed that a whopping 61% of retailers plan on using RFID by 2026. If RFID is on your radar, here’s a primer on RFID technology for omnichannel retail businesses.
How Does RFID Work?
Unlike bar codes, which are comprised of read-only technology, RFID technology has both read and write capabilities. It employs radio waves at various frequencies to automatically transmit information between a stationary location (an RFID reader) and an object, including moving ones (an RFID tag).
RFID is a decades-old technology dating back to World War II when Britain invented IFF transponders and installed them on their airplanes to differentiate them from enemy planes. The technology has evolved since the 1940s.
What Are the Primary Types of Tags?
There are two primary types of RFID tags: active and passive. Each use power differently.
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- Active RFID tags leverage internal batteries to power their integrated circuits and send data to readers at regular intervals. The batteries do eventually die.
- Passive RFID tags don’t have their own internal power source. The tags rely entirely on readers for their power when they’re in range.
Both active and passive tags enable real-time tracking.
How Much Does the Technology Cost?
Up until a few decades ago, RFID technology was too expensive to use on a large scale. But the cost of passive tags has fallen from as high as 60 cents each several decades ago to about 15 cents in the early 2000s to about 4 cents today.
Active tags cost more than passive tags. Manufacturers typically determine price based on a range of requirements, including storage type (read-only versus read-write tags that can be updated and locked, for example) and quantity. They can start at around $25 each, but prices increase as features do.
How Are Retailers Using the Technology?
Traditionally RFID technology has been used by retailers to track in-store merchandise. Readers, often placed in physical stores at doors, checkouts and in storage areas, capture data from tags when they pass within range. The reader sends the data to a retailer’s Point of Sale and Merchandising ERP in real time.
The automated, real-time tracking is more efficient and accurate than manual inventory checks and it helps retailers like you optimize the movement of inventory, replenishment and ultimately supply chain management.
In recent years, fickle supply chains have motivated more businesses to leverage RFID during global transit. RFID can provide highly accurate details about inventory including where it is: in a shipping container, on a truck, at the warehouse etc. This precision helps store managers plan staffing based on truck arrivals, and improve pick timing for store replenishment and orders.
New and cheaper tags and readers have also enabled retailers such as Uniqlo and Decathlon to leverage RFID for store checkout. Both retailers have installed big bins that automatically checkout merchandise that shoppers simply drop inside. No cashier, no scanning, little to no wait time. It’s magical.
In an April 2023 WSJ article, Fast Retailing, Uniqlo’s parent company, said that checkout wait times have been reduced by 50%. They also reported that RFID has resulted in a “significant reduction in out-of-stock” items, and that it has contributed to “reducing lost opportunities and improving customer satisfaction.”
“Smart” fitting rooms are also being explored. Here, shoppers get customized information about other sizes and colors that are available, tips on how to style an item, and recommendations for merchandise that will complete a look. Retailers get data on how many items customers try on, and conversion rates by product.
Finally, some retailers are beginning to leverage RFID systems for loss detection. Active tags — the more costly ones that are self-powered — help retailers connect dots well after stolen merchandise has left stores.
Retail Dive recently reported that Macy’s has tracked stolen items to a longtime employee’s home and merchandise from Dick’s Sporting Goods was discovered on their shelves. Stolen merchandise is often fraudulently returned to a brand’s other store locations and sometimes to different stores entirely.
Because RFID can help retailers identify where an item is or where it went, when it was sold and at what price, whether it was lost or stolen, some have called RFID “passports for products.”
What Are the Drawbacks?
Some shoppers are hesitant to use self-checkout machines because they often experience hiccups during the process. Privacy is another big concern. Ask your RFID vendor about how and when tracking is turned off, and ensure that you have security in place to safeguard sensitive information.
Employees can be hesitant too, but for a different reason: they see their work being replaced by machines. But employees do need training on how to effectively use the technology.
Then, of course, there’s cost. It can cost a chunk of money to implement an RFID system. Be sure to do a cost-benefit analysis before you jump in.
The Rebirth of RFID Technology
With cost no longer the barrier it used to be, RFID systems are being leveraged by global omnichannel retailers for multiple reasons including to:
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- strengthen their agility in responding to supply chain disruption
- optimize the tracking and movement of in-store inventory
- improve replenishment and ordering
- power contactless-checkout capabilities
- unlock new customer experiences and create cross-sell opportunities
- account for shrink and theft
RFID technology holds tremendous potential. How will you harness it?
