RFID is gaining traction with retailers and manufacturers, nearing an adoption and usage "tipping point," according to a recent study from GS1 US.
More than half (57 percent) of the retailers surveyed in the "2014 GS1 US Standards Usage Survey" reported that they are now implementing item level Electronic Product Code-enabled radio frequency identification and an additional 21.1 percent plan to implement the technology in the next 13 to 24 months. RFID enhances inventory visibility and the ability to respond to consumer demands in the omnichannel environment.
"We believe this sends a clear message to the industry that RFID is the critical enabler of omnichannel retailing," Melanie Nuce, VP of apparel and general merchandise, GS1 US, told FierceRetailIT. RFID is valuable because it helps retailers understand two inventory essentials for omnichannel success—"what do I have?" and "where is it located?"
"Using RFID, inventory read rates can be improved from an average of 63 percent to between 95 and 99 percent, according to Auburn University studies and validation by retailers. With RFID, retailers are able to see up to a third of their inventory which would be otherwise invisible, and therefore, unsellable," she said.
The total study sample was 801 apparel and general merchandise companies, although the RFID part of the research was directed to 177 companies, including manufacturers, retailers and retailers who are also manufacturers, like Macy's, VF Corp. and Levi's. The smaller number is comprised primarily of retailers in the apparel/footwear/accessories industry category, which is known to be the most aggressive in using and testing RFID. These retailers reported that 47 percent of items received have RFID tags.
The survey also reported that 48.2 percent of manufacturers said they were currently implementing RFID, with 18.4 percent planning to implement it in the next 12 months. Manufacturer respondents said 40 percent of apparel and general merchandise items have RFID tags.
"We believe RFID is nearing a tipping point because it is gaining traction as the most reliable solution in delivering on the omnichannel promise to the consumer," Nuce said. "Since around 2008, retailers have been strategically deploying item-level RFID and its effectiveness has been tested and proven in several types of use cases." With recent technological advances, more RFID deployments were made possible and they resulted in better equipment solutions, which led to more adoption and use.
"In the future, we expect to see more retailers collaborating with manufacturers to ensure items are tagged at the source, which will enhance efficiency throughout the supply chain," she said. This will be especially important as retail fulfillment models like buy-online, pick-up-in-store (BOPIS) evolve and require accurate inventory.
Besides the improved inventory read rates, the survey highlighted four other benefits of RFID to retailers:
Improved sales – RFID increases item availability, which research says can boost sales from 2 to 20 percent, Nuce said. With increased visibility, retailers are finding products faster, enabling them to fulfill orders faster, reducing mark-downs. "They are ensuring optimized assortments are on display, too, giving a better selection of size, style and color for customers to choose from," she said.
Decreased out-of-stocks – RFID also allows for real-time visibility. "With the ability to conduct more frequent and accurate inventory counts, retailers can not only sell a product online, but better fulfill it when they know an item's specific location." Auburn University research shows out-of-stocks are typically cut 50 percent with an RFID program.
Increased margins – RFID improves retailers' ability to sell inventory online that might have traditionally been lost and deeply discounted on a clearance rack. "With item level visibility, the retailer can sell 'the single item' at higher margins and make more successful matches between their product offerings and consumers, regardless of channel," Nuce said.
Expedited returns – Because RFID tags can carry far more information than a barcode, retailers can gain greater insights into their overall returns processes if all items are tagged. They can track returns by manufacturer, store and consumer, among other things, she said.
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