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RFID in Retail: Strong Growth Expected in 2017

RFID technology made big strides in 2016. The apparel sector continued to lead the charge on tagging, with approximately 4.6 billion clothing items carrying RFID tags. Cosmetics, electronics and alcohol also began to see heavier tag usage, as well as automotive supplies, sporting goods and small appliances. Cosmetics and jewelry represent a burgeoning market, as tag innovation overcomes prior tagging obstacles around metals and small form factors.

It appears that 2017 holds even more promise. According to research firm IDTechEx, the 4.6 billion tags used last year represents only about 10 percent of the entire apparel market, leaving much room for growth. Some estimates put RFID saturation for apparel as low as 4 percent of all items, leaving even more room for expansion. In total, there are 40 billion taggable apparel items, indicating the giant potential for the market.

In a survey of 60 retailers with revenues of at least $500 million, 73 percent said that have deployed or are piloting RFID, according to consulting firm Kurt Salmon. That number is more than double the 34 percent from its 2014 study.

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Perhaps the biggest sign of RFID’s promise in retail occurred last year when Macy’s announced that every product it sells will carry an RFID tag by the end of 2017. More than 60 percent of products sold by the retailer currently carry RFID tags.

“2017 is going to be an interesting year,” says Bill Hardgrave, worldwide RFID expert and Dean of the Harbert College of Business at Auburn University. “The action we have seen over the last 24 months, which has been very healthy, is only going to accelerate. Adoption is going to continue and source tagging is a big driver.”

Source: Kurt Salmon RFID in Retail Survey, 2016

Aside from Macy’s, Marks & Spencer and Decathlon both had major RFID expansions last year. RFID tag providers Avery Dennison, Impinj and NXP all report strong growth in tag sales, with Avery Dennison expecting 30 percent growth for RFID in 2016, despite a slow apparel market in the U.S. Late last year Avery saw a Tier 1 client move from pilot into early adoption, as well as a couple of small specialty retailers that moved from business case to pilot or pilot to adoption.

“We’ll not only see the breadth of retailers increase this year, but we’ll also see the depth of the usage increase,” says Hardgrave. “So a retailer that has been dabbling in a category or two, will expand into other departments. It’s all driven by inventory accuracy and retailers realize they can’t get good inventory accuracy without it.”

Aside from increasing inventory accuracy from as low as 65 percent to 98 percent or higher, retailers benefit from RFID in a number of ways, according to the Platt Retail Institute, which outlined the following results from research conducted with Macy’s:

Display Compliance: The use of RFID has substantially improved the rate of display compliance. The rate of items not being displayed was found to be in the 4 to 6 percent range, versus a self-reported rate of 30 percent prior to the implementation of RFID.

Customer Satisfaction: Overall customer satisfaction, as well as the customers’ ability to “find all items,” improved at a faster rate for the Women’s Shoe Department (WSD) than Macy’s stores as a whole. This may be attributable, in part, to improved display compliance rates, as well as the fact that store associates are spending more time with customers and less time taking inventories.

Sales and Markdown Indications: Based on the limited data provided, a definitive link between the use of RFID and unit sales and markdowns in the WSD cannot be established. However, there is an indication that 1 percent more sales were made at full price, and 2.6 percent more sales were made at full price and after the first markdown during the post-RFID deployment period than for the comparable non-deployment period.

RFID tags can also work as a theft deterrent, with passive tags replacing hard security tags in some cases. In addition, RFID allows retailers to engage with consumers and to learn about their buying habits. Retailers can gauge which products move into the fitting room and on to the checkout desk, helping to form data-driven analysis on why some product don’t sell – be it style, pricing or out-of-stocks.

However, the future is just starting to develop when it comes to disrupting retail concepts such as Amazon Go, which allows customers to enter a concept store in Seattle and purchase items without having to physically pay for them. In this case, Amazon utilizes sensor fusion – a combination of technologies like RFID, cameras and other sensor technology – to use data from all sources to solve a problem. In this case, RFID represents just one data point. Justin Patton, Director of the RFID Lab at Auburn, says the end goal is to have RFID accepted as a data capture tool that feeds into broader sensor fusion solutions.

“This is a huge leap forward in retail technology,” says Patton. “The idea is taking a lot of different types of sensors and combining them together in a retail store environment. RFID isn’t a destination, but a vehicle to get there.  “Another thing we are seeing is a shift from the focus of RFID being on store operations and loss prevention to the start of eliminating the checkout process. Retailers are heavily focused on the customer experience.”

That’s exactly what high-end fashion retailer Rebecca Minkoff is attempting to do by using an RFID-enabled solution to enable automated checkout at its flagship store in Soho. Rebecca Minkoff has partnered with technology start-up QueueHop to  re-imagine the retail store checkout experience. Rebecca Minkoff has widely deployed RFID in other use cases, including RFID mirrors and fitting rooms to engage with consumers. The redesigned checkout experience in SoHo went live in December.

While self-checkout technology has existed for years across the consumer landscape (i.e. grocery stores), fashion retail has historically been hesitant to embrace the technology because of potential theft implications on higher ticketed items. QueueHop re-engineered the security tag to unlock the moment a payment is made via a shopper’s phone or a QueueHop self-checkout kiosk.

The technology empowers customers to be in control of their shopping experience, while effectively reducing lines, cart abandonment and the time associates need to spend at checkout. Rebecca Minkoff looks to redefine the traditional checkout format and bring back foot traffic to physical retail with the digitized experience. The solution is another way for a consumer, who may be intimidated by a shopping environment or may just not want to engage with store staff, to be in control of their shopping experience.

“I don’t know if which model will be the go-to solution, but we’ll see those kinds of things pop up in 2017,” says Hardgrave. “Some retailers will be aggressive early in the year so they know if that model works well in advance of the holiday season.”

 

 

 

 

 

 

 

 

 

 

 

 

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