Just before Checkpoint Systems’ business development manager Scott Reithmeier addressed attendees at the Aptos Engage 2023 conference last week, chief information officers from Crocs and JD Sports offered a lukewarm response to whether they thought RFID was “hot or not.”
But as Reithmeier pointed out in his presentation, retailers taking only manual, annual accounts of their inventory average 65 percent accuracy, while those using RFID technology can expect 95-98 percent accuracy, reporting even weekly. Citing a 2021 McKinsey study, Reithmeier said retailers can expect an ROI of 1 percent profit for every 3 percent of accuracy, which could be tens of millions of dollars, depending on a company’s scale.
So given those benefits, why isn’t retail completely on fire for RFID, a technology American Eagle Outfitters recently deployed in 500 stores?
“I think the tech is pretty proven and it’s pretty vendor agnostic so it’s not like you’re going to make the wrong choice in vendors,” Reithmeier told Sourcing Journal following his presentation. “But once you get into it, it’s the compliance piece in stores.”
Reithmeier said getting stores to rally around a pilot program with key KPIs and cross-functional leadership often makes RFID implementation seem like too much trouble, despite its intrinsic value.
“If you’re not all bought in, it can become difficult,” he said. “Everyone has competing priorities so you have to get everyone to agree [inventory] is a top priority and to solve it and use RFID to do it, then it will be successful.”
Another barrier to entry Reithmeier pointed out was expense. He explained that in 2004, not many retailers could afford to spend the $500 million that Walmart invested in RFID tagging inventory.
“At the time, tags were really expensive and the tech was expensive as well—heavy infrastructure and it wasn’t cloud-based,” Reithmeier said. “The next 10 years were a bit of a dark period, just little movements and not a whole lot of adoption, then really, over the last seven to eight years, tag costs have come down about 80 percent and there’s a cloud-based solution as well.”
According to the Checkpoint executive, by 2025, the price per tag is expected to drop to just 5 cents, as e-commerce continues to grow so much so that even customers who intend to shop in-store increasingly check a store’s inventory online before stepping out the door.
“It’s critical not to disappoint customers and it’s devastating when you do because you lose that customer loyalty,” Reithmeier said. “So your inventory has to be accurate across sales channels.”
Reithmeier said a major misconception about implementing RFID is that it’s an all-or-nothing proposition.
“What we see is that’s not really realistic,” Reithmeier said. “For multi-brand re-sellers who have, say, Nike as their biggest seller—use [Nike’s] tag and not worry about the 30 percent of the store that’s not tagged; worry about the stuff that really sells for you anyway.”
Two major tailwinds working in RFID’s favor are headlines about sustainability and shoplifting prevention, both of which RFID tags can address.
“From a sustainability standpoint, the more you can reduce waste, reduce output, the better, and RFID gives you better control of inventory, so you have less products in the store, actually making less [while] selling more—what better way to do sustainability than that?” Reithmeier said. “The shoplifting issue is obviously huge in this country, and while RFID won’t stop people from going out the doors in the first place, at least this can get you real-time visibility about what’s actually gone out my door… it can help me build a case, from a criminal perspective, as well.”
By the time the 2030 deadline for the United Nations’ 17 sustainability goals rolls around, Reithmeier hopes RFID will be just one of many tech solutions that’s table stakes for retail.
“Retailers are going to start using that competitive advantage right now,” he said. “RFID is compatible with AI and I think in the emerging tech space, as well, there are several other technologies that can do a lot of the same thing.”
Reithmeier imagines the store of the future accounting for its inventory with about 30 percent Bluetooth, 30 percent RFID and the rest from a technology that perhaps has yet to be identified.
“I’m gonna need a software technology that can manage multiple central technologies, provide real-time insights of data on where my inventory is, what I have and be able to communicate that back to my workers,” Reithmeier said.