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Top 10 Developments in Retail RFID in 2011

As the year winds down, it’s safe to say that 2011 was a very good year for RFID. The technology is being deployed in more industries, use cases continue to grow, return-on-investment is more attractive, and the technology is becoming widely accepted as evidenced by a dramatic drop in legislation aimed at curbing its use.

This year saw major advancements in the use of RFID in the medical and healthcare sectors, as well as transportation, manufacturing, finance and agriculture.

But the year’s biggest wins came in retail, where item level tagging, mostly of apparel items, is skyrocketing. VDC Research says that 2.1 billion tags were used in retail in 2011, a number that will grow to 40 billion in 2015.

The top 10 list appears in chronological order.

1. Retailers meet at NRF; predict major rollouts by 2012 (January, 2011)

Significance: When more than 100 retailers, suppliers, technology providers and members of academia met during the Item Level RFID Initiative meeting held at NRF, it represented the first time that competing retailers gathered in the same room to collaboratively discuss the acceleration of RFID.

Background: The immediate goal of the group, which was formed in June 2010 and formally announced in November 2010, is to further accelerate item level tagging by publishing industry guidelines and business case roadmaps for return on investment for retailers and suppliers.

“The technology is here and it’s pretty exciting what we will have the ability to do,” Cynthia DiPietrantonio, chief operations officer for Jones Apparel, said during the meeting.

“No matter how good the utilization of the bar code is, it is woefully short of what you can accomplish with RFID technology,” said Peter Longo, president of logistics and operations for Macy’s.

The collaboration between Walmart, JC Penney, Kohls, Jones Apparel, Macy’s, Dillards, Levi Strauss and others in the Item Level RFID Initiative will likely lead to the biggest retail supply chain transformation since the bar code.

2. Retailers: RFID will ultimately benefit the consumer (February, 2011)

Significance: Although retailers stand to reap huge operational gains from deploying RFID, it was refreshing to hear retail execs acknowledge the gains that the consumer will see and the consumer satisfaction derived from RFID.

Background: At the end of the day, retailers hope it is the customer that gains the ultimate benefit and will drive the adoption of item level RFID tagging in retail. As customers become busier and more connected through mobile devices, they will embrace retailers who have inventory where they want it, when they want it, and priced how they want it.

“This is now literally a customer-centric initiative,” says Peter Longo, president of logistics and operations for Macy’s. “It’s not a jazzy technology initiative that consultants are working on. It’s now a customer mandate. The [retailers] that get this and move on it quickly will be the organizations that consumers reward. Those that are laggards or disbelievers will be the organizations that the consumer will punish.”

3. Impinj files for IPO (April, 2011)

Significance: Impinj is major transponder supplier for the retail apparel item level movement. Although Impinj has yet to IPO, preferring instead to wait for more stable market conditions, its plan to test the public markets was viewed as another verification of the technology. Barring a severe recession or global financial crisis, Impinj will likely debut on Wall Street in Q1 or Q2 of 2012.

Background: Impinj focuses exclusively on UHF RFID solutions, which is the fastest growing segment of the RFID market. UHF Gen2 systems are ideally suited for high-volume, item-level applications that require low-cost, consumable tags, such as retail inventory management, pharmaceutical authentication and airline baggage tracking.

From 2009 to 2010, unit sales of the Monza UHF Gen2 tag ICs increased by 279 percent. Impinj is the market leader in UHF Gen2 tag ICs, reader ICs and stationary readers. According to VDC, Impinj owns 60 percent of the tag IC market, 86 percent of the reader IC market and a 25 percent share of the stationary reader market.

Impinj estimates that its technology enables more than 70 percent of the UHF Gen2 reader market when you combine the share of its Speedway reader with that of other readers based on its Indy reader ICs.

4. Retailer Gerry Weber tags all 28M goods at item level; pursues RFID as EAS (May 2011)

Significance: The retailer invested about $2.8 million to tag all 28 million units it produces and sells. CIO Christian Grone notes that the tagging represents an 8-9 cent premium above the 4-7 cent (Euro) cost to produce the conventional care label that is affixed to every garment. Gerry Weber recently concluded an additional investment of about $2.7 million Euros to roll out RFID, and expects payback in two years.

Background: Gerry Weber has been a driving force behind item level retail tagging. The German retail chain has taken an aggressive stance on RFID and became the first overseas retailer to source-tag all of its products earlier this year when it began tagging all 28 million items that travel through its supply chain.

Gerry Weber has added incentive to tag at the source of manufacture. In an interview with RFID 24-7, CIO Christian von Grone explained that in phase two of its RFID program, Gerry Weber will extend the use of RFID to improve front of store and back store operations.

Gerry Weber is also making its RFID software interface available to all apparel manufacturers, and expects utilize cutting edge RFID systems to provide a near real-time view of inventory and to allow customers to shop with interactive fitting rooms.

Grone says that Gerry Weber is the first company in Germany, and possibly in Europe, to embed RFID tags into the garment care labels that are sewn into apparel items individually. One single label provides fabric care instructions, track and trace, and the electronic product code to manage inventory.

The retailer, which operates more than 400 stores and 2,000 shop-in-shop outlets, decided to tag of all its garments so it could gain greater supply chain visibility, in addition to the store level benefits of RFID.

5. Walmart delays RFID deployment; tag predictions drop for 2011 (June, 2011)

Significance: Walmart slowed its deployment to allow its supply chain infrastructure to catch up with its rollout. However, the delay is expected to be only a slight bump on the way to a full deployment.

Background: When retailers met at the NRF show in New York in January, they were very bullish on item level RFID in announcing the Item Level RFID Initiative.

However, since that time, Wal-Mart’s deployment for women’s apparel has been delayed by approximately two quarters, shifting demand to Q4 2011 and Q1 2012. VDC Research downgraded its transponder forecast for the retail sector to 2.1 billion for 2011.

According to VDC, the delay pertains to ensuring that the supply chain has adequate support, time and resources for a successful deployment. It appears Wal-Mart does not want to repeat the previous issues and challenges they encountered when implementing RFID in their supply chain.

6. VICS Item Level RFID Initiative receives major funding from industry vendors (June, 2011)

Significance: By signing on as Platinum sponsorsImpinjMotorola, Tyco, Avery-Dennison and Checkpoint Systems added much needed funding to the Item Level RFID Initiative.

Background: ILRI, which operates under the wing of standards group VICS, operated on a budget of about $40,000 in 2010. Behind its new Platinum sponsors, that budget will be greatly expanded this year and next, allowing the group to accelerate development of guidelines and standards, as well as promote the group to a broader set of retailers and vendors.

ILRI will also be seeking Gold and Silver sponsorships. The move makes sense for suppliers like Impinj and Motorola, who have the most to gain by a faster adoption curve.

In other ILRI news, the Retail Council of Canada has become a member of the group, representing the first foreign interest to be granted membership. Retailers like Gerry Weber in Germany have already reached out to join the group

7. RFID in retail will exceed $3.2B in 2015 (July 2011)

Significance: Retail accounted for less than 10 percent of all tag revenues in 2010; however, by 2015, the retail sector is expected to represent nearly 30 percent of total global revenues.

Background: Global demand for RFID tags exceeded $1.9 billion in 2010, a value that is expected to more than triple within the next five years. Unit volumes are anticipated to increase more than 10-fold during the same forecast period, growing from 4.3 billion tags in 2010 to more than 47 billion by 2015.

According to VDC Research, the trends behind this market growth include, but are not limited to:

Scaling of existing projects in a diversity of markets and applications

Decreased pilot-to-deployment time and an increased level of commitment

A deeper understanding of the technology’s value propositions and limitations

More attractive price/performance levels and simplified investment justification

Deep integration and continued convergence with legacy systems

A continued push for adoption throughout value chains

Although approximately 50 percent of all global transponder revenues are derived from two verticals — transportation and government (primary applications are supply chain, asset tracking, security/access control and ID) — the rapid evolution and scaling within the retail sector is expected to dramatically alter the vertical landscape.

8. Macy’s expands item level tagging – will tag $8B of inventory (September, 2011)

Significance: Macy’s announcement establishes the retailer as an item level pioneer, as it will be among the first retailers to implement RFID on a broad national scale. It also re-established momentum for retail RFID after Walmart’s summer slowdown.

Background: Macy’s announced that it will begin to roll out item level tagging at all Macy’s and Bloomingdale’s stores nationwide by Q3 of next year to count size-intensive replenishment goods — items regularly stocked and automatically resupplied as they are sold to customers.

The announcement represents about 30 percent of the company’s sales of $25 billion, meaning that Macy’s will tag approximately $8 billion worth of inventory. Additionally, Macys will use RFID to precisely track replenishment goods on-hand by size, color and style at all stores by the fall of 2013. Macy’s move is likely to push tens of millions of tags – probably more — into the retail supply chain.

The initial 2012 launch of RFID will include size-intensive replenishment categories such as men’s furnishings, intimate apparel, men’s slacks, denim and women’s shoes in all stores nationwide. Macy’s and Bloomingdale’s private brands are included in the initiative. All SKUs will be included by fall of 2013.

9. JC Penney reveals storewide rollout and full deployment by 2015 (October, 2011)

Significance: Prior to this announcement, Penney was only on record as being deployed in a trial at 33 stores. JCP adds momentum to the item level train by confirming it is shipping RFID tagged apparel to 1,100 stores.

Background: JC Penney revealed it is pushing RFID-tagged jeans, shoes and bras to all 1,100 stores. Previously, the retailer was on record only as piloting the technology at 33 stores. Frank Cassara, vice president of operations for the retailer, said that JCP stores already equipped with RFID have not seen a double-digit sales increase from the technology. However, he said deployment is still well worth the effort.

That news followed Macy’s late September announcement that it will begin to roll out item level tagging at all stores by Q3 of next year. Macy’s will tag 30 percent of the company’s SKUs, representing approximately $8 billion worth of inventory.

Between Macy’s, JCPenney, Walmart and other tier two deployments, more than 5,000 retail outlets in the U.S. will receive RFID-tagged product  during 2012. That number could go much higher as retailers operating in  stealth mode make their deployments public.

“We’re starting to see massive growth in apparel tagging,” said Patrick Javick, vice president of industry engagement at GS1 US. “There is a lot of activity we know about that we are just not authorized to speak about. The interest in apparel from other countries has skyrocketed.”

10. Retailers begin to view RFID not just an inventory management tool but as a security strategy. (November, 2011)

Significance: Retailers like Walmart and Macy’s have always viewed RFID as a way to increase supply chain visibility and in-store inventory, leading to fewer out-of-stocks and increased sales. Now retailers are recognizing RFID as a loss prevention solution.

Background: In a study produced by the Center for Retail Research, 19.3 percent of retailers saw the main use of RFID as a tool to enhance loss prevention. Another 32 report that the main drivers behind RFID are a combination of improved inventory visibility and enhanced loss prevention. In total, more than half of retailers believe that loss prevention is at least one reason to deploy RFID through their supply chain and store network.

According to the Center for Retail Research, global shrink increased 6.6 percent over the past year to more than $119 billion, a figure that represents 1.45 percent of Global retail sales.

The Center for Retail Research says that dishonest employees were responsible for more than one-third ($41.7 billion ) of shrink. The problem is even greater for retailers in the Americas, where employee theft represents 44 percent of shrink in North America and 42.6 percent in Latin America.

By increasing visibility into the entire retail supply chain, RFID is slowly starting to have an impact on theft, especially at the employee level.

“RFID has always been pretty closely aligned with electronic article surveillance (EAS) because the two technologies look quite alike,” Randy Dunn, sales director at Tyco Retail Solutions, said in a recent webcast hosted by the VICS Item Level RFID Initiative. “What we are seeing with some of the earliest RFID deployments is that there is a potential for RFID and EAS to converge.

 

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