" The (RFID) industry got out in front of its headlights and over invested in a phenomenon that just wasn't ready to take off yet—and that, by the way, happens all the time. The RFID industry, in general, has underperformed, because it was impatient and tried to drive toward a tornado too quickly. It is easy to see that in hindsight. There are real problems to be solved, and in the current market's state of adoption, end users want to give RFID companies money, but not for tags and readers. They want to give them money for solutions to their problems. If the RFID industry responds to that, it will be successful." -- Geoffrey Moore, Author of Crossing the Chasm, as quoted in RFID Journal (June 4, 2012)
The multiple RFID posts published this past week reminded me of the above quote from Geoffrey Moore. The title of his book "Crossing the Chasm" is an appropriate metaphor for the state of RFID in the retail industry. Has the RFID industry reached the point of no return, i..e. crossed the chasm to break out as a mainstream retail technology? Are we finally at the tipping point for RFID adoption and accelerated growth in the retail industry?
Let's start by summarizing the key content from the three RFID posts this past week:
- Pumping up the Retail Volume: RFID in the Apparel Industry. http://ow.ly/egyJO New Report. Dept. Stores passes tipping point. (From Apparel Magazine)
- USA Retailer JC Penney CEO will tag every single merchandise item with RFID by February 1, 2013. This includes categories such as fragrances and jewelry.
- Shoppers that use fitting rooms are 71% more likely to make a purchase and they typically buy twice the amount. If customer service is part of the fitting room equation, purchases are three times larger.
- By April 2013, all Macy's stores will drive replenishment leveraging RFID in eight merchandise categories: men's bottoms, men's suits, men's suit separates, sports coats, dress slacks, dress shirts, belts, and hotel bedding.
- Macy's eight store RFID pilot in denin, innerwear, and men's bottom categories achieved 50% increase in revenue versus control stores.
- Several brand manufacturers that are tagging for JC Penney, Macy's, and Wal-Mart have reached the tipping point where it is more economical for them to RFID tag their entire product line.
- One specialty apparel retailer reported a 55% reduction in shrink using RFID, with some of its stores seeing a 75% improvement.
- RFID is foundational to the success of ship from store programs that will drive future omnichannel strategies.
- "RFID light" is the new trend, i.e. test RFID using simple point solutions. Examples include: display execution, sample tracking, and inventory control in selected areas of the store
According to Aberdeen RFID is nearing tipping point. http://ow.ly/eiHuy Retailer JC Penney to complete rollout in 2013. (From Retail Touch Points)
- Retail Horizons Benchmark 2011-Forecasts 2012 study showed a 9% minority of retailers implementing RFID in 2011, but that is up from 1% in 2010.
- ABI Research revealed that RFID transponders, readers, software, and services will generate $70.5 billion in revenue from 2012 to the end of 2017
- According to Macy's research, the retailer previously conducted one to two barcode cycle counts per year, resulting in 2% to 3% monthly inventory deterioration, or about 30% each year. With RFID, Macy's now completes 12 to 24 cycles a year and experiences average monthly deterioration of 0.22% or just 3% to 5% per year
400 USA suppliers are placing RFID EPC tickets on items. http://ow.ly/elQ8q Update from GS1. (From RIS News)
- EPC enabled RFID is now deployed in approximately 5500 stores in the United States.
- New target categories emerging for item level RFID include home goods, consumer electronics, formal wear, jewelry, and health & beauty products.
As we have discussed in multiple previous posts, technology is an important component for the successful evolution of new emerging retail models. For RFID in retail to surpass its moment of truth and cross the chasm, focus needs to be in the following three areas:
- Positive Customer Experience - For brick and mortal stores, future successful retail will be all about creating a real-time exciting, engaging, creative, surprising, positive instore customer experience. The fitting room data cited in the "Pumping Up the Volume" article is a good example of the revenue impact of good customer service. Focus on the pain points that consumers experience from poor customer service, not the technology. By itself, RFID is not the utopia answer to delivering a positive customer experience. It is, however, an important granular foundational data building block that when combined with other emerging technologies will profitably transform the retail store of the future. More in future posts.
- Omnichannel Retailing - The definition of what is a retail store is changing rapidly. Walls around a set of products that consumers walk in to buy are breaking down. Shopping, especially for apparel is about assortment and having those goods available at the moment of truth when the consumer decides that he / she wants to buy the product. Inventory accuracy in most chains ranges from 60% to 80%. Having visibility to millions of underutilized assets, i.e. products available for sale throughout the chain will be a requirement for future successful retail. With Wal-mart and Amazon testing same day delivery, and Amazon expressing interest to add more fashion assortments to their online store, consumer will continue to have more choices. Successful future retail will be about driving an onmichannel store experience -- if you like it and we don't have it in your size or color, we will get it to you from any of our stores, across the city, or across the country (with the new target being the same day). Re-read the Macy's "Believe" post to understand the impact of onmichannel strategies on one retailer. This link will take you Macy's post http://ow.ly/euhK8
- Intelligent Loss Prevention solutions - RFID also holds some initial promise in driving smarter data rich loss prevention solutions. Knowing where the consumer assets for sale are located and whether they have been payed for as they are leaving the store would be an advancement from today's technology approaches. Having said this, the actual physics of the technology and the ubiquitous ways to expose its weaknesses need to be addressed before wide scale deployments of RFID loss prevention solutions are possible. More in future posts.
Let's close this week with some of the 2013 RFID predictions from Apparel Magazine post:
- 2013 will be the year of the "Specialty Retailer" with a noticeable proliferation of RFID implementations.
- At least 3 more North America department stores chains will announce rollouts
- The first significant activity by big box athletic retailers will materialize.
- Next generation store infrastructure solutions (hands free) will continue to struggle to gain a foothold in stores.
- Sewn in tags and encased plastic hard tags will see greater usage as RFID data carriers.
Have we reached the RFID moment of truth? Would agree with Aberdeen that yes we are getting close to the tipping point. To cross the chasm, listen to Geoffrey Moore and focus on the problems and not the technology. Retailers more than ever require greater store intelligence to serve an increasingly tech savvy consumer that will switch loyalty instantly based on price and poor customer service. RFID in helping create a more positive customer experience, supporting onmichannel retailing, and evolving loss prevention solutions has the potential to be one of the technology that drives the next wave of profitable retail change.
"Carpe Diem" today by focusing on RFID solutions that solve retail problems.