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Some Hints From Retailers on Tapping RFID’s Full Potential

UPM Raflatac Inc., a supplier of pressure-sensitive label materials and RFID tags and inlays, and Digilogics SA de CV, a supplier of labelstock converters and RFID solutions, recently formed a partnership with Mexico City retailer Common People that will not only serve as a showcase concept store for the city's goods and art, but also as a demonstration of how RFID technology can transform consumer-facing retail processes and services.

Common People features goods from Caroline Herrera Bridal, Comme des Garçons, Dior, and Prada, as well as select national designers. But it also sells stuff from smaller retailers that manufacture unique and limited-edition goods. So the store decided to affix UPM Raflatac UHF RFID short dipole hangtags on goods and apparel and short dipole tags on shoes and books. Trap tags went on media, books, jewelry, and cosmetics, and sunglasses received Web tags. This was part of a decision to implement item-level tagging to streamline inventory control, restocking, and checkout processes.

The personal experience tags begin with smart display and interactive mirrors providing product information and a built-in camera consumers can use to take pictures and email them to others for shopping advice.

This is one example of how RFID is changing the retail market, with potential for use in the high-tech supply chain. Global RFID systems will grow 16 percent to $5.3 billion in 2011, according to {complink 7280|ABI Research}, which estimates revenue from systems software will outpace that from services, transponders, and readers.

Gerd Wolfram, managing director of MGI Metro Group Information Technology, in 2008 spoke often and openly about RFID and how the company's retail stores continually test the technology, adopting many of the same applications Common People will now deploy.

Metro Group, one of the first retailers aside from Prada in the United States to pilot smart mirrors and other supply chain sensor applications in retail stores, continues to test emerging forms of RFID technology. Earlier this month, Mojix reported completing tests with Metro Group using the Mojix Star system, where the two companies experienced higher read rate performance for passive tags at the Metro Group RFID Innovation Centre in Neuss, Germany.

Common People's RFID-enabled smart fitting room is outfitted with an interactive touch screen that allows shoppers to scan goods for additional product information, browse complementary items, and electronically request that additional merchandise be delivered for their review, the requests automatically sent to sales employees' PDAs.

The companies claim the technology gives the manufacturer insight into why some products were handled and not purchased, a concept that always brings me back to advertising and marketing.

Advertising and public relations firms have clearly shown interest in paying more attention to RFID and other emerging technologies like near-field communications (NFC) with the potential for two-way communications among brands, retailers, and consumers. So, I'm wondering why more retailers in the United States have not implemented RFID and smart mirrors to monitor stock and serve as a customer service rep in the store.

If a retailer knew a consumer handled merchandise from a specific brand, but didn't purchase it, what could they do with the information? And, if NFC continues to receive attention from {complink 2294|Google}, {complink 4644|Research In Motion Ltd. (RIM)}, and others, will technology companies find a way to integrate NFC with RFID capabilities for retailers? Can we hear from some of the engineers out there?

11 comments on “Some Hints From Retailers on Tapping RFID’s Full Potential

  1. kumar1863
    November 30, 2010

    Thanks Laurie for the post. RFID technology will be a perfect feedback path between retailers and customers and this will also help store owners in improving inventory accuracy. I head some of the credit card companies (American Express, MasterCard, Visa) issuing RFID enabled credit cards this will encourage the customers to go for shopping by saving their billing time.

  2. hwong
    November 30, 2010

    The RFID technology has been broadly used in Europe and Asia but pretty much limited to certain applications. Would we see common use in stores anytime soon? The cost still restricts its adoption across the board plus we don't need additional security similar to that built in credit card with a RFID chip on it.

  3. Barbara Jorgensen
    November 30, 2010

    Interesting stuff. From the business perspective, I definitely see how valuable the technology is. The lack of end-to-end visibility is a common complaint among supply chain companies so this kind of data is a huge step in the right direction. The inventory management possibilities are endless. I'd like to see how this develops.

    As a consumer, I hate the idea that someone or something is gathering data on me. I guess the problem is, targeted marketing and advertising just adds to the overall advertising noise, rather than making advertising in general more meaningful.

    The perfect application of targeted advertising would be like a scene in the movie “Minority Report.” As Tom Cruise walks through a corridor, all the ads that appear–holographically–address his character directly. If gathering data on me means not dealing with cars I'll never drive; clothes I'll never wear; beverages I'll never drink; and stores I'll never shop in, then I guess I'd say “bring it on!”

  4. hwong
    November 30, 2010

    The local libraries are starting to install RFID technology to keep track of books at the shelves and at the checkout. While this is improving productivity, it is also cutting costs. Then the question remains, what happens to the jobs of America when we become more and more technologically sound?

  5. Laurie Sullivan
    December 1, 2010

    Hello hwong. You bring up a good point. The workers will need to educate themselves to take on new responsibilities. The old jobs will have been replaced with high tech equipment that someone will need to know how to operate and maintain.

  6. Laurie Sullivan
    December 1, 2010

    Oh Barbara, you would be the perfect consumer for the use of behavioral targeting, an online technology that relies on ad tags and cookies in browser windows to target advertisements to consumers based on likes and dislikes. The advertising industry often uses the movie “Minority Report” to describe behaviorally targeted ads. 

    The industry also insists consumers would see less ads because behaviorally targeting the ads would give consumers the right amount of information without the ad networks having to serve up an enormous amount of ads to get consumers to convert, which means to complete the purchase or download the document. 

  7. Laurie Sullivan
    December 1, 2010

    Oh Barbara, you would be the perfect consumer for the use of behavioral targeting, an online technology that relies on ad tags and cookies in browser windows to target advertisements to consumers based on likes and dislikes. The advertising industry often uses the movie “Minority Report” to describe behaviorally targeted ads. 

    The industry also insists consumers would see less ads because behaviorally targeting the ads would give consumers the right amount of information without the ad networks having to serve up an enormous amount of ads to get consumers to convert, which means to complete the purchase or download the document. 

  8. Laurie Sullivan
    December 1, 2010

    You're welcome Kumar1863

  9. DataCrunch
    December 1, 2010

    Putting privacy concerns aside for now, there are several other reasons why RFID adoption has progressed slower than expected, especially in the US. 

    The main reason is the cost of tags, which can vary depending on a number of factors, including whether the tag is simply embedded on a label or encased in a material such as plastic, passive tag or active tag, and the amount of memory required on the tag, to name a few.    The more commonly used and basic passive RFID tag (96 Bit EPC inlay) embedded on a label that is used in retail and in the supply chain can typically cost 7 to 15 cents, and of course can range depending   of volume.  The costs can increase above 15 cents for low and high frequency tags.   This does not include the costs involved for companies to provide RFID tags on products within the supply chain whether they are manually applied or systematically applied.     So for instance, companies that manufacture and/or distribute high-end electronics retailers or pharmaceuticals, the costs of the tags are easily absorbed, but for companies selling, let’s say toothpaste or pencils, the costs can dramatically affect profit margins.     So, if you are at a store that sells a variety of products, both expensive and inexpensive products, at this point it would not be feasible to expect that all the items sold in the store would have RFID tags and would require multiple processes in how to handle these products.

    Another main reason for slower than expected adoption is the overall readability of the lower cost passive RFID tags.  For example, plastic and paper products read well, while liquid and metal products do not.  This lack of “universal” readability is problematic , especially for companies looking to put a more automated RFID process within their supply chain. 

    In order to have a wider adoption rate for RFID use, tags will need to be more read easily across a wide variety of product mixes and the costs need to be under 1 cent per tag.  I do expect however that we will eventually get there.   The positives of using RFID technology greatly outweigh any negatives.

  10. Laurie Sullivan
    December 1, 2010

    Thank you Dave for your insight. You make several good points about the cost of tags and readability. But I've been hearing that same song for more than six, maybe seven, years. I can point to countless articles in the early 2000s where I wrote those very word … 1 cent tag, problems with readability, (blah, blah, blah). What's the solution? How do companies manage deployment while keeping costs low? 

  11. DataCrunch
    December 2, 2010

    Hi Laurie, RFID, if implemented properly within the supply chain can yield tremendous long term savings, along with significant increased speeds of processing goods and tracking accuracies.   Although there is an upfront cost, companies need to understand that the benefits of using RFID internally within their operations and not just for compliance purposes will prove beneficial and provide overall cost savings in the long run, even if the ROI takes a little longer.  With more companies that utilize RFID tags, the cheaper the tags will become.  RFID had a lot of momentum and buzz several years ago and has fizzled out a bit over the past 2 years, but it will eventually become what barcoding is today.    

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