Technical ReportPDF Available

Measuring the Impact of RFID in Retailing: Keys Lessons from 10 Case-study Companies

Authors:

Abstract and Figures

This report is based upon research focussed on capturing the detailed experiences of 10 retail companies that have invested in RFID technologies – understanding their decision to invest, reflecting on some of the results they have achieved, and charting the lessons (both positive and negative) they are able to share from their RFID journeys. Most of the companies that agreed to take part were Apparel retailers, adopting a range of both small and large- scale RFID systems. Collectively, these companies have overall sales in the region of €94 billion a year and are using at least 1.870 billion tags a year – equivalent to about 60 tags per second.
Content may be subject to copyright.
Measuring the Impact
of RFID in Retailing:
Keys Lessons from
10 Case-study Companies
By
Emeritus Professor Adrian Beck
University of Leicester
February 2018
Shrinkage
and OSa grOup
Measuring the iMpact of rfiD in retailing
Measuring the Impact
of RFID in Retailing:
Keys Lessons from
10 Case-study Companies
By
Emeritus Professor Adrian Beck
University of Leicester
February 2018
Shrinkage
and OSa grOup
Measuring the iMpact of rfiD in retailing
Disclaimer
The research for this report was supported by the ECR Community Shrinkage and On-shelf Availability Group
and GS1. The document is intended for general information only and is based upon a review of the available
literature together with primary research undertaken with retail companies in Europe and North America.
Companies or individuals following any actions described herein do so entirely at their own risk and are
advised to take professional advice regarding their specific needs and requirements prior to taking any actions
resulting from anything contained in this report. Companies are responsible for assuring themselves that
they comply with all relevant laws and regulations including those relating to intellectual property rights, data
protection and competition laws or regulations. The images used in this document do not necessarily reflect
the companies taking part in this research.
© February 2018, all rights reserved.
About the Author
Adrian Beck is an Emeritus Professor at the University of Leicester, UK. Over the last 29 years, his research
work has focused on helping retailers better understand the impact of loss and how it can be more effectively
managed. He is currently an academic advisor to ECR Community’s Shrinkage and On-shelf Availability Group.
He is extremely grateful to all those retailers who agreed to take part in this research – their time and patience
was very much appreciated. Particular thanks are also due to, Jacky Broomhead, Markus Mueller, Colin
Peacock, Hans-Peter Scheidt and Martin Speed for providing feedback on early drafts of this report.
To contact the author: bna@le.ac.uk
GS1
GS1 is a neutral, not-for-profit organisation that develops and maintains the most widely used global standards
for efficient business communication. It is best known for the barcode, named by the BBC as one of ‘the 50
things that made the world economy’. GS1 standards improve the efficiency, safety and visibility of supply
chains across physical and digital channels in 25 sectors. Its scale and reach – local Member Organisations
in 112 countries, 1.5 million user companies and 6 billion transactions every day – help ensure that GS1
standards create a common language that supports systems and processes across the globe.
For further information: https://www.gs1.org
ECR Community Shrinkage and On-shelf Availability Group
The Group is part of ECR Community, a voluntary and collaborative retailer-manufacturer platform
with a mission to ‘fulfil consumer wishes better, faster and at less cost’. Over the last 19 years,
the Group has acted as an independent think tank focused on creating imaginative news ways to
better manage the problems of loss and on-shelf availability across the retail industry. Championing
the idea of Sell More and Lose Less, the Group is open to any retailer and manufacturer to join.
The research commissioned by the ECR Group is made possible by financial contributions from the following
organisations:
For further information: http://ecr-shrink-group.com
Design and printed by Anchorprint group Ltd.
Measuring the iMpact of rfiD in retailing
Foreword
The ECR Community Shrinkage and On-shelf Availability Group is delighted to have had
the opportunity to co-sponsor this exciting and innovative research project. It is the latest
in a long line of research initiatives the Group has supported since its inception nearly
20 years ago. Carried out by our longstanding academic advisor, Professor Adrian Beck
from the University of Leicester in the UK, this report makes an important contribution
to our understanding of how RFID technologies can help the retailer community to not
only further enhance the consumer experience, but also be better prepared to meet the
growing challenges of operating in the 21st Century.
As a technology, RFID has taken time to become a realistic proposition for most retailers – it has often struggled
due to issues of reliability and an inability to offer a viable and sustainable return on investment. However,
as Professor Beck’s research with the 10 retail companies that agreed to take part in this research shows,
many aspects of the technology have matured to the point where they can now be considered reliable and, in
the right retail environment, and by adopting a realistic and measured approach to its use, offer an attractive
financial proposition to those willing to invest.
I very much hope you enjoy reading this report and utilising its findings to better understand whether it might
be time for you to embark on your own RFID journey.
John Fonteijn
Chair of the ECR Community Shrinkage and On-shelf Availability Group
RFID is a real game changer for retail operations. But as a technology that has been
on the radar for some time, its transformative potential has suffered from over-hyping.
This report, produced with the ECR Community Shrinkage and On-shelf Availability
Group, shows RFID has now surpassed the hype to deliver real benefits to an increasing
number of businesses. RFID addresses a lot of the key issues retailers face today; from
improving inventory management and improving sales to providing the level of detail
needed to deliver omni channel processes. And it aligns with strategic growth objectives
by helping them to provide better service and a better experience for their customers.
GS1 has been a long-term supporter of RFID, guiding the development of the industry standard EPC which
we now maintain. Developing an industry standard was a key turning point in the evolution of RFID as it gave
businesses the confidence to adopt the technology. Agreeing a standardised format also led to a +75%
reduction in the cost of RFID tags. Through the use of our standards, GS1’s primary role is to make it easier for
businesses to trade together. And, as the custodian for EPC, we provide neutral advice to help retailers on their
RFID journeys. To support their continued success with the technology we are delighted to partner with ECR
Community on this report. The findings uncover must-read content for anyone interested in adopting RFID in
retail, including the KPI data of retailers using RFID and their biggest learnings.
We hope you enjoy reading the report and look forward to seeing more successful RFID roll outs in the future.
Gary Lynch FCILT
CEO GS1 UK
Measuring the iMpact of rfiD in retailing
Executive Summary .......................................................................................................................................... 1
Background and Context ................................................................................................................................. 4
Capturing Reflections on RFID ................................................................................................................. 5
Methodology ..................................................................................................................................................... 6
Participating Companies ........................................................................................................................... 6
Confidentiality and Presentation of Data .................................................................................................. 6
Limitations ................................................................................................................................................ 7
The Business Context ....................................................................................................................................... 8
Delivering Inventory Visibility and Accuracy ............................................................................................. 8
Improving Customer Satisfaction ............................................................................................................. 8
Optimising Stock Holding ......................................................................................................................... 8
Helping to Drive Innovation and Business Efficiencies ............................................................................ 8
The Omni Channel Imperative ................................................................................................................. 9
Previous History of Using RFID ................................................................................................................ 9
The Role of the Board and Recognising the Financial Realities ............................................................... 9
The Business Context ............................................................................................................................. 10
Starting an RFID Journey ............................................................................................................................... 11
Choosing a Business Leader .................................................................................................................. 11
Engaging the Business ........................................................................................................................... 11
Seeking External Help ............................................................................................................................. 16
Choosing RFID Technologies .................................................................................................................. 12
Starting an RFID Journey ........................................................................................................................ 17
Undertaking a Trial ......................................................................................................................................... 18
Proof of Concept Trials .......................................................................................................................... 18
RFID Pilot Trials ....................................................................................................................................... 18
Development Trials ................................................................................................................................. 20
Measuring the Impact of RFID ....................................................................................................................... 21
Key Performance Indicators .................................................................................................................... 23
Intervention Mechanisms ....................................................................................................................... 23
Intervention Measures ............................................................................................................................ 25
Measuring Success ................................................................................................................................ 26
Key Performance Drivers ........................................................................................................................ 29
Return on Investment ............................................................................................................................. 29
Measuring the Impact of RFID ............................................................................................................... 30
Rolling out RFID .............................................................................................................................................. 31
Making the Case ..................................................................................................................................... 31
Planning the Roll Out .............................................................................................................................. 31
Rolling Out .............................................................................................................................................. 31
Living with RFID ...................................................................................................................................... 33
Contents
Measuring the iMpact of rfiD in retailing
The Challenges of Integration ....................................................................................................................... 34
Getting Systems to Talk .......................................................................................................................... 34
Loss Prevention and RFID .............................................................................................................................. 36
Loss Prevention in Context ..................................................................................................................... 36
Vulnerability of Tags ................................................................................................................................ 36
Exit Gate Reliability ................................................................................................................................. 37
Impacting on the Shrinkage Fog ............................................................................................................. 37
Enabling Innovation ................................................................................................................................ 38
Identifying Hot Products and Amplifying Risk ........................................................................................ 38
Learning Lessons ............................................................................................................................................ 39
Understand Your Business ..................................................................................................................... 39
Clearly Articulate the Need ..................................................................................................................... 39
Ensure Board Level Support and Engage Stakeholders ......................................................................... 39
Understand the Technology .................................................................................................................... 40
Avoid Tagging in Store ............................................................................................................................ 40
Recognise the Omni Channel Imperative ............................................................................................... 40
Standards Matter .................................................................................................................................... 41
Undertaking Trials ................................................................................................................................... 41
Measuring Impact ................................................................................................................................... 41
Rolling Out RFID ..................................................................................................................................... 42
Integrating RFID-generated Data ............................................................................................................ 42
Remember RFID is an Ongoing Journey ................................................................................................ 42
Keep it Simple ......................................................................................................................................... 42
Future Developments ..................................................................................................................................... 43
Fitting Rooms and Magic Mirrors ........................................................................................................... 43
Heading Back Down the Supply Chain ................................................................................................... 43
Broadening Coverage ............................................................................................................................. 43
Improving Data Collection Interfaces ..................................................................................................... 43
Improving Tags........................................................................................................................................ 44
Exploring Overhead Readers .................................................................................................................. 44
Getting Geographical Spread ................................................................................................................. 44
Delivering Checkout-less Stores ............................................................................................................. 44
Creating Seamless Merchandise Visibility ............................................................................................. 44
Developing Data Capabilities .................................................................................................................. 45
Industry Changes .................................................................................................................................... 45
Endnotes .......................................................................................................................................................... 46
Measuring the iMpact of rfiD in retailing
1
Background and Context
This report is based upon research focussed on
capturing the detailed experiences of 10 retail
companies that have invested in RFID technologies –
understanding their decision to invest, reflecting on
some of the results they have achieved, and charting
the lessons (both positive and negative) they are
able to share from their RFID journeys. Most of the
companies that agreed to take part were Apparel
retailers, adopting a range of both small and large-
scale RFID systems. Collectively, these companies
have overall sales in the region of €94 billion a year
and are using at least 1.870 billion tags a year –
equivalent to about 60 tags per second.
The Business Context for Investment
Driving Sales: The primary goal of investing in RFID
was to deliver improvements in inventory visibility
and accuracy, which in turn would grow sales.
Optimising Stock Holding: Respondents also
recognised the potential of RFID to enable them to
optimise their stock holding, reducing capital outlay
and improving staff productivity.
Fewer Markdowns: Most case-study companies
regarded RFID as a key tool in helping to reduce the
amount of stock they offered at discounted prices.
Helping to Drive Innovation and Business
Efficiencies: RFID was frequently viewed as part of
a broader organisational change project focussed
on putting enabling technologies in place to drive
transformational change to achieve future success.
Recognising the Omni Channel Imperative: This
technology was viewed as a key driver in developing
the capacity to deliver a profitable omni-channel
consumer experience – in effect the organisational
‘glue’ that will hold together much of the architecture
of 21st Century retailing.
Measures of Success
Increase in Sales: Seven of the 10 case studies
shared data showing a sales improvement in the
range of 1.5% to 5.5%. For SKUs identified by RFID
systems as being out of stock, the growth was even
higher. Based upon this data, the 10 companies
taking part in the study may have realised an RFID-
driven sales uplift of between €1.4 and €5.2 billion.
Improved Inventory Accuracy: Companies typically
had an improvement from 65%-75% to 93%-99%.
Stock Availability: Some of the companies taking
part were now findings SKU availability in the high
90% region.
Reduced Stock Holding: One-half of the case-study
companies shared data on this measure, indicating a
stock reduction of between 2% and 13%.
Lower Stock Loss: One company suggested that
their shrinkage losses had been reduced by 15%.
Reduced Staff Costs: One company had measured a
saving equivalent to 4% of their store staffing costs,
which if rolled out across the case-study companies
would be in the region of €378 million.
Return on Investment: All 10 companies were
unequivocal in their assertion that the ROI had been
achieved, and based upon their trial experiences,
further roll out across the business was fully justified
and embraced by the rest of the business, often with
considerable enthusiasm and optimism.
Learning Lessons
Role of Senior Management: The role of the
senior management team in both the initiation and
subsequent delivery of the RFID project was seen
as paramount – without their active support and
recognition of the financial imperative, virtually none
of the projects would have been initiated.
Choosing a Business Leader: The RFID project
leader was typically the person who had responsibility
for on-shelf availability/stock integrity, regardless
of where they were located within the business
hierarchy.
Engaging the Business: Respondents to this
research clearly articulated the importance of
working hard at getting cross functional buy in –
RFID projects have long tentacles embracing most
retail functions.
Understanding Your Business Context: Many
respondents considered this one of their biggest
challenges – understanding how RFID will impact on
the business. Undertaking detailed process mapping
and recognising how products move through the
supply chain was considered key, as was assessing
the impact the physical environment might have on
Executive Summary
Measuring the iMpact of rfiD in retailing
2
the functionality of the technology and how it would
integrate (or not) with legacy systems.
Challenges of Integration: By far and away the
biggest headache these companies faced as they
progressed on their RFID journey was the thorny
issue of integration with legacy retail systems. A
number felt they had not planned sufficiently well
on how to resolve this issue and counselled future
adopters to not only take integration seriously but
think very early on in the process the extent to
which they want new and existing data systems to
communicate.
Seeking External Help: Virtually all of the companies
taking part in this research had sought some degree
of external advice as they began their RFID journey:
RFID consultancies, technology providers, other
retailers, and organisations developing common
standards such as GS1.
Choosing RFID Technologies: Most companies
had adopted a circumspect, modest and highly price
conscious approach to the selection and use of their
RFID technologies – the mantra of ‘keep it simple
and highly focussed’ was very apparent.
Tag Reliability: No companies had any concerns
about the reliability of their chosen tags; a more
prescient issue now was ensuring the tag remained
attached and its position on the product was
optimised.
Choice of Readers: By far and away the predominate
reader technology used was handhelds provided to
store staff. Relatively few companies were utilising
any form of transition readers (to track product
moving between different parts of the supply chain),
integrated point of sale readers or exit detection
readers. As yet, none had committed to using in-
store overhead readers beyond some ongoing store
trials.
Avoid Tagging in Store: All 10 companies taking
part in this research had opted for a long-term
strategy that involved the RFID tags being applied at
the point of manufacture.
Standards Matter: While case-study companies
varied in the degree to which they were sensitised to
the importance of adopting RFID-based standards, all
agreed that without them, it would be more difficult
to innovate and evolve in the future. Standards were
highlighted as being key in reducing confusion in the
supply chain and avoiding getting locked into any
particular provider.
Undertaking Trials: All companies had undertaken
a combination of Proof of Concept Trials (does the
technology work?), Pilot Trials (how will RFID operate
in our particular environment?) and Development
Trials (how can we evolve our RFID system?). A
number of companies urged caution in the speed
with which Pilot Trials in particular were undertaken,
to ensure that the full impact of the introduction of
the technology can be fully understood across a
range of different environments.
Measuring Impact: Ultimately, RFID is an intervention
used to enable the business to be more successful
in meeting its core objectives of being a sustainably
profitable retailer. In and of itself an RFID system is
little more than a combination of technologies that
provide the user with actionable data. Most case-
study companies had relatively few KPIs they wished
to achieve, with an improvement in sales being the
most prominent. But it is important to understand
how any chosen KPI will be delivered, including
identifying the organisational drivers/mechanisms
that will enable them to be achieved and how they
will be measured.
Rolling Out RFID: All companies had committed
to rolling out their RFID programmes – a ringing
endorsement for how valuable it was considered to
be to their businesses. As with the Pilot Trials, some
companies counselled caution concerning the speed
of roll out, citing numerous difficulties they had faced
Measuring the iMpact of rfiD in retailing
3
by moving too quickly. Of particular importance was
timing – avoiding peak times in the retail calendar
and investing in high quality and sustainable training
for retail store staff.
Loss Prevention and RFID: Few of the companies
regarded their RFID system as an effective tool to
actively reduce stock loss, particularly malicious
forms of loss such as shoplifting. Primarily this was
because the tags being used (swing tags and stickers)
were very easy to remove and current exit readers
were viewed as being relatively unreliable. However,
some were using RFID data to better understand
which products would benefit from additional
security as well as helping in the evaluation of store
trials of stock loss interventions. For one retailer, an
indirect benefit of store staff now having more time
to be on the shop floor (because RFID had reduced
the time other tasks had taken) was that they could
increasingly act as a visible deterrent to prospective
shop thieves.
Remember RFID is a Journey: Case-study companies
were keen to remind prospective users that RFID
systems are not a plug and forget technology – they
require ongoing commitment to ensure they remain
fit for purpose and capable of delivering the KPIs
originally required by the business to justify any
recurring investment.
Keeping it Simple: The final piece of advice many
offered was to keep any planned RFID project simple
– do not make it over complicated, and remember
RFID merely provides data; if you do nothing with it
then it is destined to fail.
Future Developments
The 10 case-study companies highlighted the
following areas for future development of their RFID
systems:
Using the technology in fitting rooms and with
‘Magic Mirrors’.
Greater use of RFID along the entire supply chain.
Broadening coverage across more SKUs and
locations.
Improving data collection interfaces and data
integration in the business.
Improving tags, in particular how they are attached
to various products.
Exploring how overhead readers may be used in
the future.
Delivering checkout-less stores.
Creating seamless merchandise visibility with a
range of technologies beyond just RFID.
Measuring the iMpact of rfiD in retailing
4
Since the term Radio Frequency Identification
(RFID) came into common usage within the retail
environment, around the end of the 1990s, it has in
many respects been an idea driven more by hope
and hype than practical realisation1. It is closely
linked with the ‘Internet of Things’ concept whereby
all manufactured objects have the capability to be
uniquely identified and the capacity to do this without
the need for line of sight2. For retailers it promised
a world where supply chains would become fully
transparent, with all products identifiable in real time,
bringing an end to oversupply and out stocks – the
ultimate optimisation tool, allowing retailers to truly
deliver ‘just in time’ supply chains tailored precisely
to the needs of their customers3. In addition, RFID
offered other ‘game changing’ benefits such as the
end of traditional checkouts and associated queuing
for the consumer – products would automatically
‘checkout’ as they left the store, with the consumer’s
credit card being billed accordingly4.
Within the realm of loss prevention, the RFID
‘revolution’ offered much promise5. With each item
being uniquely identifiable in real time, it was argued
shop theft would become a thing of the past as
thieves would be automatically identified as they tried
to leave the store without paying. Similarly, problems
such as returns fraud (where a thief attempts to claim
credit for an item they have not actually purchased)
would be eliminated as the previous ambiguity
around whether they had actually bought ‘that’ item
would no longer exist – the product would ‘tell’ the
retailer its current status (bought or not bought).
Back in the early 2000s it seemed RFID was going
to totally transform the retail world – indeed, it was
described by one of its earliest advocates in the
following glowing terms: ‘as significant a technology
as certainly the Internet and possibly the invention of
the computer itself6.
If we skip forward 17 years, then it becomes very
quickly apparent that RFID, as yet, cannot be
remotely put in the same category as the Internet
in terms of its impact upon the world or more
specifically retailing. Arguably, it is a technology that
has seriously struggled to match up to the hype
heaped upon it at the end of the 1990s and into the
early 2000s7. It continually floundered on the rocks
of physics and economics, with the ‘Faraday Cage’
in many respects proving to be the prison ‘cell’ from
which RFID has struggled to escape8. But it also
struggled to establish a strong foothold because
questions about privacy and desirability often
remained secondary to delivering the technological
utopia of all objects being able communicate with
each other and the rest of the world9. A such, many
of those long in the tooth in retailing have become
familiar with the sentence that starts: ‘…in the next
five years RFID will…’!
However, the outlook now appears to be changing
fast for RFID and what has been seen in the past few
years is a much more enlightened, less evangelistic
and more realistic approach to how RFID may be able
to play a role within retailing, one that recognises its
limitations and plays to its identifiable strengths10.
The technology has also had the opportunity
to gradually mature, away from the spotlight of
unrealistic expectations, and begin to show how it
can be used to help retailers resolve some of their
ongoing and growing concerns. This can be seen
particularly in parts of retailing that do not have a
concentration of products largely made up of metals
and viscous fluids, which have traditionally proved
highly challenging for RFID to cope with.
Retailers focussed on apparel and footwear in
particular have begun to use this technology to help
them manage their supply chains more efficiently,
utilising RFID’s capacity to bring transparency and
ease of audit into the retail space11. As pressures
within retailing concerning competition and growing
consumer demands for greater and more accurate
Background and Context
Measuring the iMpact of rfiD in retailing
5
availability have increased (particularly with the
growth of omni channel), then some companies
have begun to invest in RFID to help them respond.
While we are still some way from RFID becoming
‘bigger than the Internet’, it would seem that a more
gradual and incremental introduction into retailing is
underway, one that recognises its weaknesses but
at the same time is beginning to take advantage of
developments in the technology. This movement is
perhaps beginning to show that while the Internet
of ‘all’ Things remains a pipe dream within retailing,
the Internet of ‘some’ Things is not only becoming a
reality, but that it seems to be making good business
sense for some retailers to begin to invest in it12.
Capturing Reflections on RFID
It is within this context that the research presented
in this report is put forward. Back in 2002 the ECR
Shrinkage Group commissioned a project to review
the way in which RFID might impact upon the
world of retail loss prevention – reflecting upon the
prospects, problems and practicalities associated
with this technology13.
Since then, much has changed, and this report offers
an opportunity to reflect more broadly on its recent
use, offering a fresh understanding about how this
technology is now being used and what lessons can
be drawn from its development, its implementation
and its impact on retail businesses. Based upon the
detailed experiences of 10 companies that have
made the commitment to invest in RFID, the report
sets out to answer the following questions:
What is the business context within which some
retailers decide to invest in RFID?
How do these companies begin their RFID
journey?
What steps do they follow when undertaking a
trial?
In what ways do they measure the impact of
RFID and what have they found?
How do they begin to roll it out to the rest of the
business?
How have they dealt with the key challenge of
integration?
What role, if any can RFID play in managing loss
prevention?
What lessons have these companies learnt on
their RFID journey?
How might they be planning to use this
technology in the future?
The report begins by offering a brief overview of the
research methodology used before moving on to
answer each of these questions in turn. By the end, it
is hoped that any company thinking about embarking
on their own RFID journey will be in a better position
to understand the pitfalls, practicalities and indeed
benefits that may await them.
Measuring the iMpact of rfiD in retailing
6
This research was primarily interested in capturing
the experiences, both good and bad, of a range
of companies that had decided to invest in some
form of RFID technology14. It adopted a case-study
methodology15 with data being collected via requests
for various types of quantitative data relating to
the use and performance of RFID, together with
primarily face-to-face interviews with company
representatives16.
Those selected to be interviewed varied in their
position within the company, but all had been involved
to varying degrees with the design, implementation
and review of the RFID project in their businesses.
Interviews took place either in the Head Quarters of
the company or one of the stores participating in the
RFID project. Where it was the latter, the researcher
was able to view the system in action and talk to
store staff about their experiences of using it.
Interviews lasted between 65 and 150 minutes, and
all were recorded and transcribed. It is important
to note that this report is focussed primarily upon
reviewing the experiences of the companies that
agreed to take part and as such it is not intended to
be a technical review of the specific RFID systems
they are utilising. As such none of the technology
providers being used by any of the case-study
companies will be named – while it will be possible
for RFID industry watchers to ascertain from the list of
companies below what technologies were used, the
report does not intend to offer any recommendations
about what RFID systems should be used.
Participating Companies
For the most part, Apparel retailers have been at the
forefront of adopting RFID technologies in recent
years and so inevitably, but not exclusively, they
make up the largest proportion of companies taking
part in this research.
A number of companies were approached to take
part based upon publicly available information on
their use of RFID. It was hoped that, where possible,
a range of different types of companies would be
included – large and small-scale RFID projects,
single and multiple country roll outs, various types
of products and types of RFID systems used, and of
course different types of retail environment.
Inevitably, as with much of the research carried
out on retailing, particularly where some of the
information required can be regarded as sensitive
and potentially competitive in nature, company
selection ends up being driven more by willingness
to engage than any overarching systematic
methodological framework. However, 10 companies
eventually agreed to participate, offering a broad
range of RFID experiences – some were on a very
big scale (in terms of quantity of tags used), with
three purchasing more than 150 million tags each per
year, while others were relatively small scale, with
significantly less than one million tags a year. Equally,
some companies had rolled out their programmes
across multiple countries while others had limited it
to just one.
The sales turnover of the companies varied between
about €150 million and €50 billion, with all 10
having total sales in the region of €94 billion a year.
Together they accounted for at least 1.870 billion
RFID tags a year17, equivalent to the use of about 60
tags per second. Geographically, most companies
were located in Europe, although one was based in
Canada, with their RFID programme covering their
North American operations, while another had rolled
it out to 800 stores in 17 countries.
The 10 companies that took part in this research
were:
Adidas
C&A
Decathlon
Lululemon
Jack Wills
John Lewis
MARC O’POLO
Marks & Spencer
River Island
Tesco
Confidentiality and Presentation of Data
Throughout this report, direct quotations are provided
from the transcripts of interviews carried out with a
range of representatives from the companies taking
Methodology
Measuring the iMpact of rfiD in retailing
7
part in this research. Each quotation has been given
an identifying case-study number, but due to the
relatively small number of companies taking part and
to avoid any particular respondent being identified
across multiple quotations, this identifier has been
changed for each section of the report. So for
instance, code R1 refers to a different retailer in each
of the sections in the report. Where respondents
have provided quantitative data, this has also been
anonymised and checked with the companies that
agreed to take part. Where currency exchange
has been necessary, the prevailing rate on the 11th
December 2017 has been used18.
Limitations
As with any research, there are limitations in what can
be achieved and presented. While this research has
attempted to offer an independent and critical review
of the use of RFID in the retail sector, the case-study
selection process needs to be taken into account
when reviewing the findings. Because of the chosen
selection criteria and the challenge of obtaining
retailer support, no companies are represented that
have trialled RFID and decided against rolling it out
– the views of these types of company are absent
from this research19.
In addition, there are some companies that have
adopted a different approach to using RFID than
those represented in this research, namely using
a hard tag variant applied either at the point of
manufacturer or later in the supply chain. While one
of these companies was approached to take part in
the research, they declined and so it is not possible
to include their experiences and views of using
RFID. As such, it is important to recognise that the
general approach adopted by these 10 companies is
not necessarily representative of all retail companies
that are now using RFID.
It is also the case that while some companies were
prepared to share limited data on the efficacy of their
RFID system, it was not possible to verify in any detail
the reliability nor accuracy of the information shared
with the researcher. Moreover, companies varied
in the ways in which they measured the impact of
RFID systems, and the ways in which they defined
particular measures such as on shelf availability and
stock integrity. Every effort has been made to try
and make valid comparisons, but the challenges of
undertaking secondary analysis of this type of data
needs to be recognised.
Given all of that, it is hoped that the data collected
from these 10 companies offers some valuable
insights about their RFID journeys – the challenges
they faced and the ways in which they developed
their programmes to ensure that they offered both
a meaningful ROI and significant opportunities for
future development.
Measuring the iMpact of rfiD in retailing
8
There were a number of reoccurring themes that
emerged when respondents were asked to explain
why their business had embarked on introducing
RFID into their organisations, most of which were
orientated around how it could improve the overall
performance of the business and meet the future
challenges of an increasingly competitive market.
Delivering Inventory Visibility and Accuracy
Most respondents were very clear that the primary
goal of their RFID programme was to help them
deal with the problem of inventory inaccuracy and
its knock-on effect on out of stocks and ultimately
lost sales: ‘There was growing awareness in the
business about how bad our out of stocks were’[R4].
Another respondent put it very succinctly: ‘for
us, [there was] only one KPI [Key Performance
Indicator]: stock integrity, which generates accurate
replenishment, which equals increased sales’[R7].
This respondent went on to highlight the impact
errors in the supply chain had upon their store
stock holding records: ‘1% of our deliveries are
inaccurate and that contributes to about 30%
of our stock inaccuracy because it builds every
week’[R7]. Others agreed and talked about the
need for, and value of, having greater visibility of
their merchandise and what it could bring to the
business: ‘merchandise visibility is the objective
– RFID is a means to an end; ‘visibility of stock
was the main reason for embarking on [our] RFID
journey’[R5].
Improving Customer Satisfaction
The problem of out of stocks and it impact upon
the business was also highlighted by others who
focussed particularly upon its effect on their
customers: ‘out of stocks was our biggest cause
of customer dissatisfaction. That was the main
reason for RFID’[R3]. They went on to argue that by
improving customer satisfaction then ultimately
sales would be improved which would justify the
investment in RFID. As detailed below, customer
satisfaction became an even more prescient factor
when retailers begin offering an omni channel
experience – the opportunities for getting it wrong
can multiple considerably: ‘operating on line is
tough – it is very easy to get it wrong and lose
customers’[R8].
Optimising Stock Holding
Some respondents highlighted the potential
opportunity presented by increased stock visibility
to reduce the amount of merchandise held in the
business which would impact upon not only capital
outlay but also staff productivity: ‘Also wanted to
reduce stock holding
– less stock to handle
improves productivity’[R9];
‘[we have a] large capital
investment in stock but
low visibility of where it
was in the business, RFID
gives us the data to make
better decisions about
how much we should
have in the business’[R5].
Helping to Drive Innovation and Business
Efficiencies
While change and reinvention in retailing is nothing
new, and arguably the main reason why only some
retailers succeed in the long term, the increasingly
dynamic nature of 21st Century retailing, epitomised
by the growth of omni channel, was also part of the
business context within
which decisions about
whether to invest in
RFID were considered.
Of particular importance
was the perceived need
for greater agility driven
by improvements in
the availability of data
concerning not only the
visibility and movement
of merchandise in the
business, but also the
behaviours and experiences of consumers. In this
respect, many respondents viewed RFID as part of
a broader organisational change project – part of
the evolution of their businesses where innovation
is viewed as a key way to achieve future success.
Some were more explicit, regarding RFID as one
of the main ways in which they could continue to
drive competitive advantage as part of their broader
organisational transformation: ‘… it is usually
best not to be the first, but you must not be the
The Business Context
merchandise
visibility is the
objective – RFID
is a means to
an end
operating on
line is tough
– it is very
easy to get it
wrong and lose
customers
Measuring the iMpact of rfiD in retailing
9
last to adopt!’[R2]. Some respondents also made
the link between improving business efficiency
and RFID: ‘the business was not good at moving
stock around the organisation, we needed better
data’[R4]. But they were very clear that RFID in
and of itself was not the panacea, it was merely a
potentially powerful tool to enable change in the
business through providing new data points to
identify weaknesses and inefficiencies, and review
interventions.
The Omni Channel Imperative
Write large across all the initial discussions about
the reasons for starting out on a RFID journey
was its enabling capacity to help businesses
develop and deliver a more profitable omni
channel consumer experience. As one respondent
clearly articulated: ‘there was an acceptance in
the business that stock accuracy was crucial to
the development of the business, based on the
desire to move into omni channel – pick from
store, intelligent stock distribution, accuracy in
buying, accuracy in stock levels and a seamless
view to both customers and staff of stock’[R7].
Other agreed: ‘the move to omni channel was
also a key driver. This is why RFID would be part
of the future of the business’[R1]; ‘our long-term
vision was that we
knew we needed to
improve our inventory
accuracy to turn on
our omni-channel
programmes’[R1].
The critical role of
RFID in helping to
improve the visibility
and accuracy of stock
files was particularly
apparent in many of
the comments made
by respondents: ‘it
also fits our strategic
ambition of omni
channel which is about visibility of product to
customers across the estate – online and in
branch’[R5]. Put simply, if there are significant levels
of inaccuracy in an inventory system, it becomes
highly challenging to offer any form of online
experience/pick up in store service that is going to
consistently and satisfactorily meet the wishes of
increasingly demanding consumers.
Previous History of Using RFID
Many of the companies taking part in this research
had a track record of trying out the technology in
the past, which often influenced their decision to
subsequently invest. As detailed earlier, RFID has
had a chequered history within retailing, initially
over-promising and subsequently languishing as
inflated expectations faded into the stark realities
of still evolving immature technologies and hard
to achieve returns on
investment.
Some respondents had
been part of that early
journey: ‘… [we] couldn’t
get it to work – the cost
was prohibitive and the
technology was not
reliable enough’[R5]; ‘our
previous efforts failed
due to cost and technical
issues’[R2]. But, it also
meant that as the technology matured, and the
business case become more attractive, these
company’s previous experiences (where the
organisational memory was maintained) enabled
them to move forward incrementally and with a
fair degree of studied circumspection. For those
that had not tried the
technology before,
most were aware of
the previous challenges
and had felt that the
positive momentum
within the RFID
industry, particularly
around pricing and
notable improvements
in the reliability of the
technology, made it the
right time to initiate a trial.
The Role of the Board and Recognising the
Financial Realities
For virtually all of the companies contributing to
this research, the role of the senior management
team in both the initiation and subsequent delivery
of the RFID project was paramount: ‘[the] initiative
came from the Board20. High initial costs required a
strong business case and ROI – could only happen
with full Board support’[R2]. This is perhaps not
the business
was not good
at moving stock
around the
organisation,
we needed
better data
everything
is possible, but
it comes back
to the cost and
the benefit it
can bring to the
business
the move to
omni channel
was also a key
driver. This
is why RFID
would be part
of the future of
the business
Measuring the iMpact of rfiD in retailing
10
surprising, given the not inconsiderable upfront
investment and business changes required to
make it work: ‘everything is possible, but it comes
back to the cost and the benefit it can bring to the
business’[R3].
For some, senior management positively
championed the idea: ‘it came directly from the
Board, top down’[R2], while for others the senior
team were more watchful: ‘introduction of RFID
was more evolutionary than revolutionary – interest
from the Board that matured into a business
case’[R7]. In only one case was the drive for using
RFID from the bottom up but even then, the
support of the Board was still key to getting the
project moving forward. In many respects this is not
unexpected; most if not all RFID projects will span
across virtually all elements within a modern retail
business and so achieving cross functional buy-in
inevitably will require decisions made at the highest
level of the organisation.
Above all, however, all
respondents recognised
the critical importance of
identifying the financial
imperative – ‘it needs to
be a sound investment
and not just a nice to
have technology’[R6]; ‘they
[the Board] will always
want to know how much
is it going to cost and what will we get out of it?’[R5].
The Business Context
While the research interviews elicited many
different contexts within which the decision to
invest in RFID was made, most had the same
core driving imperative: how can the business
evolve to remain competitive through continuing
to delight the consumer in ways that are both
efficient and profitable? Improving the visibility of
merchandise across the retail environment was
viewed as a key factor in enabling this to happen –
in many respects, it was seen as the glue that will
increasingly hold together much of the architecture
of 21st Century retailing. How that visibility will
be realised is still an open debate and will no
doubt be achieved through a myriad of technologies
and processes, but for the companies taking
part in this research, their business context
made an investment in an RFID system something
worth pursuing.
it needs to
be a sound
investment
and not just a
nice to have
technology
Measuring the iMpact of rfiD in retailing
11
The following sections of this report are written
with the prospective RFID retail user in mind,
mapping out the various steps taken by the case-
study companies on their journey to using RFID in
their businesses. This first section focusses upon
how they started their journey – who was tasked to
lead the initiative, how and why it was important to
engage the rest of the business with it, where they
sought help and how they went about choosing
the technology they decided to use. This is then
followed by sections continuing the journey: the
process of undertaking a trial; how they went about
measuring the impact of RFID and what they found;
and then subsequently how they went about rolling
out the technology across their businesses.
Choosing a Business Leader
As with all change projects, it requires a leader
to drive the initiative forward. For the companies
taking part in this research three approaches
were adopted. For some, the scale of the project
necessitated the establishment of a new business
unit, with a leader and support staff drawn from
other areas, based upon some existing established
expertise considered relevant to the initiative.
For the majority of the case studies, a leader
was identified within the business unit largely
responsible for operations (the exact title varied
between companies, such as Retail Operations,
Operations or Sales Support). In two cases, a third
approach was adopted: the project leader was
based in the loss prevention function.
While the first two approaches are largely self-
explanatory, drawing leadership from within loss
prevention teams may seem an unusual approach
to adopt given the overarching objectives set out by
most of the companies introducing this technology.
Partly it may be attributable to RFID being
associated with ‘tagging’ and the loss prevention
function being historically responsible for another
form of retail tagging: Electronic Article Surveillance
(EAS). But, for one of the two case studies, it was
more to do with how the company defined the
parameters of responsibility for the loss prevention
team, in this case holding them accountable for
stock integrity.
In the other case it was more about the RFID
initiative coming directly from the loss prevention
leader and this person very much taking the
initiative on an ad hoc largely unplanned basis.
Other than the last case, the common denominator
is that leadership for the project typically came from
whoever had/or was given responsibility for on-
shelf availability/stock integrity, which, as discussed
in the previous section, is a major business driver
for thinking about investing in RFID. Even in the
loss prevention-driven case study, the view now
seems to be that the future roll-out and ownership
of the initiative should be moved away from loss
prevention and into the function responsible for
store operations.
Engaging the Business
As mentioned previously, RFID projects by their
very nature, develop long tentacles spreading out
across entire retail organisations: ‘… it touches the
entire business’[R7]; ‘every function was involved in
the project – buying, production, logistics; it was
very important to have all functions represented’[R3].
Respondents to this research clearly articulated
the importance of working hard at getting cross
functional buy in to their RFID project: ‘there was a
lot of education [of the rest of business] needed on
the benefits of RFID technology – [it] wasn’t clear
to the rest of the business what a change it would
bring along’[R10]. At least one of the companies used
stakeholder analysis21, a very common but valuable
Starting an RFID Journey
Measuring the iMpact of rfiD in retailing
12
business tool, to identify who should be involved
and to what degree there may be resistance to its
introduction: ‘[we] used stakeholder analysis to
identify all our key players in the business and how
they might feel about being involved in a project’[R4].
Indeed, it should not be assumed that everybody
will be immediately
supportive of the
project: ‘people
were nervous about
introducing this
technology and
whether the resource
was available to
deliver it’[R3]; ‘[the]
rest of the business
was largely positive
– some pockets of
resistance’[R2].
A group that was considered particularly important
to engage in the project, especially when it begins
to roll out more broadly across the organisation
and become part of business as usual (BAU), was
the Buying function: ‘Buyers have to be on board
very early – [for us] nine months before the product
enters the supply chain’[R4]. For the most part, the
case-study companies did not experience much
resistance: ‘thought it would need a really strong
buy in from the business but actually the complete
opposite, IT very early on saw the benefits and
wanted to integrate – the whole organisation has
embraced the initiative’[R7].
Approaches to raising awareness varied
considerably between companies: RFID open days,
store mock-ups in Head Quarters showing how
RFID would work, cross functional briefing events
and so on. But all agreed that in the early stages of
the development of the project, getting the rest of
the business not only aware of what RFID is and
its potential, but also clearly articulating what the
responsibilities of other functions are going to be
was vitally important. In this respect, active support
from senior management was considered key;
they not only sign off on the required expenditure
but can also generate the requisite organisational
leverage to ensure key players are engaged.
Seeking External Help
Virtually all of the companies taking part in this
research sought some degree of external advice
as they began their RFID journey, although it
varied considerably in the degree to which it was
formalised. Three approaches were evident: employ
the services of a RFID specialist consultancy;
rely upon the advice available from the chosen
technology provider; and finally, reach out to other
retailers who had already embarked on introducing
RFID into their businesses and organisations that
have developed standards such as GS1.
Numerous RFID consultancies are now available
and two of the case-study companies made use
of their services to varying degrees. Some of
the services provided included: advice on which
technology to select; drawing up procurement
documents; developing the business case to be
presented to the Board; carrying out reviews to
understand the size of the problems that RFID
might address; overseeing implementation of a
trial and roll out; and measuring impact. Clearly
there is a cost associated with this approach, but
for those using this service, it was regarded as a
sound investment, especially where organisational
knowledge on the topic was limited.
Another approach is to rely upon the experience
and knowledge available from the one or more
of the technology providers selected by the
business. For most of
these providers, this will
not be their first RFID
project and so they will
often have a wealth
of experience to offer,
particularly in terms
of the practicalities of
delivering RFID in a
retail environment. The
obvious concern with this
approach is that these
companies may well
have a vested interest in
the advice and choices
they present, which may not always be the most
advantageous nor appropriate for the retail client.
Finally, the majority of respondents suggested
that they reached out to other retailers for advice,
mainly through attending trade shows and
conferences and/or through personal contacts.
A number of retail companies have been very
active in the RFID sphere for some years and
regularly present at conferences such as RFID
Live22. These presentations, while often only
ever able to provide overviews of the approach
leadership
typically
came from
whoever had
responsibility
for on-shelf
availability/stock
integrity
the rest of
the business
needed
educating on
the benefits
of RFID
Technologies
Measuring the iMpact of rfiD in retailing
13
to adopt and the pitfalls to be aware of, can be
extremely useful, particularly in terms providing
access to a company representative that can be
contacted after the event. A number of companies
had also made use of the information made
available by standards bodies such as GS1 that
regularly provide conferences and have built up
a considerable knowledge base on how to utilise
RFID technologies23.
Whatever approach is adopted, virtually all of the
respondents recognised the value and importance
of seeking help from outside their own organisation
– initiating an RFID project can be a daunting
project, especially when the capital outlay can be
considerable, and the technology choices are many
and varied.
Choosing RFID Technologies
One of the main reasons why the RFID euphoria
in the early to mid 2000s quickly faded away was
the realisation that while the concept it promised
was genuinely revolutionary (transparency of all
merchandise throughout retail supply chains,
checkout less stores, the end of retail crime etc.),
the reality was very different, mainly due to the
immaturity of the technology necessary to deliver
it. Early adopters, some of whom took part in this
research, ran into too many issues around reliability
and cost. This next section looks at some of the
decisions made about the choice of technology
used but it is important to stress that it is not
a review per se of any given technology nor its
provider – it is not the purpose of this report to
provide a technical review. The first part looks
at choices made around tagging technologies
while the second part focusses upon the other
technologies used to both read them and make
sense of the ensuing data.
It is worth noting that, for most of the companies
taking part in this research, the approach adopted
to developing their RFID ‘system’ can be best
described as circumspect, cautious, modest and
highly price conscious. The majority of systems
reviewed by this research are relatively simple using
just a few technologies. Most rely mainly upon
handheld readers used by store staff to capture
RFID data and none have invested in overhead
readers beyond some experimental trial stores.
Measuring the iMpact of rfiD in retailing
14
Some have invested in transition readers to capture
data flows between different parts of the supply
chain and zones in retail stores, but not many.
Moreover, one-half have yet to fully integrate a
read capability into their POS systems and properly
resolve the thorny issue of data integration with
existing inventory systems (something which
will be discussed later in the report). As one
respondent put it: ‘we only have handheld readers,
nothing else. No connection with till, no front or
back readers’[R4]. In many respects this was both
surprising and refreshing: surprising because media
hype often tends to suggest we are entering a retail
future of startling
technological
complexity akin to
a Minority Report
landscape, much
of which will be
delivered by objects
communicating
with each other and
various systems
at all times. But it
was also refreshing
because most of
these companies
had built a successful business model, with
verifiable Returns on Investment (ROIs), mostly
focussing upon fixing often only one issue and
doing it with the minimum of technological
investment. The overarching philosophy for most of
these companies when it came to developing their
RFID programme was focussed pragmatism driven
by financial probity – keep it simple and make it pay.
Tags
One of the technology challenges in the early
to mid 2000s was the manufacture, supply and
application of RFID tags that were sufficiently
reliable and financially viable for a retailer to
purchase on a large scale24. For this group of
retailers, the issue of tag reliability did not seem to
be an issue of concern anymore: ‘never found a tag
that didn’t read’[R4]; ‘had so few tag failures that we
stopped checking and recording them’[R3]. Indeed,
one respondent offered some data on the extent to
which their chosen tags were actually performing
better than traditional barcodes: ‘had only 20 errors
with tags not correctly set up out of 1.5 billion
products; with barcodes it was 1.5% and with
RFID tags it is 0.003%’[R8]. Other respondents were
of the same view in terms of the reliability of the
tag but did highlight associated issues that were
more of a concern: ‘tag quality is not the problem
anymore – [tags] falling off is more of an issue to
us’[R2]; ‘[it is] not about reliability of the tag per se,
more about where it is positioned and affixed and
whether it is on the product at all’[R6].
Virtually all of the respondents to this research
had opted for a combination of swing and sticker
tags, with only one initially utilising a hard tag
variant although they too are now planning to use
swing tags and stickers as the initial approach was
deemed impractical in the planned roll out phase.
The decision to use this type of tag was driven
mainly by pragmatism – they offered the most
straightforward approach to application in
the manufacturing process. All respondents bar
one had opted very early on in their RFID journey
for source tagging at the point of manufacture
– it was deemed the most sustainable and cost-
effective way of applying them: ‘for us, source
tagging was the only way we could make this work
in the long term – DCs are too busy and stores are
not reliable enough to do it consistently, especially
at busy times’[R3].
Some companies had considered the extent to
which the tag could and should be incorporated into
the merchandise, such as being sown into the care
label, but this raised two main concerns associated
with privacy and practicality: ‘didn’t want to sow
into garment for privacy reasons and worries about
the impact of the manufacturing process on the
tag[R2]; ‘we did not want
the company associated
with any issues relating to
privacy and data protection
… it would also impact
upon the look and feel of
the product’[R3]. However,
two of the case-study
companies viewed greater
integration of the tag as a
critical next step in their
RFID journey, principally
to deal with the ongoing
problems of accidental
and malicious removal of
the tag.
It was very apparent that most of the companies
had taken a considerable amount of time to test
and refine the design and positioning of the tag
the overarching
philosophy
was focussed
pragmatism driven
by financial probity
– keep it simple
and make it pay
it’s not about
reliability of
the tag per se,
more about
where it is
positioned and
affixed and
whether it is on
the product at
all
Measuring the iMpact of rfiD in retailing
15
and at which point in the manufacturing process
it should be applied. For some of the larger users
(in terms of volume of tags purchased and range
of SKUs being tagged) they had established teams
to advise on tag location and design, including
developing detailed guides for suppliers on how
the tags should be applied. The key message was
that in order for the RFID project to be successful,
the impact of all supply chain processes on the tag,
the way in which particular products will impact
upon tag performance, and where the tags will
be read, needed to be carefully researched and
documented.
Finally, views differed on the extent to which
retailers should be utilising one or more tag
suppliers. Some had opted for more than one
supplier to reduce risk and increase competition
while others regarded this as too complex to
manage and instead preferred to use only one
provider. Clearly, there is no right or wrong answer
and the decision will come down to any given
company’s appetite for risk and ability to manage
complexity in their supply chain.
Reader Technologies
As mentioned earlier, most of the case-study
companies had adopted a relatively straightforward
and arguably simplistic approach to how they went
about capturing RFID-related data within their
businesses, driven by the realities of their own retail
environment, organisational ambition and budget.
The 10 case-study companies had experience of
a combination of five different forms of readers
to enable them to capture RFID data at different
locations and points in the retail process: Handheld
Readers/Wands; Point of Sale (POS) Readers;
Transition Readers (overhead and fixed stations);
Overhead Readers; and Exit Readers (Table 1).
By far the most common were Handheld Readers/
Wands, which were employed by all of the
companies and were provided to store staff. There
were used to perform a number of tasks including
regular stock counts both in the front and back of
their stores and receiving stock deliveries.
Each chosen Handheld Reader/Wand technology
had varying degrees of functionality although giving
the user statistical awareness of the number of
products they were aiming to scan and/or their
progress towards reaching the required product
recognition target was considered very important.
Indeed, one respondent highlighted the operational
necessity of doing this: ‘we needed to get [store]
staff to understand to work to the [company SKU]
target rather than 100% – 100% accuracy generally
costs too much money to achieve in terms of
productivity’[R2]. In this example, overly assiduous
store staff were considered to be spending too
much time seeking a ‘perfect’ SKU score when the
added value to the business of achieving this was
less than the cost of the time it took to deliver:
‘[it is] important to remember that it is not about
getting 100% accuracy, the goal is to meet the aims
of the project – improve on where we were which
was nowhere near 100%!’[R6].
Table 1 Business as Usual In-store Use of RFID Readers
Case-study
Companies
Store Readers
Handheld Transition Integrated
POS Overhead Exit
Pad Overhead
1ü ü
2ü
3ü ü ü
4ü
5ü ü ü
6ü ü ü
7ü ü ü
8ü ü ü ü
9ü ü
10 ü
All 10 5 2 4 0 2
Measuring the iMpact of rfiD in retailing
16
The next most common form of reader in use was
Transition Readers – either a fixed pad/device,
usually at the back of the store, that staff could use
to manually register RFID-enabled merchandise,
or overhead devices that automatically recorded
when tags moved through their read field. For
those companies using this technology, the primary
purpose was to better understand where stock was
located, principally in the front or back of the store.
As will be discussed below, one of the key drivers
of lost sales is stock not being moved in good
time from the back of the store to the sales floor,
generating what some retailers describe as Not on
Shelf But On Stock (NOSBOS) events – lost sales
not because the store does not physically have the
merchandise but that it is not in the ‘right’ place at
the ‘right’ time to enable a customer to purchase it.
Only two of the 10 companies were using overhead
transition readers, with one-half using fixed readers/
pads, which require staff to manually transition/
record stock as it is moved from one place in the
store to another. As will be discussed later, RFID
systems typically work best when the amount of
human interaction in the data collection process is
kept to a minimum, and so overhead readers would
seem a better option. But, all of the companies
that were either using overhead readers or had
tested their use, had significant concerns about
their reliability and cost effectiveness: ‘we asked
ourselves, do we really need overhead readers – do
they work well enough and will they deliver enough
to justify the cost?[R3].
Less than one-half of
case-study companies
had currently invested in
some form of integrated
RFID Reader at the POS
whereby a member
of staff was able to
either scan/read the
product tag just once
as part of the customer
purchase transaction. As will be discussed below,
this point of integration has generated the greatest
difficulties/challenges for many of the companies
taking part in this research, not least because of
complexity and scalability issues, and associated
costs: ‘would love to link to EPOS at some point
but considerable cost involved’[R6]; ‘we looked at
this [linking to EPOS system] but a lengthy project
would be required – would require 23 different
systems to change to make it work’[R2].
Where companies tried a compromise arrangement
at the POS, such as a separate RFID reader,
recording accuracy became an issue: ‘every day
[staff] missed between 3-6% of tags despite all
best efforts’[R5]. Another user had found a similar
error rate: ‘getting a read rate of 90% to 95% at the
checkout’[R9]; and a third found a similar rate in their
trial period that persuaded them it was not a long-
term option for them: ‘had [RFID] pads at POS but
only got 80% read rate. We realised had to go for
integration at POS’[R10].
As can be seen in Table 1, no case study company
had rolled out any form of fixed overhead reader
technology as this stage, although one company
was currently undertaking a concerted trial to
understand whether they might be a viable option
for some of their retail environments in the near
future.
A number of the other companies had explored
the possibility of using fixed overhead readers as
they potentially offer an exciting extension to an
RFID system, effectively removing the need for
staff to carry out any manual scanning of tagged
merchandise, which would lead to considerable
staff productivity savings. But, most were of the
view that it was currently impossible to achieve a
ROI on this technology:
we cannot make the finances stack up. We
reckon the pay back was 13 years but [could be]
up to 26 years for large stores – just not going to
fly[R9]; long way to go with fixed readers but they
will be there in the future[R2].
Where the technology was being trialled,
impressive read rates had been observed but it was
still questionable as to whether either a subsequent
sales uplift due to greater stock accuracy and/
or reductions in staff costs would warrant the
investment.
In terms of reader technology at store exits, two
companies were using this technology across their
retail estate and others had tested them but they
had also come up against issues of read accuracy:
‘a high percentage of [our] products have a metal
component so exit reads were poor – stops them
[Exit Readers] getting a really clean read[R10]; ‘we
have exit antennae but we have had problems
with them – if people walk too fast or it is windy or
people have bags – only getting 70% read rate at
the exits’[R3]; ‘we are getting 85% accuracy at the
readers at the exits’[R8].
we looked at
linking to EPOS
but it would
require 23
different systems
to change to
make it work
Measuring the iMpact of rfiD in retailing
17
As will be discussed later, when the issue of RFID
and Loss Prevention is discussed in more detail,
with the RFID technologies currently adopted by
these case-study companies, getting a reliable read
rate at exits clearly remains a challenge and may
explain why few currently regard RFID as a viable
store security intervention.
RFID Software Systems
The final piece of the ‘technology’ picture25, is the
use of a software system to record, assimilate and,
where possible integrate, the RFID data generated
by the various readers as they capture the presence
and movement of RFID tags in the retail supply
chain. There was a broad range of providers used
by the companies taking part in this research,
chosen for a host of different reasons including:
previous experience, perceived compatibility with
existing systems, price and recommendation.
The integration of RFID data with existing systems
has proved to be one of the biggest challenges
these companies have faced: ‘the integration
issue is still the problem – still a lot of noise’[R10].
Understanding how any proposed RFID software
system will not only meet the objectives of the
programme, but crucially work with the current
business systems was something most companies
struggled with and continue to try and address: ‘we
didn’t think this through enough when we started
and in hindsight we would have chosen a different
piece of software, but we are where we are’[R3].
Starting an RFID Journey
For most of the companies taking part in this
research their RFID journey began with an
understanding of a problem that needed to be
resolved and a recognition of the importance of
gaining cross-functional support from the business.
It was also clear that many of them had worked
very hard to develop a good understanding of how
a RFID-based system might interact within their
given business context and how this would affect
the choice of technologies to be used. Much of
this learning came from undertaking various types
of trials and it is to these experiences that we turn
to next.
Measuring the iMpact of rfiD in retailing
18
Perhaps not surprisingly, given the potential cost
and impact upon the business, all the companies
taking part in this research had undertaken or were
continuing to undertake various forms of trials to
better understand what the value of investing in
an RFID system might be and how it should be
designed to work most effectively within their
organisational eco system. While the participating
companies all adopted different ways in which to
trial RFID, some common themes can be identified,
not least the use of feasibility studies or proof of
concept trials, followed up by more detailed pilot
studies and then development trials.
Proof of Concept Trials
While some of the case-study companies had used
RFID technologies in the past, all felt that it was
important to start out with relatively small-scale
proof of concept trials to understand at a basic
level, whether the proposed technologies would
actually work in their environment. On average
this was undertaken in about 3 stores, usually on
just a few SKUs and was designed to keep store
disruption to a minimum.
At this stage, most companies simply opted
to apply the RFID tags either at one or more of
their own Distribution Centres (DCs) or in the
participating stores, with responsibility for gathering
data undertaken by the project team rather than
store staff. Above all, these types of trial were
mainly about simply understanding whether various
types of RFID technology would actually work
or not and whether they should be used in any
subsequent pilot trial: ‘tried Portals between back
of house and shop floor but didn’t have high read
rates and [so we] abandoned that option’[R5].
While the period of time for these types of trial
varied considerably between the companies,
most were relatively short, in the region of about
3 months, not least because of the cost and effort
involved in undertaking them. It could be that in
the future, as the technology continues to improve
and previous concerns about the reliability of the
technology fade (as has been found in the case
studies presented in this study), then Proof of
Concept Trials may become less necessary and
prospective users are able to begin their RFID
journey with Pilot Trials, skipping this technology
verification step.
RFID Pilot Trials
After this initial feasibility testing, companies
typically embarked upon more detailed trials to try
and answer the following questions:
To what extent will RFID deliver the proposed
improvements in agreed KPIs and achieve an
ROI?
How well or not will the technology work in
various retail settings?
How will RFID operate within current business
processes and what would need to change?
How will staff respond to and use the
technology?
What needs to be put in place to ensure any
future roll out will be sustainable and successful?
Different companies adopted different approaches
to how these trials were carried out with some
lasting many years while others were remarkably
and perhaps regrettably short:
Had to resolve the process-related issues in the
[pilot] stores and 2 months was not enough time
… [store] staff felt overwhelmed by everything
– using different systems; the technology was
completely new to them; they didn’t understand
the unique identification of all products – [it was]
hard to explain why this mattered given how
they had viewed stock in the past; [they] felt like
[it was] more work not less; couldn’t see how it
would help them[R8].
Undertaking a Trial
Measuring the iMpact of rfiD in retailing
19
for most
companies it
was decided that
source tagging
at the point of
manufacture was
the only feasible
way in which
RFID could be
rolled out across
the business
For others, the approach adopted was much more
incremental, designing the pilot phase to identify
whether the RFID system would deliver the planned
improvements in KPIs across different retail settings
and how it would impact upon the business: ‘[we]
needed to systematically and rigorously understand
the people and process elements of the business
and how they will be impacted and or respond to
the use of RFID’[R8].
One respondent described how they gradually
ratcheted up their trial programme to fully test
the potential impact of growing levels of retail
complexity: ‘we started with just a few small
stores with average levels of historical stock
accuracy where we did all the counting …[then]
we progressed to stores where the staff did the
counting … [then] moved on to trying it in bigger
stores with more complex spaces, such as remote
stock rooms and multiple levels’[R9].
For 9 out of the 10 case studies, an early decision
was made that source tagging at the point of
manufacture was the only feasible way in which
RFID could be rolled out across the business
and so many of the trials were designed with
a temporary and
unsustainable tagging
strategy in place,
which invariably
impacted upon the
scale, timing, length
and location of the
trials: ‘the DCs did
struggle to support
the trial’[R8]; ‘we had
entire teams in the
DC just tagging’[R5].
As detailed in the
previous section,
a number of the
technological issues
that plagued previous
RFID trials carried out
in the early to mid
2000s have now been addressed to a fair degree
and so a significant proportion of the learning in
the trials was more about understanding how RFID
would assimilate with business processes and be
understood and used by store staff: ‘the process
and people parts were the hardest – complex
processes and infrastructure in the business … [we]
needed to systematically and rigorously understand
the people and process elements of the business
and how they will be impacted and or respond to
the use of RFID’[R8].
Some retailers also
used pilot trials to
prepare the business
for a future roll out
of RFID, in particular
how staff would be
trained to use the
system and suppliers
would be advised
about tag application.
As will be discussed
below, rolling out
RFID programmes
across large and
complex retail organisations can be challenging and
for some businesses, the pilot phase enabled them
to work through what some of these challenges
might be and how they might best be resolved:
this [trial period] was less about checking the
technology and more about checking the quality
of the roll out materials – the viability of the
distance learning pack, the tagging guide, how
to use the equipment and so on. We were not
going to use face to face training, it was all
going to be online and so we needed to test it
would work[R9].
Given that all 10 companies taking part in this
research have moved to roll out RFID across
their organisations, it can be argued that their
trial process was successful – it enabled them
to generate evidence to support the financial
case for RFID, identified what the impact on the
the process
and people parts
were the hardest
... we needed
to understand
how they will
be impacted
by RFID
Measuring the iMpact of rfiD in retailing
20
business was likely to be, how the system had
to be designed to fit within existing systems
and processes and what the limitations of the
technology were within a given context: ‘trials went
pretty much as we expected … our worst fears
were not realised – tags didn’t fall of as much as we
thought they might!’[R7].
Development Trials
For many of the companies in this study, the roll
out of an RFID system across their business is a
significant but also incremental step in their RFID
journey – a number continue to test new ideas and
technologies to see how the original system can be
built upon and enhanced.
As mentioned previously, most of the RFID
systems rolled out by the companies covered in
this research might best be described as modest –
currently almost exclusively store-based with data
capture mainly reliant upon the active involvement
of store staff and many integration issues yet
to be resolved. But all see this as a viable and
sustainable (financially at least) model upon which
to build future iterations. As such, some companies
financial
prudence that
embraces most
if not all of the
programmes
studied by
this research
will not doubt
remain a key
driver of future
developments
continue to carry out developmental RFID trials
such as testing the use of overhead and transition
readers, ways to
better integrate the
data with existing
systems, and new
ideas concerning
tag performance
and applicability to
a broader range of
merchandise.
While RFID-based
technologies will
undoubtedly evolve
further, it is likely that
these companies
will continue to
experiment but only
where there is a
justifiable business case to be made – the financial
prudence that embraces most if not all of the
programmes studied by this research will not doubt
remain a key driver of future developments.
Measuring the iMpact of rfiD in retailing
21
For all the companies taking part in this research,
the primary objective of investing in an RFID
system was to improve their profitability by reaping
various benefits delivered through having the
ability to more accurately and effectively identify
merchandise as it moved through their retail supply
chains – from point of manufacture right through
to the point of sale and sometimes beyond such as
managing returns.
How this was measured and the ways in which
RFID systems actually deliver these benefits
varied considerably. As with any intervention,
understanding the way in which Key Performance
Indicators (KPIs) – the verifiable and agreed
measures associated with the introduction of
change, is frequently shrouded in rather confused
and confusing terminology26. For instance, KPIs
are metrics that actively measure specific, directly
attributable, planned outcomes related to agreed
goals, but they are often confused with other
variables that are more concerned with measuring
the performance of the intervention – in effect is it
doing what it is supposed to do?27 One company
considered the latter to be Key Performance
Drivers (KPDs), measures of whether RFID
operations are operating correctly and optimally,
such as the reliability of tags or the success rate of
Readers to identify them28. In and of themselves,
they do not directly contribute to the delivery of
a project goal – they are measures of system
efficiency and reliability and not indicators of the
consequence of introducing an intervention.
It is also important to understand the ways in
which KPIs are actually delivered within a business
context and how these are measured. For instance,
the goal of introducing a technology such as CCTV
may be to reduce crime and make people feel
safer. The KPIs might therefore be levels of certain
types of crime and public perceptions of feeling
safe and secure. But understanding how CCTV will
actually deliver any difference in these KPIs needs
to be understood – the ‘Intervention Mechanisms’
and how these are converted into ‘Intervention
Measures’ have to be clearly articulated. For
instance, crime will not be reduced simply because
a camera has been installed on a pole in a public
street – in and of itself it has no impact – it cannot
leap off its pole and arrest a thief! But, crime could
be reduced because would-be offenders who see
the camera may now feel it has become too risky
to commit crime in that area because they feel
they are more likely to get caught. It may also be
the case that crime goes down because more
offenders get caught because the camera operator
is able to raise a physical security response
to a crime scene and the offender is arrested,
subsequently incarcerated and can no longer
commit any further crimes for a period of time.
In the first instance,
crime will be reduced
because offenders are
less likely to commit
crime in that location
and in the second
instance, crime will be
reduced because there
are fewer criminals
around to commit
crime. Either way,
understanding how an
intervention will trigger
mechanisms that will in
turn deliver changes in
KPIs is vitally important
to understand if they
are to be designed and
managed effectively.
Outlined below in Table 2 is a summary of the
KPIs and associated Intervention Mechanisms and
Intervention Measures that could be identified
across the 10 case studies taking part in this
research. It is important to stress that it is an
aggregation of all the companies – none made
use of all the KPIs detailed nor described all the
associated Intervention Mechanisms and some are
based upon the researcher extrapolating from the
comments made by those interviewed. It is also
not intended to be an exhaustive list of all
the possible KPIs, Mechanisms and Measures
that could be associated with the use of an
RFID system.
Measuring the Impact of RFID
understanding
how various
interventions
trigger
mechanisms
that will deliver
changes in
KPIs is vitally
important to
understand
Measuring the iMpact of rfiD in retailing
22
Intervention
Capability KPIs Intervention Mechanisms Intervention Measures
RFID Systems
Increase
Sales
Reduce incidents of out of
stocks.
Increased sales through fewer out of
stocks.
Improve stock availability on
actual and virtual sales floor.
Increased sales through improved
stock availability.
Improve customer satisfaction. Increased sales due to improvements
in customer loyalty.
Improve staff service. Increased sales through
improvements in staff availability.
Reduce
Staff
Costs
Less time spent counting stock. Reduction in staff hours required to
count stock.
Less time spent restocking. Reduction in staff hours spent
sourcing and restocking shop floor.
Less time processing customer
sales.
Reduction in staff hours spent
processing customer sales at
checkout.
Less time protecting products Reduction in hours applying security
tags to products.
Reduce
Stock
Loss
At risk products identified more
quickly.
Reduction in losses through targeting
high-risk products with additional
security.
Fraudulent returns identified
more easily.
Reduction in losses caused by
fraudulent customer returns.
Theft reduction interventions
tested more quickly and easily.
Reduction in losses because new
interventions can be evaluated and
introduced more quickly and cheaply.
Potential thieves identified
exiting the store in real time.
Reduction in losses because thieves
are caught when exiting the store and
product is retrieved.
More thieves deterred because
of increase in perceived risk.
Reduction in losses because thieves
are deterred by perceived increased
risk of being detected when exiting
the store.
Reduction in stock damages
through less overstocking.
Reduction in value of stock either
marked down or written off due to
in-store damages.
More stock delivery inaccura-
cies identified.
Reduction in unknown losses
recorded by stores.
Fewer
Mark
Downs
Fewer products sold at less than
full price.
Increase in profit because better stock
management means fewer items are
sold at a discount.
Reduce
Stock
Holding
Less stock held in business. Increase in profit because company
can hold less stock in the business.
Reduce
Audit
Costs
Fewer full location audits
required.
Reduction in audit costs because
the number of location-specific full
physical audits is reduced.
Table 2 Measuring the Impact of RFID
To improve the identification of merchandise
across retail supply chains
Measuring the iMpact of rfiD in retailing
23
Key Performance Indicators
The research identified six key metrics used by the
participating companies to measure the impact of
using RFID systems:
By far and away the most popular measure used
by the case-study companies was the impact upon
sales/turnover – 9 of the 10 companies explicitly
measured the impact on this metric. For some it
was the only metric that was used and as will be
seen below, a relatively modest improvement was
more than sufficient to generate a satisfactory ROI:
‘for us, only one KPI: increased sales … which
is driven by stock integrity, generating accurate
replenishment’[R4]. The second most popular
measure was the capacity for RFID to enable
businesses to reduce their stock holding without
have any adverse impact upon their operations.
The biggest cost to a retailer is the purchase of
stock and so developing the capacity to reduce the
amount of merchandise within a business clearly
has the potential to produce significant financial
benefits.
The third most used KPI related to the extent to
which RFID could reduce the amount of stock
that was sold at a discount. One of the great
challenges of retailing is ensuring that the right
stock is in the right place at the right time because
this significantly increases the opportunity to
achieve the desired price. When this does not
happen, particularly with highly seasonal and/or
promotional products, inevitably price discounting
has to take place to ensure some value for the
stock is achieved. Because RFID can significantly
help to minimise this margin-erosion problem, it is
understandable why this was a KPI for many of the
companies taking part in this research.
The remaining three KPIs: reducing stock loss,
staffing costs and audit costs were much less
frequently used by the case-study companies –
only two had some form of measure for stock loss
and only one had a KPI for staff saving and audit
costs. In terms of stock loss, as will be discussed
later in this report, most companies did not believe
that their RFID system, as currently configured,
had much prospect for dealing with most forms of
malicious stock loss – the tags were too easy to
remove and the exit reader technology was either
absent or deemed to be too unreliable.
While only one company actively sought to measure
the value of introducing RFID to reduce staff costs,
a number of other companies recognised its ability
to do this in the future and as can be seen in Table
4 below, a significant number had ‘banked’ RFID-
enabled staff time to help deliver improved sales
through better customer service and engagement.
Finally, only one company had reached the point
where they were able to measure the impact of
using RFID on reducing the cost of physical stock
audit. However, a number of other companies
suggested that this was certainly something that
would accrue to them over time as their RFID
systems bedded down and accounting and auditing
practices began to understand and accept the use
of data derived from these systems.
Intervention Mechanisms
As detailed above, RFID in and of itself cannot
deliver KPIs – it is merely a technology that
generates data that can then be used to enable
changes or mechanisms to be triggered, in
this respect, it
is a facilitator
technology. It is
also worth noting
that Intervention
Mechanisms can be
both positive and
spaces can lead to
the displacement of
crime – crime is not
reduced, it is simply
moved to another
location.
The case-study companies also varied in their
ability to measure these mechanisms – some are
inevitably much more tangible and amenable to
measurement than others, such as levels of out
of stocks compared with improved customer
satisfaction (Table 4 below lists those that were
measured). It is also worth noting that while
the overarching KPI associated with one or
Case Study Use KPIs
9 Increase Sales/Turnover
6 Reduce Stock Holding
5 Fewer Mark Downs
2 Reduce Stock Loss
1 Reduce Staff Costs
1 Reduce Audit Costs
RFID in and
of itself cannot
deliver KPIs –
it is merely a
technology that
generates data
that can enable
change
Measuring the iMpact of rfiD in retailing
24
more Intervention Mechanisms was not actively
measured by a company, some still considered the
underlying mechanisms as being part of their RFID
programme. For instance, while most did not have a
KPI for a reduction in staff costs, some recognised
that RFID delivered a staff time benefit that could
be utilised to enable another KPI such as an
improvement in sales or a reduction in stock loss.
As can be seen in Table 2, it was possible to
begin to identify, for each of the KPIs used, the
Intervention Mechanisms that can be associated
with the case-study companies taking part in
this research. It is important to note that this list
of Intervention Mechanisms is not necessarily
complete – it is merely those that were gleaned
from the data collection process for this research.
Increase Sales
Four Intervention Mechanisms were associated
with this KPI: reduced out of stocks, improved
stock availability, improved staff service and
increased customer satisfaction. The link to
improved sales for the first two is relatively
straightforward – if the right stock is not available
on the shelves for customers to buy then clearly
sales will be impacted. As detailed below, some
companies were able to share data on the
way these mechanisms were affected by the
introduction of RFID. The latter two mechanisms
are rather more tangentially linked to increased
sales: by reducing the amount of time staff had to
spend auditing merchandise and restocking,
RFID had enabled staff to potentially spend more
time on the shop floor assisting customers and
encouraging sales.
It was also the case that by ensuring more
customers were able to purchase the products
they wanted at the right time and place (because
RFID had enabled better stock accuracy both in
stores and online), then they may be more inclined
to shop with that retailer in the future and hence
increase sales.
Reduce Stock Holding and Fewer Mark Downs
For both these KPIs, only one Intervention
Mechanism was apparent for each of them – the
reduction in the amount of merchandise held by the
business, either overall or in particular locations,
and the amount of stock sold at a discounted
price. While the former measure was thought to be
relatively easy to calculate, the latter often required
fairly detailed analytics to extract the value added
offered by RFID.
Reduce Stock Loss
While as a KPI it was used by only two companies,
the complexity of the issue generates the most
number of Intervention Mechanisms of all the
KPIs found in this research. In terms of shop theft
(assuming the tag remains on the product and
can be read by a reader), two mechanisms can be
triggered: thieves leaving the store can be identified
and stolen product recovered (assuming there is a
human response available); and thieves are more
likely to be deterred from trying to steal because
they become aware of the potential of the system
to facilitate their detention. In addition, fraudulent
returns are potentially easier to identify (assuming
the original tag is still attached to the product)
because the EPC associated with the returning
product is capable of establishing whether it has
been purchased in the first place.
Case-study companies also identified other
potential Intervention Mechanisms associated with
reducing stock loss, including better identifying
those products more prone to theft (which could
then be better protected with other forms of
security) and being able to test loss prevention
interventions more quickly and easily. Historically,
testing the impact of loss prevention interventions
has been notoriously difficult, principally because
getting reliable and verifiable stock data before,
during and after the intervention has been
introduced has been neither easy nor cheap.
Measuring the iMpact of rfiD in retailing
25
With the introduction of RFID and associated
regular, frequently weekly stock counts, loss
prevention managers can now potentially test loss
prevention interventions much more quickly and
have access to much better data to understand
their impact.
Two Intervention Mechanisms were associated with
having an impact on non-malicious forms of loss: a
reduction in damaged products that are either not
possible to sell or must be sold at a reduced price
(because of an associated KPI – Reduced Stock
Holding), and greater visibility of stock delivery
errors. For the former, typically, if retail stores have
less stock, then they are much less likely to damage
it – store rooms are easier to manage, product is
sold through more quickly and so on. For the latter,
gaining greater visibility of actual stock deliveries
to stores can positively impact upon levels of
unknown stock loss (shrinkage), particularly where
stock can be shown to have not been delivered or
the wrong stock has been sent.
Reduce Staff Costs
While only one company used this KPI, a number
of companies pointed to the use of some of the
associated Intervention Mechanisms as valuable
outcomes of using RFID, and which enabled other
KPIs to be delivered. Most common was the
saving associated with the amount to time staff
had to spend restocking as a consequence of
RFID – it enabled staff to have much better visibility
about not only what needed to be restocked but
also where it was located in the backroom area.
Similarly, a number of companies pointed to the
significant time savings they had accrued because
staff could now count stock so much more quickly,
mainly using the hand-held scanners provided.
Two other mechanisms were identified – less time
required to process customers at the point of sale
and less time required to apply security tags. In
terms of the former, one company in particular had
undertaken detailed analysis to understand the
value of this saving, while for the latter, this was
obviously only the case where RFID was seen as
a replacement to an existing security technology
such as EAS, or had enabled a more nuanced and
selective approach to the number of products
having an EAS tag attached to them.
Intervention Measures
While Intervention Mechanisms provide stepping
stones between an intervention’s capability and its
associated KPIs, there is also a need to understand
the way in which potential Intervention Mechanisms
should be measured to enable the KPI to be
achieved. Table 3 provides an illustration of how
each of the identified Mechanisms have a related
Measure. For the most part, these are relatively
straightforward.
Intervention
Capability
Intervention
Mechanism
Intervention
Measure KPI
improve identification
of merchandise across
retail supply chains
Reduce
OOS
Increase sales
through fewer
OOS
Increase
Sales
Identify
Fraudulent
Returns
Reduce
Shrinkage
Reduce
Stock Loss
Table 3 The Journey from Intervention Capability to Measurable KPI
Measuring the iMpact of rfiD in retailing
26
What is important is to identify how any given
Intervention Mechanism may be measured,
although it is recognised that for some this may
prove challenging and/or impractical to achieve
as part of an RFID programme. In this respect, as
found in this research, while companies may elect
to identify only those Intervention Mechanisms and
associated Measures that are possible to measure
when building a business case, it may well be
worth thinking through what some of the other
more intangible outcomes of introducing RFID
might be as these could be used as part of the
overall business case.
Table 4 below summarises how the case-study
companies varied in the ways in which they actively
recognised the use of both KPI metrics and some of
the underlying Intervention Mechanisms outlined in
Table 2 above.
Measuring Success
While the case-study companies that agreed to
participate in this research were prepared to share
their experiences and detailed knowledge of using
RFID-based systems, only some were willing to
offer an indication of the actual results they had
garnered from their use. This is not surprising given
the sensitivity of some of the data and the growing
view that successfully delivering RFID can be seen
as part of maintaining a competitive edge in an
increasingly challenging economic environment,
particularly as omni-channel retail becomes more
prevalent and important.
It is also worth noting that this study set out to
collect mainly qualitative data, offering a detailed
review of how some retail companies went about
their RFID journey. As such, the data below cannot
be regarded in any way as representative of all
retailers who are now using RFID nor the impact it
has had on their companies – other methodologies
are much more appropriate to achieve this type of
goal29. In addition, companies that were prepared
to share some data, often had different ways in
which they framed their results, partly because
of how they went about measuring the various
metrics relating to RFID, but also because of
concerns about disclosing sensitive information
to a third party. In addition, where data has been
provided, it has not been possible to carry out any
form of detailed verification beyond questioning
those offering the numbers on how the data was
generated (such as timeframe, number of stores,
definitions etc.). As such, the following results
should be treated with a fair degree of caution, fully
recognising the limitations outlined above.
KPIs Intervention Mechanisms Case-study Companies
1 2 3 4 5 6 7 8 9 10 All
Sales/Turnover ü ü ü ü ü ü ü ü ü
9
Improved On-shelf Availability ü ü ü ü ü ü ü
Improved Stock Accuracy ü ü ü ü ü ü ü ü ü
Improved Staff Availability ü ü ü ü
Staff Costs ü
1
Less Time Restocking ü ü ü ü
Less Time Looking for Stock ü ü ü ü
Less Time at POS ü ü
Stock Loss ü ü
2
Stolen Stock Identified Leaving Store ü
More Staff Available as Deterrent ü
Theft Interventions Tested More Easily ü
Mark Downs ü ü ü ü ü
5
Stock Holding ü ü ü ü ü ü
6
Audit Costs ü
1
Table 4 Key Performance Indicators and Intervention Mechanisms
Identified by Case-study Companies
Measuring the iMpact of rfiD in retailing
27
Sales
As detailed above, of the 10 companies
taking part, nine used changes in retail
sales as a measure of the impact of
their RFID programme.
Of those nine, seven
were prepared to share
some data on this
issue, but not always
in a consistent format.
In terms of those that
measured the overall
impact on sales, the
improvement was
typically between
1.5% and 5.5%.
One company was
prepared to say
that for every 3%
improvement in
stock accuracy
they had
experienced a 1%
uplift in sales.
For two companies, they were prepared to share
more nuanced RFID/Sales-related data – the impact
on sales where the explicit use of RFID enabled
genuine Out of Stock events to be more quickly
corrected, either by identifying that stock was in the
back of the store but not in the front, or correcting
current inventory records for a given SKU to zero,
triggering an automated restock. In retailers where
restocking is almost exclusively driven by inventory
records triggering a restock, then this can have
a profound impact on sales. For one of the case-
study companies they calculated that impacting on
these events had generated an uplift in sales of 8%
while for another, it was a remarkable 300%.
If the range of sales improvement detailed above
(between 1.5% and 5.5%) was generalised to
the sales turnover for the 10 companies taking
part in this research, then on this one KPI alone,
RFID could have contributed between €1.4 and
€5.2 billion to their businesses. It is perhaps not
surprising then that for a number of case-study
companies this was the only KPI they needed to
deliver to make RFID a success.
Inventory Accuracy
As detailed above, one of the Impact Measures
contributing to the delivery of improved sales is
inventory accuracy – it was a metric virtually all
of the case-study companies measured as it was
seen as a critical enabler for improved sales. As
has been seen in numerous other RFID studies,
these companies found that their level of inventory
accuracy improved dramatically, typically moving
from somewhere in the region of 65%-75% to 93%
to 99%30.
Out of Stocks/Stock Availability
Far fewer companies were able/prepared to offer
data on the impact of RFID on out of stocks or
levels of stock availability. For those that did share
data, the impact of RFID was again impressive – in
one instance, the percentage of SKUs that were
now available to the consumer increased from the
high 80s to the high 90s, while another suggested
that their stock availability was now in the region of
98-99%. For another case study company, they had
seen a 20% reduction in the number of SKUs being
found to be out of stock while another estimated
that whereas between 15% and 20% of items that
were only out of stock because replenishment had
not taken place from the back of the store, had
been reduced to just 2%.
Stock Holding
The second most frequently used KPI for measuring
the impact of RFID was the extent to which it could
enable companies to reduce their stock holding.
By doing this, retailers can benefit in a number of
ways, including: freeing up working capital/
reducing business borrowing; reducing
the amount of storage space required;
reducing handling
costs; decreasing the
risk of stored product
becoming damaged
and being written off
or reduced in price;
and reducing the risk
of excess seasonal
stock having to be
marked down to
clear. In addition,
the growth of omni
channel retailing
and the associated
need to ensure
stock availability
when a consumer
is shopping online
and may request a pick
SALES
INCREASED
€1.4
billion
€5.2
billion
1.5%
5%
Size 32
(01)95012345678903(21)00123
2%
13%
STOCK HOLDING
REDUCED
(01)95012345678903(21)00123
Size 16
Measuring the iMpact of rfiD in retailing
28
up in a particular store, has led to some retailers
holding additional ‘buffer’ stock to compensate for
possible errors in inventory records.
By offering the prospect of much improved stock
visibility and integrity, RFID was viewed as a
valuable tool in enabling many of the case-study
companies to reduce their levels of stock holding.
Of the six companies prepared to share some data
on this issue, five had experienced a reduction in
stock holding between 2% and 13%, with the other
company declaring that RFID had enabled them to
reduce their total number of SKUs by 17%31.
Stock Loss
As discussed elsewhere in this report, few of the
companies taking part in this research
regarded their RFID programme as
offering much current potential
to actively deal with
the issue of stock loss.
Only two suggested
that it was a KPI
they were actively
measuring, although
only one was
prepared to share
any numbers on
this topic. For
this company,
they attributed a
15% reduction in
their shrinkage
number due to
the introduction
and use of RFID,
mainly due to
more thieves being deterred by
the interactive nature of their exit controls (store
guards were provided, via a handheld device, with
an exact description and picture of the products(s)
leaving the store that had not been purchased), and
a reduction in process-related losses due to greater
stock visibility.
Mark Downs
While one-half of the case-study companies
suggested that they had used the impact on the
number of products that were marked down in
value as a measure of the performance of RFID,
none were prepared to share any data on this KPI
because of issues of commercial confidentiality.
Given the relatively high number of companies
opting to measure this metric, it can be assumed to
be important, but to what degree, remains an open
question.
Audit Costs
There was only one company that claimed to be
using the savings in inventory auditing costs as a
measure of the contribution of RFID, although quite
a few others suggested that this was something
they were either in the process of reviewing, or
were looking to better understand how their audit
procedures may change in the future, particularly
as confidence in the quality of RFID data grew and
external auditors become more willing to utilise it32.
The costs associated with undertaking physical
stock audits can be considerable, especially when
third party companies are employed to undertake
this work on a regular basis. But even when it is
done internally, it can still generate real costs such
as having to pay overtime to store staff to complete
the work, sometimes the closure of stores while
the stock counts are undertaken and disruptions
in stock movements when distribution centres are
audited. So, the ease of undertaking stock counts
offered through the use of RFID could potentially
deliver some considerable costs savings.
While the company measuring the reduction in
audit costs was not prepared to share specific
data, they indicated that as a consequence of
introducing RFID, they were now moving
from undertaking physical audits once a
month to just once a year,
claiming to save 75% of
the budgeted staff costs
for this activity.
Staff Costs
Only one of the 10
case-study companies
had decided to
explicitly measure the
performance of their
RFID system based
upon anticipated
savings in staff
costs, although
others recognised
that it could enable
staff to have more
time to undertake
STAFF COSTS
REDUCED
4%
(01)95012345678903(21)00123
Size 10
Measuring the iMpact of rfiD in retailing
29
other activities such as helping customers and
driving sales. By introducing RFID, this company
estimated that they had been able to reduce their
store staff costs by about 4%. If this were to be
replicated across the case-study companies, then it
could lead to a RFID-related saving in the region of
€378 million33.
Key Performance Drivers
While KPIs are intended to directly measure the
impact of a given intervention, it was clear that
many of the case-study companies were also
collecting and reviewing a series of other indicators
that were more concerned with measuring whether
RFID was both operating as planned and being
used as intended by staff. In this respect they
can be regarded as ‘health’ indicators of the RFID
system, monitoring its capacity to deliver the
relevant Intervention Mechanisms and associated
KPIs34. These varied considerably between case-
study companies and included indicators such as:
Tag reliability – both the ability to be read and to
remain attached to merchandise.
Read rates – the performance of RFID readers,
both in terms of consistency and speed.
Frequency and accuracy of store RFID audits,
including different merchandise locations.
Frequency of store inventory updates based
upon RFID-derived data.
Accuracy of in-store tag application (such
as dealing with merchandise that has been
returned).
For many of the
companies taking part
in this study, the use
of these KPDs was
particularly important
in the trial phase of
their RFID journey –
understanding how
well and in what
circumstances the
technology would
function for instance. But
for some companies, they
are important measures
to monitor to ensure RFID
remains fit for purpose
and able to continue delivering the planned benefits
to the business35. As one respondent noted: ‘it isn’t
plug in and forget [technology]… we needed a team
behind it and we need to keep making incremental
improvements to get better and better’[R1].
It is also worth noting that none of the case-study
companies explicitly mentioned any ongoing
measurement of consumer concerns relating
to privacy, such as requests for RFID tags to be
‘killed’36. It could be that previous speculation about
levels of consumer concern relating to this issue
were overblown, or consumers now no longer view
it as a problem, or they simply do not know that
RFID tags are being applied to the products they
are purchasing. More research would be required
to satisfactorily answer this question, but anecdotal
evidence collected from the companies taking part
suggest that consumer concerns about privacy
relating to the use of RFID tags were almost non-
existent.
Return on Investment
For those thinking about embarking on an RFID
journey, the key question is of course whether this
investment will be worth it – will it ‘wash its face’ as
one respondent put it?37 Perhaps not surprisingly,
given how the case-
study companies
viewed the sensitivity
of data relating to a
considerable number
of the KPIs discussed
above, none were
prepared to share explicit data on the ROI on
their RFID project. The only numbers some were
prepared to share related to the length of time it
was anticipated the project would realise a positive
return and whether this varied with reality: ‘the
plan was three years and the ROI was achieved
in two’[R10]. For, others it was as expected: ‘a two-
three year pay back was planned and expected’[R10].
While it would have been interesting to have greater
financial detail about the ROIs experienced by these
companies, perhaps the most important measure
is the fact that all 10 companies were unequivocal
in their assertion that the ROI had been achieved,
and based upon their trial experiences, further
roll out across the business was fully justified and
largely embraced with considerable enthusiasm and
optimism: ‘the reaction of the business has been
overwhelmingly positive’[R7].
it isn’t plug
in and forget
technology…
we needed a
team behind it
and we need
to keep making
incremental
improvements
to get better
and better
the plan was
three years and
the ROI was
achieved in two
Measuring the iMpact of rfiD in retailing
30
Measuring the Impact of RFID
In and of itself, RFID will not deliver any benefits
to a retailer that decides to invest in it – it is very
much a facilitator or enabling technology, creating
the opportunities for benefits to be accrued. It is
also important to distinguish between KPIs and
KPDs – the former focus upon tangible metrics
of the benefits RFID can provide, while the latter
are measures of its capability to deliver them. In
addition, while KPIs are the desirable outcomes of
an intervention, it is not always clear how
they will be delivered and so it is important to
identify the underlying Intervention Mechanisms,
and associated Measures that enable them to
be realised.
The companies taking part in this research, opted
for a range of KPIs although three were most
evidently in use: an increase in retail sales, a
reduction in stock holding and a reduction in the
volume of merchandise
marked down in price.
Where data was able
to be shared, it seems
clear that a persuasive
ROI was highly
achievable, often with
only a very modest set
of KPIs – the business
case for investing in
RFID seems clear and
unambiguous. The
next part of this report
will now focus upon
how these companies
went about obtaining
this benefit through rolling out RFID across their
organisations.
all of the
companies were
unequivocal that
the ROI had been
achieved and
therefore further
roll out across
the business was
fully justified
Measuring the iMpact of rfiD in retailing
31
All the companies taking part in this research had
taken the decision to roll out some form of RFID
system after their initial trial periods although they
varied in the extent to which this had happened.
This section looks at their experiences of the roll
out phase of their RFID journey including issues
relating to the training of end users and what
impact if any, the introduction of this technology
had on policies and practices relating to carrying
out physical stock audits.
Making the Case
As detailed in the previous section, all of the
companies were able to generate a sufficient ROI
to persuade the broader organisation that it made
sense to roll out RFID:
‘it was pretty clear what
direction the company
wanted to take … just
based upon one KPI
it was sufficient to
persuade the business
to roll it out’[R3]; ‘the
reaction of the business
has been overwhelmingly
positive’[R9]. Most
companies had to build a revised business case
for the roll out although the positive numbers
generated by the trials typically made this a
relatively straightforward task: ‘[we] had to build a
new business case to roll out across the estate – it
was not a difficult sell, [there was] real momentum
at Board level – [they] wanted to invest in it’[R7].
Planning the Roll Out
Companies varied in the degree to which the roll
out was planned and the pace at which it happened
– for some, organisational enthusiasm to reap the
promised rewards led to what some respondents
considered to be overly accelerated roll outs: ‘my
advice would be don’t do a tight and fast roll out –
business wanted to keep to their original deadline,
but maybe do it more slowly!’[R10]. Another retailer
echoed this view: ‘Roll out was too quick, it was
like trying to build a car while racing it down the
highway!’[R3]. Planning and business preparation
was key, particularly for some of the companies
that were rolling out across multiple countries: ‘we
rolled out across 17 countries in 800 stores!’[R5].
For most, the issue of moving to a source tagging
model required the greatest level of advanced
business planning: ‘we had to start the tagging
process one year
before roll out’[R5];
‘it will take about
1.5 years for roll out
to be complete to
take account of the
various seasons of
merchandise that will
be source tagged’[R2].
As detailed earlier
in this report, such
fundamental changes
required careful co-
ordination and cross
functional buy-in to the
roll out programme
to make it a success,
not least from the
Buying function
that would typically
negotiate contracts
with suppliers, especially where the cost of the
RFID tag moved from being part of a trial budget to
being regarded as part of business as usual. Timing
was also an issue for some of the companies, not
least ensuring that the roll out timetable did not
clash with peak retail times such as Christmas: ‘it
was a failure, time frame was too short, and the
implementation team had become complacent …
didn’t provide the proper support and training; it
was the wrong time’[R6].
Rolling Out
For virtually all of the companies taking part in this
research a key element of the roll out was dealing
with legacy stock, primarily in the retail stores, to
ensure that an RFID tag was retrospectively applied
to the applicable merchandise. Various approaches
were adopted such as organising ‘tagging parties’
in stores to encourage staff to actively participate,
or sending third party support to assist staff in the
tag up process. Either way, an important part of the
roll out programme was planning and delivering
a strategy to ensure selected current stock could
begin to be identified by the RFID system.
Rolling out RFID
just based
upon one KPI it
was sufficient
to persuade the
business to roll it
out
we had to
start the source
tagging process
one year before
roll out; it will
take about 1.5
years for it to
be complete
in order to take
account of the
various seasons
of merchandise
Measuring the iMpact of rfiD in retailing
32
For some companies there was also considerable
work to be done to deal with certain store
environments that presented challenges to the
effective implementation of RFID: ‘80% of roll out
was straightforward – the remaining 20% of stores
were challenging for a number of reasons – lacking
Wi-Fi, layout, construction of buildings and so
on’[R1]. The limitations of RFID technologies are well
known and most of those companies that were
interested in being able to differentiate between
stock held in the front and back of the store quickly
recognised that as part of the roll out process,
some form of shielding needed to be installed to
remove the possibility of ‘data bleed’, where tags in
one location were inadvertently read and assumed
to be present in another location. This took the form
of special paints and coverings being applied to the
walls separating the sales floor from the backroom
areas (only visible in the backroom areas and not on
the sales floor).
Training and Awareness
A key part of any roll out is ensuring that the
staff who will be using and interacting with the
technology are provided with sufficient awareness
of why it is being introduced together with training
on how to use it: ‘you have to explain that it will
actually reduce workload – it will help you [the
member of staff] to do things better or do other
things for the customer’[R4]. Another company
reiterated this point:
you know, we had to educate staff as to why it
becomes important to tell a system when they
are moving stock around – they had never done
this before. We had to spend time explaining
to staff why RFID is a benefit to them … will
be able to replenish more effectively, customer
experience will be improved… we made good
use of examples from the trial stores[R7].
So, obtaining staff buy in to RFID was very
important, but providing training was also key and
something that a few of the companies felt could
have been improved: ‘training was the big issue.
Training could have been better in the roll out[R10];
Checkout staff required more training than we
first realised’[R5]. Others, however, recognised its
importance and spent a considerable amount of
time and resource getting it right and sustainable:
‘whatever you do, invest in training materials
for store staff and remember staff turnover, you
won’t regret it!’[R9]. As mentioned previously, one
company in particular, incorporated the design
and delivery of training programmes into their trial
process to ensure it was fit for purpose, assessing
staff reactions to the e-learning materials they had
developed and whether they were sufficient to
enable staff to begin to use the technology without
any actual face-to-face external training.
Impact on Audit
As discussed in the previous section, reducing the
cost of physical audits is one of the possible KPIs
when an RFID system is introduced – the theory
being that automated and semi-automated RFID
counts could replace existing physical inventory
audits undertaken by either third party companies
or store staff. The
reality for most of the
companies taking part
in this research was that
their roll out plans saw
little immediate change
in current practices.
Some of this was due to
ongoing concerns about
the veracity of the RFID
data: ‘we are planning
to move to 2 physical
counts a year from 4
– but we don’t believe that we are still sufficiently
confident in the RFID data to get rid of them
[physical audits]’[R3]. For others it was an issue with
how their external Auditors viewed RFID data:
[the] Auditors have not yet agreed to use RFID
counts instead of physical counts[R7]; external
audit companies still require physical counts.
Still relying upon the old inventory system
for audit reasons – accountants have not
whatever
you do, invest in
training materials
for store staff and
remember staff
turnover, you
won’t regret it!
Measuring the iMpact of rfiD in retailing
33
adopted the RFID data yet – hopefully, these
[requirements] will no longer be necessary – our
next big project![R10].
However, some clearly had a transitional strategy
in place: ‘still doing twice yearly physical audits in
house but the external auditors are now beginning
to accept the idea of RFID counts’[R4]; ‘[we] will
be moving from two
[audits] to one per
year … negotiating
with auditors
to accept RFID
counts’[R4]. For one of
the companies the roll
out programme had
already secured a significant change and saving in
audit costs: ‘we are moving from once a month to
once a year – 75% reduction in staff audit hours’[R2].
Given the not inconsiderable costs associated with
undertaking physical audits, and the clear potential
for RFID systems to provide at least equivalent and
arguably more reliable stock counts, it seems that
future roll out programmes should take account of
how this process might evolve.
Living with RFID
A number of the companies participating in this
research reflected on their post roll out experience
and the ongoing commitment required to manage
RFID systems:
it isn’t a plug in and forget technology … you
need to continue to make investments in
processes and support, which is something we
didn’t do as an organisation. We rolled it out and
said we are done without realising we needed
a team behind it and we need to keep making
incremental improvements to get better and
better[R3].
Others agreed about the need for RFID systems
to be continually monitored and managed: ‘the
challenges of RFID don’t go away, you need to
keep managing it’[R4]. Understanding this ongoing
commitment was part of most of the roll out
business cases of these companies, but not all
and as part of this, some reflected upon the data
consequences of rolling out RFID: ‘it [the roll out]
has made us realise that we need to get a data
lake sorted out’[R3]; ‘data synchronisation is key but
difficult – integration is so difficult to get right and
we continue to learn and work on it[R10].
It became clear from all of the companies taking
part in this research that the issue of integration
was one of their biggest challenges on their RFID
journey and so the next section of this report will
now consider this in more detail.
the challenges
don’t go away,
you need to keep
managing them
Measuring the iMpact of rfiD in retailing
34
This is the topic that united all of the companies
and generated the most exasperation when
respondents were interviewed for the research:
was it easy to integrate NO, definitely not! It
took a long time, there was a lot of resistance
towards integration[R7]; data synchronisation is
key but difficult – integration is so difficult to get
right[R4]; data integration? We have not found it
easy[R6].
Part of the challenge came from perhaps
understandable concerns from the business about
the potential impact on existing systems and day-
to-day operations essential to profit generation:
‘we were not allowed to interfere with the existing
sales process at the checkout – [the business
wants] change without change!’[R8]; ‘the business
was worried about being dependent on the new
system’[R4].
There were three areas that were considered to
offer particular challenges: connecting with supply
chain systems (such as DC inbound data), the main
retail stock system (ERP), and the store point of
sale system (EPOS), with the last of these being a
potentially crucial data collection point in the RFID
journey. Only four of the companies taking part
in this study could be regarded as having a fully
integrated RFID interface at the POS, where store
staff have a single-step process for recording the
transaction and the EPC38 code. For others it was
something they would like to do but cost remained
a key stumbling block:
The RFID system is pretty much standalone –
would love to link to EPOS at some point but
considerable cost involved’[R1]; The POS element
was a real struggle. [We] have RFID pads at the
POS – every day [staff] miss between 3-6% of
tags despite all best efforts[R2]; we looked at
using a EPC barcode [to get around the problem]
but a lengthy project would be required – would
require 23 different systems to change[R5].
While the issue of mis-reads at POS or not having
the capacity to record RFID tags as products are
purchased did not necessarily affect the ability of
some case studies to deliver their overall ROI, it
did mean that for some, data fixes had to be put in
place to ensure subsequent SKU counts remained
accurate: ‘when an RFID transaction takes place [at
the checkout] …we had to find a way of updating
the RFID system – it works but it is not perfect’[R5].
For another retailer, the desire to deal with the issue
of fraudulent returns is requiring a POS intervention
that will use a 2d barcode rather than an RF reader
because the costs of getting the former to work
was considerably less than the latter.
Getting Systems to Talk
Part of the problem came down to the nature
of the data that flows in most existing inventory
systems compared with that generated by RFID
systems: ‘the existing system struggled to cope
with the degree of detail offered by RFID, [it was]
not able to move from style level to item level[R7].
For another company it was when the data was
created: ‘one problem is that the RFID data is in
real time while the other data is daily – which data
is correct at any point in time?’[R4]. But perhaps
the biggest challenge was for those businesses
where less than 100%
of all merchandise was
RFID tagged: ‘it’s hard
to integrate systems
unless you have a 100%
tagging strategy[R8].
This inevitably leads
to multiple data flows
as non-RFID and
RFID-tagged products flow through the retail
supply chain: ‘we still have two information flows
– RFID and traditional data inventory flows – they
communicate with each other, but they are still
separate. It is a very gradual process of introducing
the technology to the business’[R9].
The Challenges of Integration
it’s hard to
integrate systems
unless you have
a 100% tagging
strategy
Measuring the iMpact of rfiD in retailing
35
Other respondents echoed this approach: ‘the RFID
system is separate to the legacy system with the
former providing data to the latter. The RFID data
overrides the legacy data. The EPOS system is
separate to the RFID system[R5]. A third interviewee
also flagged up this issue: ‘have a parallel data
system – RFID data flows into the existing system
but could just revert back to using EAN codes at
the checkout. [We have] found it very difficult to
integrate[R4].
Dealing with this issue clearly generated much head
scratching for many of the RFID implementation
teams in these companies:
had to create work around hacks, so we created
middle wares to try and connect the two,
definitely not a perfect system and there are
definitely some risks and opportunities for errors
to happen’[R7]; had to create translation tables to
ensure RFID fitted with existing ERP (Enterprise
Resource Planning)[R8].
For some the choice of
system to manage the
RFID data was an issue:
‘the integration issue is
still the problem – still
a lot of noise. Next
version of software
will improve things,
but the software has
been our limitation –
integration has been
our real issue with the
business model’[R7].
For one company in
particular, the degree
of complexity and
challenge presented
by integration issues
had raised questions
about their ability
to successfully roll
out RFID across the
business:
now trying to extend to more and more stores
but have not put the resource in to fix the data
integration issues. Wouldn’t say we have lost
control but this has become a major point of
potential failure[R10].
Even where a company had made the commitment
to go for full integration, it was clear that it had not
been an easy journey:
we have a completely integrated system –
integrated with EPOS and inventory system. It
was a complex process to get right – in my view
most of the POS companies do not know how to
do it. We have not found it easy[R6].
So, it would seem that for most of the companies
taking part in this
research the issue
of data integration
represented probably
the biggest challenge
in their RFID journey
– how to bring RFID-
derived data into
alignment with existing
systems in a way that
was cost effective
and kept disruption to
a minimum. As with
the introduction of an
RFID system itself, the
general advice would
be to carefully review
how RFID-related
data integration will
interact with, and impact upon, existing systems
and processes, and adopt a relatively modest
incremental approach that takes account of them.
Furthermore, it seems very clear that understanding
what the initially defined aims and objectives of
any proposed RFID system will require in terms of
data integration with existing business systems
should be part of the very early stages of the
planning process. However, what is also clear,
despite the problems highlighted above, is that full
data integration is not always necessary to enable
a satisfactory ROI to be achieved – for some of
the companies, relatively limited use of the data
emanating from their RFID system still generated
more than enough value to warrant its use. For
these companies, part of the ongoing RFID journey
is to understand how greater integration can be
achieved over time and in a way that continues to
make financial sense.
the integration
issue is still the
problem – still
a lot of noise.
Next version of
software will
improve things,
but it has been
our limitation –
integration has
been our real
issue with the
business
model
understanding
what the aims
and objectives
of any proposed
RFID system
will require in
terms of data
integration should
be part of the
very early stages
of the planning
process
Measuring the iMpact of rfiD in retailing
36
While only two of the 10 case-study companies
set out with the explicit aim to utilise their RFID
system to impact upon retail loss, it is a topic that
has frequently been discussed when considering
the potential use cases of RFID39. It is therefore
worthwhile reviewing why, for the most part, the
companies taking part in this research largely
eschewed its use to deal with retail losses.
Loss Prevention in Context
One of the great
challenges of managing
retail loss is the lack
of precise data on
its causes, making
the development of
ameliorative actions
more akin to guesswork
than calculated
intervention. The reason
why the causes of most
losses remain unknown
is due to the way in
which loss or ‘shrink’
data is often generated.
Typically, a retailer’s
shrink number will be
calculated when periodic
physical stock audits
are undertaken, which
reveal the difference
between the amount of stock (either in terms of
value or number of items) the system thinks the
business should have on hand (based upon the
difference between the amount of stock acquired
versus the amount sold through checkouts), and
what is actually present. The discrepancy is ‘shrink’,
often expressed as a percentage of the total
amount. So, a company that buys 100 units and
sells 80, with 10 remaining in stock has a shrink
rate of 10% – 10 items have gone missing. Because
there is very often a time lag between when an
item has gone missing and when a physical audit
takes place that recognises the loss (for those
undertaking annual audits, it could be up to a year),
it can be very difficult to know why it happened. Did
the item ever arrive at the store? Was it returned
to the supply chain but the transfer not recorded?
Did a customer steal it? Did a member of staff
steal it? There are many reasons why losses may
occur but very often because of the data time lag,
ascertaining the root cause is almost impossible.
Given this, the potential for RFID systems to
generate stock level data much more frequently
(most of the case-study companies were
generating RFID data every one to three weeks),
and for some, enable awareness of product
location, then impacting on retail losses would
seem like an excellent opportunity. However, hardly
any case studies in this research actively used
their RFID system for managing retail losses. A
number of factors emerged to explain why this
was the case, although it is worth noting that one
of the companies was much more proactive in this
respect and sought to use the data from their RFID
tags to identify and react to non-purchased product
exiting their stores, but they were very much in the
minority.
Vulnerability of Tags
Perhaps the most significant challenge respondents
identified was the relative fragility of the RFID
tags they had decided to use – swing tags and
simple stickers – which made them very easy to
remove by a would-be thief and hence not activate
security gates at the exit: ‘tag is easy to defeat –
it’s the right tag for our
products for selling but
not for security’[R6]; ‘[we]
realise the tag is only any
good with opportunistic
thieves[R8].
Evidence from other
studies has certainly
shown that the type of
security tag being used
can influence the degree to which some types of
thieves are deterred, with hard Electronic Article
Surveillance (EAS) tags generally being regarded
as offering a more effective deterrent potential40.
This raises an interesting organisational conundrum
when it comes designing and implementing an
RFID system. To what extent do you want RFID to
replace an existing hard tag EAS system, which is
likely to be applied in-store and often on selected
products41? Interestingly, one of the case-study
Loss Prevention and RFID
one of the
great challenges
of managing
retail loss is the
lack of precise
data on its
causes, making
the development
of ameliorative
actions more akin
to guesswork
than calculated
intervention tag is easy
to defeat – it’s
the right tag for
selling but not
security
Measuring the iMpact of rfiD in retailing
37
companies started out using a hard RFID tag
applied in store, potentially getting both the stock
visibility data benefits combined with the risk
amplification attributes of an existing EAS hard tag.
But, the in-store tag application process was found
to be difficult to deliver consistently, particularly
when the stores were busy and the programme
was rolled out to bigger outlets, which undermined
the efficacy of the stock visibility data.
While there are companies that have utilised a
RFID-enabled hard tag applied away from the
store environment (either in DCs or at the point
of manufacture) that did not participate in this
research, the primary goal of the case-study
companies was finding a cost-effective way of
improving stock visibility. For them, source-tagging
utilising a once-use swing tag/sticker offered a
cheap and relatively simple supply chain solution
compared with the alternative of a multi-use hard
tag that inevitably needs a more involved supply
chain-driven recycling process.
Deciding what approach is best will be a very
company-specific decision based upon the nature
of the products being stocked, the design of the
supply chain, the capability of the manufacturers
and above all, the extent to which controlling
shrinkage is seen as a primary goal for the
investment. Certainly, for the companies taking
part in this research, the additional complexity and
cost of applying a RFID-enabled hard tag made
opting for swing tags and stickers a much more
compelling business case for them.
It was also interesting to note that for two
companies, they purposefully did not want their
RFID tags and stickers to be regarded as a ‘security’
tag because they were concerned about would-be
thieves deciding to remove/destroy the RFID tag
prior to leaving the store (in an attempt to evade
detection), which in turn would negatively impact
upon stock file accuracy:
only using RFID as a loss detection tool and not
loss prevention. We don’t want thieves to realise
that it is the RFID tags that are offering security
because they will begin to remove the tags and
we will lose [stock] accuracy[R1]; don’t want RFID
tags to be viewed as security tags – will affect
stock accuracy. Not a high priority to link to EAS
podiums[R10].
Again, trying to utilise the chosen technology for
security was seen as potentially undermining the
primary goal of the system – stock integrity.
Exit Gate Reliability
For those companies that had opted to use their
RFID tags as a form of EAS, or had tried them as
part of their trial process, they also faced challenges
trying to read the tags at store exits: ‘exit reads are
poor’[R6]; ‘the theft antennae are not performing
well, they cannot capture accurate loss numbers
well’[R3]. As detailed earlier, companies using this
technology were getting read rates of between 70%
and 80% and this was confirmed by store visits
where staged attempts to remove unpurchased
product revealed that on occasions, this rate could
drop to as low as 60%. There is certainly much
developmental work underway to improve the read
rate of overhead/exit readers, but for now, few of
the case-study companies were prioritising the
reading of tags as they exited their stores.
Impacting on the Shrinkage Fog
As detailed earlier, one of the potential loss
prevention-related benefits of RFID was delivering
greater product transparency concerning where
and when stock loss was occurring. On this, case
studies had very mixed views, no doubt largely
influenced by the degree of data integration they
had achieved. For some, RFID had done little to lift
the fog surrounding their shrink number:
feel that the shrink number got more complex
– added new forms of admin shrink. Find it
hard to zone out store errors from the shrink
numbers[R6]; it [RFID] has not really provided
any great insights into better understanding
shrinkage and loss – we need more integration
and scale before it might make a difference[R10].
Measuring the iMpact of rfiD in retailing
38
But for others, it had provided them with greater
clarity about what the causes of the lost might be:
‘I think RFID reduces the shrink fog – it helps to rule
out many process-based causes of shrink’[R9]; ‘RFID
has enabled us to iron out all the obvious system
glitches that caused some shrinkage – most of the
store losses are now malicious’[R2]. Certainly, where
the RFID system is able to reduce the amount of
‘unknown stock’ in the store, through identifying
errors inherited from the supply chain, then it can
play an important role in helping to reduce the
volume of non-malicious losses recorded by stores.
As mentioned above, these rather contradictory
views on the impact of RFID on awareness of
the scale and extent of retail losses can be partly
explained by the degree of integration and the
capacity to capture data movement across the
supply chain, but it is also a function for some
of tag penetration in the business. If you have
less than 100% of SKUs tagged, then inevitably
there will be dual data flows within the business
– one for non-RFID-tagged product and another
for tagged SKUs. In addition, the continuation of
manual counts for RFID enabled products and how
this data is assimilated, can actually, make it more
challenging and complex to fully understand the
overall shrinkage and loss picture in a retail store.
Enabling Innovation
A particularly interesting development for one
retailer was the ability to test store interventions
more quickly and
cheaper than ever
before: ‘weekly stock
counts give us huge
insights – we can now
test ideas in the stores
really quickly and
cheaply’[R2]. Measuring
the impact of any loss
prevention-related
intervention has always
been a difficult and
involved experimental
process, requiring the careful manual counting of
stock before, during and after an intervention has
been introduced, and comparing this with identical
data collected in control stores, to understand what
loss had occurred and what could be attributed to
the intervention rather than random change. Where
stores are now counting stock on a weekly basis
as part of BAU, then measuring the impact of an
intervention becomes a much more straightforward
process and opens up the prospect of not only
identifying loss prevention interventions that might
actually work to reduce loss, but also being able to
fine tune them to meet the specific circumstances
of particular store environments42.
Identifying Hot Products and Amplifying Risk
Finally, it is interesting to note how some
companies were beginning to use RFID-driven data
as a loss prevention
facilitator – helping
them to identify ‘hot
products’ (those
regarded as much
more likely to suffer
from loss) and giving
staff more opportunity
to become guardians
of control, amplifying
the sense of risk for
would-be thieves. In
the case of the former,
hot products were targeted with more traditional
forms of security such as hard EAS tags, while in
the latter, staff now had more time to be on the
shop floor because RFID had reduced the time it
took to complete other tasks, such as restocking
and stock counting. They could then engage more
with would-be customers and prospective thieves,
encouraging sales and deterring theft: ‘store staff
now have more time to act as a positive deterrent
to theft because the time spent restocking is much
less’[R3].
There is certainly a significant body of evidence
to suggest that engaged and engaging store staff
are one of the most effective loss prevention
tools a retailer can deploy and so this particular
Intervention Mechanism, while difficult to
accurately measure, may well be RFID’s most
important contribution to controlling malicious
forms of retail loss43.
store staff
now have more
time to act as a
positive deterrent
because the time
spent restocking
is much less
weekly stock
counts give us
huge insights –
we can now test
ideas in the stores
really quickly and
cheaply
Measuring the iMpact of rfiD in retailing
39
One of the great benefits of not being an early
adopter of a particular technology is the opportunity
to learn from the experiences of those brave souls
who decided to be pioneers! This section of the
report brings together the many and varied lessons
learnt by the 10 case-study companies as they
progressed on their RFID journey.
Understand Your Business
Not unlike any change management project in
retailing, planning is a fundamental part of the
process and for some taking part of this research,
they felt that they could have done more: ‘[we]
didn’t plan well enough, particularly in terms
of impact on current
systems[R2]; ‘the biggest
challenge is doing the
change management…
this is something we
underestimated at the
beginning’[R3].
As detailed earlier,
initiating an RFID project
is now perhaps more
about evaluating how
current processes and
business practices
will be impacted than it is navigating a series of
technological hurdles. Indeed, one respondent
advised against becoming overly influenced by the
latter: ‘don’t let the technology provider dictate
what you should be doing – they often want
the business to change its processes to fit the
technology’[R5].
Carrying out detailed process mapping of the
products that will be included in the project is
key, including understanding what really happens
throughout the supply chain: ‘we found that at busy
times, staff cut corners – we needed to understand
how RFID would work in the real world’[R8];
‘we wish we had mapped the store processes
more clearly to understand all the exceptions
and the problems staff might encounter using
RFID’[R9]. In this respect, a number of respondents
recommended that early involvement of
representatives of end users was important: ‘make
sure those who will be using it and understand the
processes, are involved from the start’[R6].
It is also important to understand your business in
terms of the ways in which the physical estate may
impact upon the successful introduction of RFID:
‘recognise the limitations imposed by your physical
estate – shielding, Wi-Fi coverage and so on[R6].
Many of the companies taking part in this research
came up against, and continue to be challenged
by, their retail environments, and so it is critical that
this is taken into account when planning a RFID
project.
Clearly Articulate the Need
Respondents to this research also stressed the
critical importance of thinking through the extent
to which RFID will be
used in the business:
‘think about how far you
want to go with RFID
– we will never get to
100% tagging because
some assortments do
not make it possible –
fast moving, short term
sales items, very small
items’[R6]. They also
recommended keeping
a clear and determined
focus on what needed
to be improved in the
business, rather than
potentially becoming
side tracked by the
technological components of the project: ‘need to
understand the current processes – you have to
keep asking yourself the question: what do I need
to improve and will RFID deliver this improvement
or can something else do this?’[R3].
Ensure Board Level Support and Engage
Stakeholders
The role of senior management in both the initiation
and subsequent delivery of an RFID project is
key – without their support it is unlikely that it will
succeed. In addition, case-study companies were
unanimous in emphasising the need to secure
cross-organisational support for their RFID initiative:
‘work hard on engagement in the company – worth
the investment’[R8]; ‘use stakeholder analysis to
identify all your key players in the business and
Learning Lessons
we didn’t
plan well
enough,
particularly in
terms of impact
on current
systems
you have
to keep asking
yourself the
question: what
do I need to
improve and will
RFID deliver this
improvement or
can something
else do this?
Measuring the iMpact of rfiD in retailing
40
how they might feel about being involved in a
project’[R7]; ‘Involve more people at the beginning,
particularly those that are resistant (finance and
production)’[R4]. As detailed earlier, most RFID
projects cut across entire organisations and their
successful introduction and integration requires
early and sustained engagement across retail
businesses.
Understand the Technology
Compared with RFID pioneers in the early to mid
2000s, retailers utilising the current generation of
technologies have far fewer issues to confront and
resolve: ‘the technology is working, no question
anymore, tag reliability is fine, readers are fine’[R3].
Undoubtedly some
of the same issues
remain prescient –
products that contain
metals or viscous
fluids will continue
to be a challenge as
will environments that
are not conducive to
the free movement
of radio waves, such
as enclosed metal shelving and dense building
materials. But greater awareness of these issues
together with a determination to minimise their
impact was a clear message coming from the
case-study companies: ‘we will not get rid of the
challenges of RF technologies, but we have to
manage them and find solutions’[R3].
Some respondents were also very keen to
emphasise that the technology is simply a means to
an end and that any choices on investment needed
to be clearly made within the broader business
case for introducing RFID: ‘it is now less about the
technology and more about cost’[R6]. As detailed
earlier, most companies had opted for remarkably
simple systems with few technological components
– handheld readers with a software interface being
the most common. The rationale behind this was
primarily driven by cost and pragmatism, focussing
on what needs to be introduced to enable the ROI
to be achieved.
Avoid Tagging in Store
All 10 companies taking part in this research
had opted for a long-term strategy that involved
the RFID tags being applied at the point of
manufacture. While there
are other case studies
in the public domain
that have adopted a
strategy where the tags
are applied further along
the supply chain, such as
in DCs, there is general
agreement that it is not
a good idea to build an
RFID programme where
the tags are applied in
the retail store44. It is
an environment where
it is difficult to ensure
consistency and sustainable compliance or achieve
economies of scale.
Recognise the Omni Channel Imperative
As one respondent very clearly put it: ‘if you want
to be a big player in omni-channel then you need
to think seriously about investing in a merchandise
identification system’[R3]. As retail environments
become more fluid, with consumer expectations
growing for a highly flexible and responsive
shopping experience, meeting that need cost
effectively is undoubtedly a growing imperative
for many if not all retailers. Getting traditional retail
business models to flex across physical and virtual
shopping spaces requires levels of stock accuracy
and transparency that are simply impossible with
existing modes of stock accounting and auditing –
the margin of error it generates makes the business
model increasingly unsustainable.
How improved levels of merchandise identification
are achieved is of course open to debate, but for all
the technology
is working,
no question
anymore, tag
reliability is fine,
readers are fine
all companies
had opted for a
long-term strategy
that involved
RFID tags
being applied
at the point of
manufacture
Measuring the iMpact of rfiD in retailing
41
of the companies taking part in this research, their
RFID-driven system was regarded as a key player in
enabling the businesses to develop and sustainably
manage their increasingly complex omni channel
retail offering.
Standards Matter
While case-study companies varied in the degree
to which they were sensitised to the importance
of adopting RFID-based standards, all agreed that
without them, it would be more difficult to innovate
and evolve in the future45: ‘standards enable tags
to become a commodity and then you do not
need to be associated
with a particular [tag]
provider’[R10]; ‘if you do
not have standards it can
stifle innovation – look at
Bluetooth for instance’[R3].
Many pointed to the
standards offered by
GS1 because they were
regarded as a way of minimising problems in the
supply chain: ‘[we are] GS1 compliant – it reduces
confusion in the supply chain’[R8]. But it was not
just standards concerning technologies that was
thought to be important, some companies also
emphasised the need for standards concerning the
collection, collation and storage of data:
[there are] so many closed/encapsulated
systems offered by providers which cause
problems when wanting to charge for any
movement of data between systems. Once you
have standardised data then you can get various
suppliers to innovate because they have clarity
and confidence in the underlying data supply[R3].
This respondent went on to recommend utilising
standards around how the data was stored by
retailers, an issue that some had found to be
problematic: ‘if you are setting out on an RFID
project then it makes sense to utilise the standards
associated with an [Electronic Product Code
Information System] EPCIS46 repository’[R3]. This
is a GS1 standard aimed at enabling businesses
across the retail supply chain to share detailed
product information regardless of the technologies
being used to hold and transfer the data. It is
regarded as a way of: ‘answering the “what, where
and when” questions to meet consumer and
regulatory demands for accurate and detail product
information’47.
Undertaking Trials
As detailed earlier, all companies had undertaken
various types of trials to ascertain what
technologies to use and how they would perform
in their business context. The length of time taken
varied enormously although most proof of concept
trials lasted around about 3 months and were
carried out in just a few stores. RFID Pilot Trials
tended to last longer and involved more stores with
varying degrees of complexity to understand how
the proposed system would work both with existing
business processes but also in different retail
environments.
Naturally, there were mixed views about how long
this should take, for some they warned against
doing this too quickly: ‘Had to resolve the process-
related issues in the [pilot] stores and 2 months was
not enough time …[R9]. For others, they felt they
had taken a bit too long: ‘perhaps adopt a more
quick and dirty approach rather than considered and
cautious’[R6]. Perhaps the key lesson on trials is to
ensure that by the end of the period, the following
questions had been satisfactorily answered:
To what extent will RFID deliver the proposed
improvements in agreed KPIs and achieve an
ROI?
How well or not will the technology work in
various retail settings?
How will RFID operate within current business
processes and what would need to change?
How will staff respond to and use the
technology?
What needs to be put in place to ensure any
future roll out will be sustainable and successful?
Measuring Impact
Ultimately, RFID is an intervention used to enable
the business to be more successful in meeting its
core objectives of being a sustainably profitable
retailer. In and of itself an RFID system is little more
than a combination
of technologies that
provide the user with
actionable data. As
detailed earlier in this
report, most case-
study companies
had relatively few
KPIs they wished to
if you do not
have standards
it can stifle
innovation
start with a
few KPIs – if you
try to measure
everything you
will be lost
Measuring the iMpact of rfiD in retailing
42
achieve and for many there was a good reason for
this: ‘start with a few KPIs – if you try to measure
everything you will be lost’[R1]. But it was also
important to understand how the chosen KPIs will
be achieved – the Intervention Mechanisms that
need to be triggered to see a positive change:
‘for us, only one KPI: increased sales … which
is driven by stock integrity, generating accurate
replenishment’[R8].
Rolling Out RFID
Every one of the case-study companies had
made the commitment to roll out their RFID
programme more broadly across their businesses
and a number offered a series of advisory points
on this issue:’ Roll out [was] too quick: ‘was
like trying to build a car while racing it down the
highway’[R2]. Others agreed and advised against
organisational enthusiasm hampering a successful
roll out process: ‘sometimes [you] need to slow
the business down when it comes to roll out’[R6].
The scope of an RFID roll out is significant and
companies reflected upon the importance of
fully understanding how it will impact upon store
operations in particular: ‘RFID touches every part of
the business and the change management in the
store is huge’[R1]. Two other issues were considered
particularly key: ensuring the timing of the roll out
did not adversely impact upon the business: ‘avoid
peak retail times for roll out’[R5]; and putting in place
an effective and sustainable training programme
for using the RFID system: ‘train staff properly’[R5];
‘invest in training materials for store staff and
remember staff turnover!’[R8]; ‘think about who will
do the training when you operate across multiple
countries’[R9].
Integrating RFID-Generated Data
By far and away the biggest headache these
companies faced as they progressed on their RFID
journey was the thorny issue of integration of the
RFID-generated data with legacy retail systems. A
number felt they had not planned sufficiently well
on how to resolve this issue and counselled future
adopters to not only take integration seriously but
think very early on in the process the extent to
which they want new and existing data systems
to communicate. While views varied as to when
retail IT departments should be involved, many
encouraged early engagement: ‘IT need to be
involved early on – integration issues generated
many problems to be resolved’[R4].
RFID is an Ongoing Journey
Case-study companies were keen to remind
prospective users that RFID systems are not a
plug and forget technology – they require ongoing
commitment to ensure they remain fit for purpose
and capable of delivering the KPIs originally
required by the business to justify any recurring
investment. This was evidenced by the ongoing use
of Key Performance Drivers (KPDs) by many of the
companies – indicators tracking the overall ‘health’
of the system: ‘we have had to put measures in
place to make sure it [the RFID system] continues
to work properly’[R2]. Others also pointed to the
need to recognise the costs associated with
building upon and expanding their current system:
‘Future developments
of the system require
proper resourcing’[R1].
Not unlike retailing
itself, RFID systems
need to evolve as
circumstances change
and new opportunities
become apparent. As
detailed earlier, one of
the attractions of investing in RFID is the potential
key role it can play in enabling a business to remain
competitive, and as such continuing to reflect
on how it might do this would seem a judicious
strategy to adopt.
Keep it Simple
The final piece of advice offered by many of those
contributing to this research was to remember
to keep it simple. Indeed, some reflected on how
they had not followed this advice when they set
out: ‘we could have potentially built something
simpler and more streamlined’[R2]; ‘don’t over
complicate it – you are likely to scare off other
parts of the business and the project will not get
off the ground’[R5]. As part of this, keeping the
core purpose of what RFID can and cannot do was
considered key: ‘remember, RFID simply gives you
data – if you do nothing with it [the data] then you
just have a nice shiny expensive tool!’[R6].
we have had
to put measures
in place to make
sure the RFID
system continues
to work properly
Measuring the iMpact of rfiD in retailing
43
This final section of the report begins by
first looking at some of the future uses and
developments envisaged by the case-study
companies taking part in this research before
moving on to consider the ways in which they
would like to see the RFID industry better support
their work in the future.
Fitting Rooms and Magic Mirrors
The most frequently cited future development
related to gaining greater visibility and
understanding of
how consumers use
changing rooms and
how they may begin
to interact with ‘smart’
mirrors. Of particular
interest was the types
of products being taken
into changing rooms:
‘how many people are
taking clothes into fitting
rooms, number and type
of products taken in[R8];
‘fitting rooms are an
interesting space for future development – knowing
what has entered and then what has been sold –
help with size availability and messages to staff to
help[R3].
Others talked about how RFID would be able to
help with the ‘digitisation’ of the store and the
extent to which various technologies could be
developed to utilise the EPC code on the RFID tag
to help the consumer product-selection process:
‘digital futures for stores – smart mirrors, interactive
changing rooms[R6]. While none claimed to be
actively trialling this technology at the moment,
it was certainly at the forefront of their thinking
about what to explore next with RFID-enabled
technologies.
Heading Back Down the Supply Chain
The second most mentioned development was
beginning to utilise the RFID capability in the supply
chain prior to the store: ‘next phase is to get it into
the Supply Chain and gain benefit from it in that
environment’[R2]; ‘currently have no connection
between DC and the stores for E-commerce or
using RFID. So, starting to work on the DCs to
use RFID’[R6]. It was recognised that in the pre-
store environment a different business plan would
be required to understand whether a payback
would be achieved and what KPIs would be most
appropriate to achieve this. However, as detailed
earlier, much of the recurrent cost (the purchase
and application of the tag) was already covered
by KPIs associated with retail stores and so rolling
back down the supply chain was seen to offer
significant potential.
The only concern expressed by some was
understanding how item level tagging would be
able to produce sufficiently high read rates in what
are likely to be challenging environments for RFID
tags. However, others were more interested in
using RFID to track shipments rather than individual
items – something which a number of the case-
study companies were already successfully doing.
Broadening Coverage
A number of respondents were particularly
interested in beginning to broaden the range of
SKUs covered by RFID, including the tagging of
retail assets such as returnable transport items
such as totes, dollies, racks and pallets. For one
retailer the next immediate goal was getting the
business to the point where 100% of all stocked
products were tagged, a significant turning
point that they believed would have profound
implications for simplifying and streamlining their
current dual data flow process (as detailed earlier,
for other retailers they could not envision ever
developing an ROI for adopting this approach given
some of the products they stock).
What was interesting was that very few talked
explicitly about prioritising greater integration at
the POS, possibly because for some it was already
underway, while for a number of others, the cost
implications, because of the size of their retail
estate, were still too profound to make the ROI
deliverable in the near term.
Improving Data Collection Interfaces
Because all 10 case-study companies were
exclusively dependent upon store staff using
Future Developments
fitting rooms
are an interesting
space for future
development –
knowing what
has entered and
then what has
been sold
Measuring the iMpact of rfiD in retailing
44
some form of handheld reader to collect data on a
regular basis in the front and back of the store, a
number had plans for developing the usability and
interface of these devices. This included making
them smaller and/or more powerful: ‘looking at
watch-based handhelds for staff[R7]; making the
data interface more flexible and dynamic: ‘want
staff to be able to see what is in the store at all
times so they can better help customers’[R3]; and
ensuring users are given the most appropriate
feedback when they are undertaking stock counts:
‘we needed to get [store] staff to understand to
work to the [company SKU] target rather than 100%
– 100% accuracy generally costs too much money
to achieve in terms of productivity’[R7].
Many of the companies taking part in this research
had witnessed significant improvements in this
technology already, particularly through working
closely with their providers, and as handheld
computer devices in general continue to develop,
this was certainly viewed as an area for significant
future investment.
Improving Tags
As mentioned throughout this report, all of the
respondents had few or no issues with the quality
of the tags they were now using; for some it was
now about developing tag technology further to
enable them to be used on a broader range of
products (such as those containing fluids and
higher quantities of metal) and achieving greater
miniaturisation to minimise their impact upon
certain types of packaging: ‘tags are getting
smaller, so [our] packaging people can be more
creative about what you can put them on’[R7].
Others were also looking at how tag designed
could be improved in the future to deal with the
challenges of reading tightly compacted products
reliably and consistently48.
Exploring Overhead Readers
While only one case-study company was actively
testing overhead readers in any meaningful way,
others were certainly interested in understanding
how this technology may evolve in the future: ‘long
way to go with fixed readers but believe they are
the future’[R7]. The challenge expressed by many
was obtaining a realistic ROI in the near future,
particularly for those retailers with relatively large
stores currently containing metal shelving49.
Getting Geographical Spread
A number of the companies taking part in this
research had established an RFID system in parts
of their global organisations but not others and so
their future ambitions were targeted primarily upon
broadening out their geographic spread to cover
other regions where they had stores.
Delivering Checkout-less Stores
One of the early lofty ambitions of RFID was
enabling retail stores to be able to eliminate
the need for retail stores to have checkouts.
RFID enabled products would be automatically
associated with a consumer, via some form of
ID (such as an RFID-enabled loyalty card and
connected payment card) and as they left the store
they would be charged for the products associated
with them.
Of course, the reality has proved much more
challenging to deliver and to date no retailer has
managed to deliver this experience outside a tightly
controlled test store50. However, one of the retailers
taking part in this research was confident that this
was not only one of their short to medium term
business goal but that it was also achievable in
the next few years. As the saying goes, watch this
space51!
Creating Seamless Merchandise Visibility
As discussed at the beginning of this report, while
the focus has been on the use of RFID systems,
the aspect that brings the real value is the ID
component of the system – the ability to recognise
objects uniquely – to make a retailer’s merchandise
fully visible throughout the supply chain and
Measuring the iMpact of rfiD in retailing
45
beyond. For a number of retailers in this study,
it was the transformative nature of this data that
was a key part of the future development of their
businesses:
the ID is the transformation in retail – the
unique transaction, the product; the shopping
experience. Our future retail environment may
well contain a suite of interfaces that allow EPC
to be communicated via a range of technologies
– beacons, barcodes, sound, vision; RF[R4].52
Developing Data Capabilities
The final future development offered by some
of the retailers taking part in this research was
expanding the ways in which they utilised the data
generated by their RFID systems. As mentioned
earlier, a concern for some had been their inability
to properly manage the flow and volume of
data associated with RFID – their lack of a data
lake had foreshortened many of their plans for
undertaking some analytical activities. For others
it was about broadening access to the data via,
Cloud technologies to enable more functions within
the business to seek greater business insights.
For instance, one company pointed to the way in
which data derived from product entering changing
rooms would help with future product design: ‘do
all mediums going into a changing room turn into
a large?’[R8]. As with all emerging data sets, it is
knowing what the right questions are to ask in order
to maximise its capability and part of this comes
from encouraging as broad a range as possible of
users to engage with it.
Industry Changes
The final part of this section summarises some
of the main issues that respondents felt the RFID
industry could help them to resolve, some of
which have already been covered above. In the first
instance, a number felt that more could be done
to develop a forum where retailers could share
their thoughts, concerns and ideas: ‘I would like to
make a call out to industry bodies to do more work
to reach out to us and find out what it is that we
want’[R3]. This is not dissimilar to concerns raised
by those working in loss prevention who have often
expressed the concern that technology providers
seem to develop solutions searching for problems
rather than communicating with them more
directly to better understand the actual concerns
they would like to see technologies developed
to address. It could well be that a body such as
GS1 could utilise its existing extensive network to
facilitate this dialogue in the future.
Two other interconnected issues were put
forward by some respondents: tags and overhead
readers. On the former, some wanted greater
standardisation around tag performance53, while
others were keen to see further miniaturisation and
perhaps predictably a reduction in prices. A number
of others highlighted that further work on improving
how tags are secured to products would be useful.
As detailed earlier, the main issue with RFID tags
is now not the reliability of the technology itself,
but more how it is applied to the product and
whether it can adequately survive the journey along
the retail supply chain. An extension of this is of
course whether the tag can be secured sufficiently
well to deliver security-related benefits without
comprising the quality and feel of the product or
impact adversely on the ROI. For some this can be
delivered by greater integration of the tag into the
product itself although this then raises questions
about its ability to remain a viable amplifier of risk –
balancing durability with visibility will remain a key
determinant to be addressed in the future.
The final issue raised focussed upon a desire to
see what one respondent described as: ‘better
overhead solutions that actually work in real life’[R8].
As detailed earlier, this is a technology some
have tried, and others continue to test. Without
doubt, the concept is highly desirable – potentially
automating one of the RFID-related process steps
that still takes a considerable amount of time – staff
manually scanning product in the front and back
of retail stores. Undoubtedly, the technology will
continue to develop and for those companies that
can deliver an approach that fits squarely within
current ROI models, they may have some success
in persuading interested retailers to adopt it.
Measuring the iMpact of rfiD in retailing
46
Endnotes
1 Brock, D. L, (2001) ‘The Electronic Product Code – A Naming Scheme for Physical Objects’, Auto-ID White Paper,
WH- 002, January; Brock, D. L, (2001) ‘The Physical Markup Language – A Universal Language for Physical Objects’,
Auto-ID White Paper, WH-003, February.
2 Sarma, S., Brock, D.L., Ashton, K., (2000) The Networked Physical World, Proposals for Engineering the Next
Generation of Computing, Commerce & Automatic-Identification, AutoID Center: Boston; McKinsey Global Institute
(2015) The Internet of Things: Mapping the Value Beyond the Hype, McKinsey Global Institute: New York.
3 Agarwal, V., (2001) Assessing the benefits of Auto-ID Technology in the Consumer Goods Industry, AutoID Center:
Boston; Chappell, G., Ginsburg, L., Schmidt, P., Smith, J., Tobolski, J., (2002) Auto-ID on Demand: The Value of
Auto-ID Technology in Consumer Packaged Goods Demand Planning, AutoID Center: Boston; Moran, H., Ayub,
S., McFarlane, D., (2003) Auto-ID Use Case: Improving Inventory Visibility in a Retail Company – Impact on Existing
Procedures and Information Systems, AutoID Center: Boston.
4 Kambil, A., Brooks, J., (2002) Auto-ID Across the Value Chain: From Dramatic Potential to Greater Efficiency & Profit,
AutoID Center: Boston.
5 Alexander, K., Gilliam, T., Gramling, K., Grubelic, C., Kleinberger, H., Leng, S., Moogimane, D., Sheedy, C., (2002)
Applying Auto-ID to Reduce Losses Associated with Shrink, AutoID Center: Boston.
6 From a video of Kevin Ashton (and others) in 2002 describing the AutoID Center and RFID. See also Srivastava, B.
(2004) ‘Radio frequency ID technology: The next revolution in SCM’, Business Horizons, 47 (6): 60-68.
7 Ziegler, M. (2004) ‘From Promise to Performance’, Elsevier Food International, (4), pp. 74-77.
8 Huber, N., Michael, K. and McCathie, L. (2007) Barriers to RFID Adoption in the Supply Chain, Faculty of Informatics
Paper, University of Wollongong: New South Wales.
9 Ilic, A., Harrison, M., Bhattacharyya, R., Board, E., Minisci, M., Humora, R., Hogan, B., (2016) Privacy and Security
Implications of the Internet of Things: Response to the US Federal Trade Commission Request for Comments,
AutoID Center: Boston; Kelly, D. (2008) The Politics of RFID: The Issues, University of Arkansas: Arkansas; Thiesse,
F., Staake, T., Schmitt, P. and Fleisch, E. (2011) ‘The Rise of the “next-generation bar code”: an International RFID
Adoption Study’, Supply Chain Management: An International Journal, 16 (5): 328-345.
10 Hardgrave, B. and Patton, J. (2016) 2016 State of RFID Adoption Among US Apparel Retailers, Auburn University,
Auburn; Edwards, J. (2009) ‘An RFID Fashion Statement’, RFID Journal; Miles, R., Mitchell, Y. & Hardgrave, B.
(2010) Item-level RFOD for Apparel/Footwear: The JC Penney RFID Initiative, Sam W. Walton College of Business,
Arkansas; Patton, J. & Hardgrave, B. (2008) RFID as Electronic Article Surveillance (EAS): Feasibility Assessment, Sam
M. Walton College of Business, Arkansas; Salmon, K. (2016) Kurt Salmon RFID in Retail Study 2016, Kurt Salmon,
New York.
11 Recent publicised examples of retailers presenting their case studies on how RFID is being utilised in their
companies include: JC Penney, Marks & Spencer, Jack Wills, John Lewis, Decathlon, and Sport Zone. See also
Auburn University (2014) Annual Audit Report 2013-2014, Auburn University: Auburn.
12 See Kay, M. and Salmon K. (unknown date) ‘RFID: Well Within Reach’, Apparel, Supplement, 1-8.
13 Beck, A. (2002) Automatic Product Identification and Shrinkage: Scoping the Potential, A White Paper for ECR
Brussels: ECR Europe.
14 Throughout this report, the phrases RFID, RFID system and RFID technologies will be used to describe a system
whereby some form of uniquely identifiable taggant is attached to a retail product, which can then be identified
using a range of different Readers, which in turn communicate with a software system that is able to recognise,
record and where appropriate associate that taggant with other retail data. While there are numerous variants of this
system, the basic elements remain consistent: some form of unique tag, a variety of readers to identify the tag and
a software system to offer analysis.
15 Yin, Y. (1993) Application of Case Study Research, Sage: London.
16 Because of the location of two of the companies taking part, interviews were undertaken via Skype.
17 One company was not prepared to share how many tags they purchased a year other than that it was more than the
average for all the other companies taking part. Hence the total number is the minimum quantity purchased and is
likely to be more.
18 The exchange was provided by: http://www.xe.com/currencyconverter/.
Measuring the iMpact of rfiD in retailing
47
19 Thiesse et al (2011) op. cit. discuss the problems associated with adopting this approach.
20 Thiesse et al (2011) ibid, also concluded that the support of senior management was critical.
21 For background see: Varvasovsky, Z. and Brugha, R. (2000) ‘A Stakeholder Analysis’, Health Policy and Planning, 15
(3): 338-345.
22 https://www.rfidjournallive.com.
23 See for instance: https://www.gs1.org/epc-rfid.
24 For the impact of changing levels of RFID technological capability see for instance: Thiess, F., Al-Kassab, J. and
Fleisch E. (2009) ‘Understanding the value of integrated RFID systems: a case study from apparel retail’, European
Journal of Information Systems, 18: 592-614.
25 It is worth noting that all of the companies had also invested in some form of localised tag printing technology to
deal with stock that either arrived without a tag, had lost its tag somewhere in the store, had incorrect data on the
original tag, or had been returned by a customer without a tag. This enabled store staff to generate and record new
tags on the RFID system.
26 For instance, see Salmon, K. (2016) Kurt Salmon RFID in Retail Study 2016, Kurt Salmon: New York, where it is not
clear whether some of the metrics presented should be viewed as ROIs, KPIs or as ‘Key Retail Metrics’, and how
they are being affected by the introduction of RFID.
27 See for example: Marr, B. (2010) How to Design Key Performance Indictors, API White Paper, The Advance
Performance Institute: https://www.bernardmarr.com.
28 This author would like to express gratitude to Hans-Peter Schiedt and Joachim Wilkens from C&A for sharing this
phrase as part of their contribution to this research.
29 For an extensive empirical review of a large number of RFID case studies, albeit it from 6 years ago, see: Waller, M.,
Cromhout, D., Patton, J., Williams, B. and Hardgrave, B. (2011) An Empirical Study of Potential Uses of RFID in the
Apparel Retail Supply Chain, University of Arkansas: Fayetteville.
30 These estimates are broadly in line with a recent survey undertaken by Kurt Salmon (2016) ibid.
31 This was achieved because in some retail stores there was not the physical space to accommodate the ranges
being sent by the supply chain an