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How to establish an RFID strategy
A number of major retailers abroad have started to engage RFID technology to better serve the connected customer. In the last of this series, Chris Warry looks at how Australia compares as well as the steps to adopting the technology.
Adoption of RFID technology here in Australia is fairly nascent in comparison to the rest of the world – and this needs to change, given the increasing level of international competition in this market.
It’s well documented that the Australian retail industry hasn’t traditionally been at the forefront of emerging trends and technologies, and it appears to be taking the customary ‘suck it and see’ approach to RFID – a technology for identifying and tracking inventory – preferring to keep an eye on developments in the northern hemisphere before seriously considering it for future plans.
With increasing globalisation, Australian retailers need to move up the RFID adoption curve before they find themselves at a competitive disadvantage against offshore organisations that, as part of global roll-outs, implement the technology in their Australian e-commerce and bricks-and-mortar operations.
One of the most telling insights from the list of early adopters that have spent the last few years trailblazing is that they’re not pulling back, which only points to more and more adopters following suit and a charge towards the tipping point.
While there haven’t been any public announcements from Australian retailers on RFID adoption to rival what we’ve seen coming out of the US and Europe, we know that a number of retailers here have it on their agenda and some are already planning, or in the process of undertaking, pilot schemes.
Should your organisation be actively considering an RFID strategy?
If you’re an apparel retailer, then it’s a resounding ‘yes’.
In its Apparel RFID 2013-2023 report, market research firm IDTechEx stated that “the RFID tagging of apparel is now the largest and fastest growing application of RFID in retailing”. According to its analysis, the systems and tag business concerned with apparel RFID will grow at double the rate of the overall RFID market over the next ten years. In its November/December 2o14 edition, online publication RFID Journal stated that “new RFID apparel retail deployments are being announced monthly, indicating that the sector is moving toward a tipping point.”
In a previous post, I listed organisations that are pushing ahead with RFID and there certainly appears to be a heavy bias towards apparel retailers. Also of note is the high percentage of own-brand products within the product range of these organisations.
The enthusiastic adoption of RFID makes a lot of sense when you consider specific challenges in apparel retail, resulting from the complicated nature of the merchandise such as a varied mix of fast and slow items and multiple options of the one product (sizes, colours). The sales and productivity benefits are exemplified when thinking about RFID’s ability to help apparel retailers understand instantly the variations of the product that are out of stock, enable them to locate that stock instantly in the network to ensure quick availability and significantly cut the time to find and count that stock within the store. Also, tagging at item level requires application at the point of manufacture which will be easier to implement for retailers that have greater control.
What if you’re not an apparel retailer? If the product mix shares similar complications to apparel, is high value/high margin, or if you’re banking on an omnichannel strategy to drive competitive advantage for your business, then the advice is to start exploring RFID.
The grocery retail segment presents a slightly different picture. The two big players carry a high percentage of branded products, so RFID adoption will take a lot longer given an industry solution would be required. But as Aldi continues to grow strongly and recent strategic announcements1 point towards high focus on the growth of private label products and omnichannel capability, grocery retailers will be keeping a keen eye on developments.
Navigating the RFID journey
Another telling insight from the list of early adopters is a near-universal approach of starting with an announcement that testing and piloting of RFID is under way. This is often followed at differing intervals with further announcements on scaled deployment of the technology.
While the timeframe for RFID implementation varies – for example, some early adopters have taken five or six years from pilots to large-scale rollout, while some recent adopters have reached that in two years – the first step in the journey doesn’t.
For those looking to get serious with RFID, the first stage is to investigate the opportunity RFID provides and experiment with the technology. This stage involves the following key steps:
- Establish an RFID working group made up of cross-functional representatives. It should not be an IT led initiative or solely a business led initiative but a combined team.
- Learn the basics of RFID and assess the problems or opportunities RFID could potentially solve or realise.
- Engage RFID vendors and other retailers to further build knowledge and get hands-on experience (this may include setting up a lab and purchasing tags and interrogators).
- Begin to define potential business applications or use cases for RFID that will start to inform the pilot design (including understanding high-level operational and systemic requirements and the benefits associated with each application).
- Assess where RFID sits on the strategic plans of the business and agree and establish a vision for a possible RFID desired solution.
- Make a go/no go decision to pilot.
The technology that was set to become ‘the next big thing’, RFID finally seems to making its mark. While all Australian retailers should keep an eye on developments, it is the apparel retailers that must be particularly vigilant.
So to the question everyone is asking, who in Australia will take the RFID leap first? We await the answer with great interest.
The previous articles in this series can be found on Digital Pulse here and here.
References
- http://www.skynews.com.au/business/business/market/2015/05/20/coles-to-offer-more-own-brand-products.html
- https://www.insideretail.com.au/blog/2015/05/06/woolworths-reveals-growth-strategy/
- http://www.news.com.au/finance/business/retail/coles-ramps-up-online-battle-with-pick-and-pack-technology/news-story/df2a3da6acdd969703c24922534f7188
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