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Update: Russian Store of the Future will tag 1.5M items a month

In November RFID 24-7 published an article about an RFID-enabled grocery store pilot in Russia dubbed the Store of the Future. Few details about the project were coming out of Russia at the time, but we felt it was important to get the bare details out to the RFID community.

Over the past several weeks RFID 24-7 has conducted more research on the Store of the Future, which is a partnership between X5 Retail Group, RUSNANO and OJSC RTI. X5 Retail Group is the leading food retailer in Moscow and St. Petersburg, operating more than 3,400 stores. Nordic ID has already signed on as a hardware supplier for the project. The Store of the Future initiative is funded by $11.5 million over three years.

The Store of the Future pilot location is at the X5 headquarters in Moscow. The store is not open to the public. Only employees of X5 Retail Group and their guests can make purchases at the store. The 2,500-square-foot pilot store stocks more than 5,300 grocery items, all of which carry RFID tags.

Future Store, RFID in retail, item level tagging

The Future Store in Moscow is tagging more than 5,000 grocery items.

Tag demand for the store could reach 1.5 million units per month, or 18 million annually, by the end of 2013. Of course, tag volumes would ramp up significantly when the project is expanded. Based on the pilot results, X5 hopes to roll out a commercial Store of the Future by the end of 2013. The company intends to begin active promotion of RFID technology through the entire supply chain, starting from the retailer, wholesalers, logistic companies and manufacturers.

One of the main goals for the Store of the Future is to test self-checkout at the grocery store level. For almost two months, most of the X5 Retail Group office staff has regularly made purchases at the store. Nearly half of all purchases are made without the help of store employees.

“We are certain that this is the first step toward the universal application of RFID technology in the retail industry,” says Georgiy Kolpachev, managing director of RUSNANO, a Russian goverment-owned entity that invests in nanotechnology projects. “The introduction of the new technology decreases expenses for all market participants and demonstrates the benefits of cross industry collaboration to improve processes and results.”

RFID tags facilitate product monitoring from the vendor, to X5’s distribution centers and then to the retail floor at the Store of the Future, known as the Perekrestok supermarket in Moscow. Because all products are tagged, store personnel can better control product expiration dates, collect information on quantity and assortment on the shelves to limit out-of-stocks, and prevent the delivery and acceptance of pirated products.

The benefits are plentiful for customers who are assured of product authentication and receive a faster checkout. RFID allows the customer to scan all of the selected products at the same time and instantly calculate an electronic bill. The Future Store is also looking at RFID to prevent theft and shrinkage.

Upon selecting products from the store shelf, the shopper puts them into a basket and proceeds to the automated cash pay-office. After loading the basket with the selected products into a special scanner compartment, the customer inserts the special client card into the readout device and the terminal screen displays the list of selected products and the total price. The products are scanned simultaneously, which significantly decreases checkout times. Payment is taken at a special terminal that accepts cash and credit cards.

Sergey Ageev, technical director for the Store of the Future, says that although much of the focus on RFID in retail has been on the apparel sector, tremendous advantages exist for the grocery industry.

“One of the major advantages of item level RFID for food retail is the possibility of reading all the tags in a group simultaneously, without the need of making contact with every product unit individually,” he says. “The more goods there are in a shopping cart, the bigger is the advantage of RFID in comparison with a bar code. In fashion retail this benefit is not that important. The process of self-service that we have offered in our pilot store reduces shopping time, makes it more comfortable, increases the throughput of checkout area, allows customers making purchases without the cashier.”

RFID received much attention in the grocery industry during the early days of the technology’s adoption curve. However, grocery retailers realized that the technology was too costly to tag goods like bottled water that sell for less than a dollar. The wide variety of liquids, foils and frozen goods carried by grocery retailers also limited early efforts to deploy RFID in retail. Ageev says those barriers have been removed, and that pricing continues to make the Future Store initiative more attractive.

“We are familiar with such point of view; and of course, such opinion has a right for existence today,” Ageev says or pricing concerns. “At the same time, the dynamic development of the RFID technology shows that cheap, small sized tags optimized in performance for a particular product can be created in the coming years. And the price of such tag (when it is put during production) might be revolutionary low at 1.5 rubles (5 cents) per tag or even lower.”

Since plans for the Store of the Future were launched, tag prices have already dropped from 12 rubles, (40 cents) in 2010, to 23 cents in 2011. Last year the tags used by the Future Store cost 13 cents each. “If the downward trend of the tag price continues,” says Ageev, “the economic attractiveness of tagging low-cost, small-scale goods will increase.”

Ageev says that there have been several key learnings from the project already, including that RFID appears to be a workable solution for a much greater part of the supermarket product range than initially expected. In 2011, Store of the Future leaders expected to tag only about one-third of the products in the store. However, the pilot has already demonstrated that the number products able to be successfully tagged exceeds 90 percent.

In addition, the complete self-service checkout system has received high remarks from shoppers. Store management is also noticing that the appeal of the purchasing process in the RFID store can influence consumer shopping habits. For instance, some clients say that they have changed their choice of the usual items that are not yet available in the RFID shop for similar items that can be bought in the RFID-enabled store.

“X5 has taken a leading role in promoting and applying the most advanced technology in the food retail industry,” says Stephan DuCharme, acting CEO at X5 Retail Group N.V. “We are grateful to our partners in the joint project for their hard work and contributions, which have resulted in the successful creation of the Store of the Future. We hope that this unique and improved shopping experience will soon be available to more of X5’s customers.”

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