Retailers who delayed or refrained from adopting RFID (Radio-Frequency Identification) technology have incurred enormous retail losses—often so much more than the initial savings of not investing. Many surveys have highlighted that RFID adoption is on the rise, however, only 47% of retailers in North Americas, Europe, and Asia Pacific regions have fully adopted the RFID technology. While North American retailers lead with overall RFID adoption (93%) including full adoption and piloting, retailers in Europe have fallen behind as per a study by Accenture.
Why RFID Adoption is Necessary?
Why RFID adoption is even necessary, you might ask. The reasons are multifold. RFID is quickly replacing barcode technology in retail supply chain and since it offers far greater efficiency in retail operations, inventorying and item scanning, RFID is the smart choice between various AIDC technologies available.
The covid19 pandemic forced retailers to focus more on online shopping and customer shopping experience on e-commerce websites while in-store shopping experience hasn’t changed much in decades. Focussing on RFID adoption, it is mostly used by retailers for supply chain and inventory management purposes but self-checkout, RFID shopping carts, etc. have only a few takers.
For example, Uniqlo has deployed self-checkout kiosks that use RFID technology to cut short long queues and offer a better shopping experience inside the stores. Not adopting RFID technology forces retailers to depend on traditional data capture technologies, resulting in a lack of inventory visibility and supply chain bottlenecks.
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The Missed Opportunities: Retailers and the RFID Oversight
Loss for Retailers by Not Adopting RFID
- 1. Inefficient inventory management
- 2. Human errors and inaccuracies
- 3. Lack of item-level visibility
- 4. Loss of business due to ‘out of stock’
- 5. Labor-intensive and time-taking audits
- 6. Theft and retail shrinkage
- 7. Failure in order fulfillment
- 8. Supply chain bottlenecks and delays
- 9. Less productivity and growth
- 10. Bad customer experience
Let’s see how RFID oversight has led to several disadvantageous for retailers across the globe.
a.Inventory Inaccuracy: The Silent Profit Killer
When EPC was invented, the intent was to use EPC, similar to barcode UPC, simplifying inventory management and inventory visibility. By not actively considering RFID technology, retailers are frequently functioning with a lack of correct stock records, which causes alarm at several operational levels.
As retailers move forward with manual inventory procedures, it happens slowly, is prone to mistakes, and results in out-of-stock (lost sales, where a product is not on the shelf) and over-stock (inventory that occupies cash and rides with markdowns) frequently. For example, Walmart, Macy’s Zara, and H&M lacked inventory visibility prior to RFID which often resulted in lost sales and bad customer shopping experiences.
b. Retail Loss and Theft Has Increased
Shoplifting is widespread, and US retail shrinkage stands at an astonishing $112 Billion in 2023. Traditional loss prevention technologies of yesterday, such as EAS tags, only assist in informing the staff of theft and do not assist in knowing what items were taken. RFID enables loss prevention personnel to match inventory and loss with accuracy. Retailers that are not leveraging RFID are missing out on this.
c. Lost Sales due to Inadequate Shelf Availability
For retailers, one big hidden cost is the "Not on Shelf But On Stock" (NOSBOS) phenomenon where products are on not the shelves, but available in the inventory (in stock), making them inaccessible to shoppers.
Firms that haven’t adopted RFID, do not know where products are, eventually resulting in lost sales. Auto identification with RFID offers complete visibility enabling replenishment at the right time.
d. Labor Inefficiency and Increased Operating Expenses
Each store conducts yearly inventory counts and between inventory counts stores conduct cycle counts. However, these take time, are labor-intensive, and are prone to human error. RFID is able to automate cycle counts and other inventory procedures, lowering labor hours allocated to inventory tasks by as much as 10–15%, and enables personnel to spend more valuable time on other tasks and overcome retail loss.
Retailers that continue to conduct inventory management in a traditional way have greater labor expenses and possibly lower employee morale as hourly workers are supposed to execute repetitive, detail-driven tasks that may result in mistakes.
e. Poor Omnichannel Performance
Shoppers today simply don't shop at the store anymore. They prefer shopping through an e-commerce channel, or simply ordering online and picking up at the store (BOPIS). Having complete access to inventory and stock is crucial for retailers to ensure a robust shopping experience for customers. Without RFID technology, retailers lack the advantage of "real-time" inventory information which prevents them from being able to complete purchases made online (in-store) or provide services like 'buy online, pick up in-store' ('BOPIS'). This results in lost sales opportunities and bad customer experience.
f. Decreased Customer Satisfaction
RFID enables faster checkout, accurate inventory information, and personalized experiences unlocked by virtual fitting rooms or self-guided navigation through the store. Retailers not adopting RFID are lagging in the latest shopping trends and eventually not meeting evolving customer expectations. Customers don’t want to wait hours in shopping queues anymore. RFID, through self-checkout systems, solves this problem and boosts sales.
Why Retailers Are Not Investing in RFID?
So what are the reasons behind retailers not adopting RFID, and not investing in developing digital infrastructure to capture data in warehouses, supply chains, and retail stores? Investing in RFID requires detailed research and proven results. Piloting RFID with limited stores is an option that many retailers use. When Walmart started with RFID back in the early 2000s, it started with only a few Walmart stores in Ohio.
Some of the main reasons behind retailers not adopting RFID are as follows:
1.RFID tags and readers are significantly costlier than barcode labels and scanners that retailers have been using.
2. Adopting RFID systems necessitates integrating readers, tags, inventory management systems, networks, and building wiring, which can be resource-intensive.
3. Data collision and RFID interference a critical issues in high-volume scanning environments.
4. RFID adoption often requires significant changes to existing processes, including updates to inventory management software, data collection methods, and necessary staff training.
5. There are certain implementation challenges as well as businesses need to understand exact needs, and how the technology can deliver on those requirements. Understanding RFID technology is also a challenge for businesses.
To conclude, the choice to abstain from using RFID technology in the retail sector is costly. With the changing retail landscape and customer expectations and competition, RFID has become a clear-cut distinction between growing retailers and loss-making ones. Retailers who procrastinate or shy away from RFID adoption suffer from unseen losses due to inventory accuracy, shoplifting, operational inefficiency, and bad customer experience. As the competitive and complex nature of the retail environment increases, the actual cost of not employing RFID only gets larger.
Choosing EnCstore as your RFID partner means you are opting for proven technology and expertise with coordinated support for your retail objectives. Our end-to-end solutions will provide improved inventory accuracy, reduced retail loss, and unparalleled customer experience, regardless of size and scale. Get in touch for RFID-based retail inventory solutions, and RFID/barcode hardware such as tags, readers, antennas, mobile computers, and printers, available at competitive prices.
Frequently Asked Questions on RFID and Retail
1.How does RFID help to reduce theft and inventory shrinkage?
RFID examines the movement of tagged items in real time, making it easier to fetch, investigate, and prevent theft or misplacement which results in reduced shrinkage.
2. What is RFID and how does it work in retail?
Radio Frequency Identification (RFID) is a technology that uses radio frequency (RF) signals to track and fetch items throughout the process from the warehouse to the sales floor. Individual RFID tags are attached to each item, storing data such as SKU numbers, product descriptions, and inventory levels. These tags can be scanned individually by RFID readers without requiring line-of-sight, unlike traditional barcodes, enabling faster and more accurate inventory tracking.
3. Is RFID suitable for large retail chains only, or can small stores benefit too?
RFID technology is scalable and customizable. It works for every industry in every possible aspect. EnCstore offers solutions for businesses of all sizes, from single store to large chains, ensuring every retailer can benefit from improved efficiency and accuracy.
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