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RFID beyond retail apparel; the next big opportunities

Retail apparel tagging is trailblazing a path for overall RFID adoption. For every retailer like Macy’s that has gone public with its plan for deploying RFID, there are likely two more in stealth mode, preparing for a full rollout.

At a recent RFID event, tag vendors revealed that there are “hundreds of millions” of tags in the pipeline that they can’t discuss yet. And research firm IDTechEx says that two major retailers will buy a combined 500 million tags annually.

In a recent interview with RFID 24-7, Justin Patton, the managing director of the RFID Research Center at the University of Arkansas, went so far as to say that educational efforts are complete when it comes to proving the use case for apparel tagging.

“We feel like apparel is pretty much done in terms of trying to prove the business value to retailers,” Patton said.

If that’s the case, what are the next big markets for RFID in retail and other industries?

The apparel tagging movement began with apparel, but quickly spread to goods like women’s lingerie and shoes.

“Retailers are still focusing heavily on apparel, but it’s gone from denim to women’s lingerie, dress shirts, suits and shoes,” says Patrick Javick, vice president of retail apparel and general merchandise for standards group GS1 US. “You’re starting to see retailers move into the adjacent categories.”

Retailers are evaluating rolling out RFID to new product categories based on high turnover, theft and loss prevention, price point and other factors. Regional sporting goods store Mammoth, for example, just unveiled an item-level tagging program for all products valued at more than $3. The chain operates three stores in Canada.

Department stores are expected to move quickly into tagging items like electronics, furniture (Macy’s has already tackled this one), lawn and garden equipment and tools, and automotive goods like batteries and tires. Although liquor and tobacco tagging is expanding rapidly in Asia, those items are not expected to see rapid growth in North America because preventing counterfeiting is not a strong business case as it is overseas.

“When you think about a department store that carries multiple product categories, once the RFID infrastructure is in place it becomes easier to add more categories because overhead costs have been absorbed,” says Bill Hardgrave, dean of the College of Business at Auburn University and the founder of the RFID Research Center.

Of course, pricing still remains a major factor for those deploying chain-wide rollouts or major RFID infrastructure. The cost of deployment can vary greatly based on the retailer’s goal. Starting out with a few handheld readers in a mobile solution can be done relatively inexpensively, but won’t result in huge business process changes.

Costs add up quickly when you integrate RFID infrastructure to include fixed point of entry and point of exit, point-of-sale functionality, and upgrading wireless capabilities, and could exceed $250,000 or more per store.

“It can be tough to approach a board and say I need $250,000 and by the way we have 50 stores,” says Javick. “Those numbers don’t get swept under the table – but retailers and brands should understand that this investment will drastically improve the way they do business with their customers.”

However, the investment can be extremely worthwhile if it presents retailers with new ways to merchandise items. By RFID-enabling fitting rooms, for example, retailers gain insight into which products were taken into the fitting room, which ones were sold and which garments were returned to the rack. Gathering customer data can help retailers to better understand buying patterns and why some products are better sellers than others.

And by adding RFID and loss prevention capabilities to high-value items like jewelry and cosmetics, retailers can better merchandise those products, resulting in greater sales.

“A lot of the dressing room applications are still in the future, but it’s a question of how big do you want to go,” says Javick. “Do you want to get started with low hanging fruit, or do you want to go big picture because you have identified a true business need and you want to be that leading company that changes the way retailers merchandise and operate their stores.”

Outside the retail setting, it’s expected that food safety and quality will be the next major area to see deployment, potentially followed by healthcare and, potentially, pharmaceuticals. The adoption of RFID and temperature sensors in the food sector could pave the way for similar solutions in pharma, which has seen numerous starts and re-starts when it comes to deploying RFID.

A recent white paper produced by ChainLink Research says that the adoption of carton-level tagging using temperature-sensing RFID for pharmaceuticals could be nearing an inflection point, such as item level tagging in apparel. Recent RFID solutions now enable pharmaceutical manufacturers and couriers to change how they manage cold chain operations. ChainLink says that Panalpina already tracks temperature-sensitive shipments on five different routes out of its Luxembourg hub. Abbott Labs, DDN, DB Schenker, Parelex and others are using RFID to track the temperature of drugs.

Meanwhile, healthcare continues to embrace RFID for asset tracking, patient and staff monitoring, and other apps that enhance workflow and patient safety. The healthcare sector, along with retail, is expected to benefit from today’s announcement of a $32 million RFID research initiative, funded in part by Tagsys.

ABI Research reports that “modernizing RFID applications” like asset tracking and baggage and cargo tracking are expected to grow twice as fast as traditional markets like animal ID and auto access cards. Asset tracking, supply chain management, baggage and cargo tracking, RTLS, contactless payment, and ticketing are all areas in which businesses are looking to operate in a quicker, smarter, and more secure manner. As a result, those categories will grow by $4.5 billion by 2017, driving the total market to $14 billion by 2017.

“Despite the general economic malaise affecting much of the world, solutions and technologies that can deliver savings and provide wider benefit will attract investment,” says ABI RFID practice director John Devlin. “The business model and use case for RFID is now being better understood and real-world ROI can be demonstrated in a growing number of instances.”

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