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Adoption for RFID and item-level RFID technology is growing rapidly across luxury and high-end retail. Research from Accenture points to full adoption of RFID solutions in 47% of U.S retailers and nearly 1 in 3 European retailers in 2023. And it’s no surprise why: brands that implement it are seeing boosts to inventory visibility and a 25% increase in inventory accuracy – up to 96% or more – in brick-and-mortar stores.
What can item-level RFID technology do for retailers?
Many retailers look to RFID solutions to save revenue lost to stockouts and overstock, but also improve order fulfillment, loss prevention, and store staff efficiency. But item-level RFID, especially the more innovative, next generation RFID solutions, can provide exponentially greater value than what a single use case can provide – and without proper mapping and project planning, much of the potential profitability will be impossible to add later on.
This blog defines the different use cases for item-level RFID and the steps you can take to ensure your solution makes the maximal impact on your bottom line.
Table of Contents
Item-Level RFID Use Cases: Thinking Big
While investing in digitization and item-level RFID is usually a pilot project started by one department, the most successful deployments are ones that get feedback and buy-in from people across the business. And the best way to get it is to ensure your technology solves pains across your organization.
According to the 2023 Gartner® “Innovation Insight for Item-Level RFID in the transformation of the Retail Store” report, “Inventory accuracy and proactive stock management have seen renewed focus in retail as store-based fulfillment processes continue to scale. Item-level RFID is a critical contributor to addressing this need. Retail CIOs must evaluate various use cases to apply this technology in their organizations.”
Gartner continues,
“Articulate and quantify operational efficiencies gained by the use of item-level RFID by conducting a baseline assessment of current processes and measuring ROI through KPIs, such as increase in labor productivity, decrease in shrink and reduction in safety stock.”
Before choosing an RFID solution, plan out which use cases should be addressed in the pilot, which can be implemented later on, and which aren’t relevant for your business.
Per Gartner, “Many retailers continue to struggle with creating compelling experiences for customers and associates in physical locations.
“Retailers that have deployed item-level RFID have seen significant improvements in execution of in-store processes, realizing material benefits through increased labor productivity, reduction in shrinkage and loss, improved item location accuracy, reduced stock-outs and higher sales.”
Loss Prevention Strategy with item-level RFID
When an item is stolen with a traditional EAS system, it takes store teams a painstakingly long time to identify exactly which product it was, and when it left the store.
By tracking items in real time, retailers see when the item stopped transmitting, and can use that ‘time stamp’ to pinpoint when it was stolen and identify the thief on security footage. In a real-life use case, a store using Nexite’s NanoBT tags was able to learn from footage of a theft to spot and prevent new shoplifting methods, and the retailer used the information to tighten their loss prevention strategy.
According to Gartner, “Retailers are investing in item-level RFID as an alternative electronic-article-surveillance (EAS) solution for protection against shrink and theft. Loss prevention (LP) solutions can be integrated with POS; support self-check-out or product returns; and can be deployed as a stand-alone solution. Tagged products that leave a store without the tag nullified at check-out can trigger an alarm, similar to traditional EAS monitoring.”
Technology for Retail and Store Operations:
- Track merchandise to make sure it’s always on display
- Automate stock counts to reduce reliance on store staff
- Digitize and automate tasks like locating stock, stock receiving and gap investigations to save time on operational processes
- Save costs on employee hours. Make it easy for store associates to complete tasks find items across the sales floor with money maps (maps showing merchandise location)
Customer Engagement and Employee Efficiency
Automating tasks like stock counting or gap investigations, and providing automatic lists of tasks like replenishing styles on shelves or picking ship-from-store orders can free up hours of store associate’s time – time they can then use to provide concierge services for customers.
Some solutions also focus on frictionless customer experiences like mobile self-checkout.
Omnichannel fulfillment
In the report above, “Gartner is observing more and more retailers across several retail segments fulfilling well over 50% or more of their e-commerce orders directly from their stores.” Using a single pool of stock to fulfill BOPIS orders, items for delivery, and orders from in-store customers will reduce the risk of excess stock in stores and simplify inventory management.
Sustainability and Compliance
With European laws against retail waste and burning excess stock going into effect, luxury brands can use data from item-level RFID to optimize future buying that minimizes excess stock.
Retailers as a whole can eliminate waste – and even the need for safety stock – by using store-level insights to localize allocation, pricing and assortments.
KPIs for Item-level RFID
For many retailers, getting data on store inventory isn’t the hard part – it’s figuring what to do with the data once they have it.
Use KPIs to quantify the ROI you expect from using item-level RFID. For example, are you looking for end-to-end inventory visibility from manufacture through store distribution for more efficient fulfillment? Are you looking mainly for data to better plan and optimize store assortments and pricing for next season? Or perhaps solutions to help you increase full-price sell-through and reduce your reliance on markdowns for in-season styles?
Define the stakeholders involved in the project, and make sure that whichever item-level RFID solution you choose helps meet their specific KPIs.
How Continuous Inventory Opens New Value
Continuous inventory opens whole new opportunities for revenue and increasing the bottom line through efficiencies. Use your RFID POC as an opportunity to set NEW KPIs from new data.
One of the most impactful set of KPIs relates to the sales funnel: measuring how customers interact with products before they walk about out of the store, with or without making a purchase. Another is using item-level RFID technology to tackle store staff retention, a hot issue for many retailers today.
Gartner recommends to “Evaluate the impact of deploying item-level RFID solutions to the customer experience by appraising increased product interactions, sales conversions and return visits, as well as assessing positive impact to the store associates.”
Today, most decisions are based on sales data. But between the time a customer walks into a store to the moment they make a sale (or don’t purchase anything) lies a treasure trove of information that can impact sales, pricing, and visual merchandising strategy.
For example, if you can measure how often customers pick a shirt off the rack in real time, it can point to interest in a style. Calculating the number of times a style was tried on and then purchased , or abandoned, can help define sales funnel benchmarks to forecast how many shirts will sell in a store – even before sales data has come in. In the time it would normally take to get sales data on the sales from that style, you could transfer the shirt to another store where the data predicts it will sell off the shelf.
This data point – engagement with a product on the sales floor – is a valuable KPI that can power better planning. But of course, it’s one thing to have the data, and another to know what to do with it.
Choosing an Item-level RFID Solution: Map Requirements and Resources
New technology solutions almost always require new business or operating processes. When choosing an item-level RFID solution, look at the current processes you have in place, and understand how they would change with the new solution.
For example, are you looking to automate in-store operations? Some software solutions for RFID have store-facing apps with personalized checklists for employees. Some apps will automatically list items for replenishing, or the styles that should be promoted in the store.
The example above requires a cloud-based software system that receives data, analyzes it, and translates it into tasks or recommendations for teams. Not all RFID cloud software will automate these steps; some only present the data.
Implementation and IT hours
One of the biggest blockers to digitization projects in retail stores is the lack of a dedicated IT team. Make sure that whatever pilot you sign on to is one that you can support with the IT resources you have at hand.
Software vs. Hardware
When most people think about item-level RFID, they imagine tags sewn into every item, and store associates waving handheld readers at fixtures. That’s enough to capture data – but where will you send it to, and what will you do with it once it gets there?
Most item-level RFID companies offer one or two parts of a full RFID solution, which requires:
- Tags with an RFID chip
- Handheld or fixed readers
- A cloud-based platform with one or more web or mobile applications
The greatest differentiator between different item-level RFID solutions – besides cost – is how the data is used to drive value. How well will the solution turn your raw in-store data into insights and actions across the chain? Who will be able to see the data, how will it translate into the KPIs that matter most to you, and which use cases can you impact?
Most of that will depend on which software solution you choose.
Future Proof Your item-level RFID Technology
According to Gartner,
“In more than 80% of Gartner inquiries on RFID, implementers that focused on trying to use a single technology for all of their business needs were not aware that there are many battery, frequency and carrier options for RFID tags.
Ultimately, 50% of projects need more than one tag.”
To get the most value out of item-level RFID technology, look at the solution – tags, readers, and software platform- as a whole solution to be planned and justified in advance. And that includes not only the use cases you want to test in your pilot, but also use cases down the road.
Using a platform that can support numerous end points using different frequencies and technologies (wifi, rfid, BLE) and can support use cases across the business is a great way to give yourself room to expand the solution’s value later on.
For example, self-checkout is just starting to hit the inflection point. Now, early adopters of item-level RFID are installing self-checkout bins where customers can quickly drop their items, have them scanned, and pay without ever needing assistance from store staff.
That’s a competitive advantage for today. But we’re already seeing omnichannel fulfillment change consumers’ expectations. People are buying more goods online and offline from their phones.
Soon, customers will see RFID bin checkout not as timesavers, but just another line they have to wait in. And when that happens, your RFID solution will need to support mobile self-checkout.
Build new benchmarks
When retailers make buying decisions, they base benchmarks like sell-through and stock turnover time on what sold, and what didn’t sell. But they don’t know:
- Why items didn’t sell – was the pricing off, or were the items not on display?
- How much more could have sold if the store had a different collection highlighted on display?
- How many customers tried on items, only to leave the store without buying them
And even subtle improvements to each engagement point will increase the number of customers at each point in the sales funnel, and result in higher sales.
Make buying decisions based on real-time data collection
Having benchmarks and real-time data for customer engagement with merchandise in specific stores and across the chain will fuel better buying decisions.
For example, If a store is underperforming with a key item, it may be because the ‘benchmark’ set by headquarters for that item is not realistic for the local consumers in that store.
Alternatively, real-time data could expose an entirely different reason for the underperforming items, whether lack of visual merchandising compliance, a promotional issue, or simple because the item was not available on the shelf when customers were walking by.
Once retailers know not only what sold, but what had the potential to sell more, they can more accurately forecast demand, plan assortments, and make buying decisions that will net higher revenue.
Even if these use cases aren’t relevant for your initial RFID business cases, look for an item-level RFID solution – tags, readers, and software platform – that will support them in the future.
How successful your item-level RFID solution will be depend on how well you prepare, match the solution to your use cases, and change operational processes, benchmarks and KPIs to reflect the new data and insights coming in. But it will also depend on whether you pick a solution – hardware and software – that can scale up with your business.
About Nexite
Nexite’s Connected Retail Platform is an all-in-solution that takes item-level RFID to the next level, digitizing and connecting physical merchandise to the cloud to deliver business intelligence across the organization. Our patented NanoBT (bluetooth) tags and readers, combined with a cloud platform powering automation and AI-based actions, help retailers maximize in-store efficiency and profitability with real-time customer behavior analytics, item-level insights and digital-first experiences for customers and employees.
Frequently Asked Questions
How Accurate is RFID inventory?
How to use RFID for inventory?
Gartner, Innovation Insight for Item-Level RFID in the Transformation of the Retail Store, By Sandeep Unni, Published 26 June 2023
Gartner, When and Why Enterprises Should Implement RFID to Track Critical Assets, By Tim Zimmerman, Nick Jones, Refreshed 12 December 2022, Published 23 July 2021
GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.