Why not implementing RFID can cost you in the long run

Tom Vieweger
14 November, 22

While many leading brands across the globe are adopting RFID technology in the face of digital transformation and sustainability, there are still retailers that are unsure of what the real benefits of RFID actually are.

In 2020, it was predicted that COVID-19 has accelerated the use of online shopping by around five years, forcing retailers to invest more in the in-store experience and respond with the broad adoption of omnichannel services. It is now necessary to improve stock file accuracy to create leaner inventories with clear visibility of stores and their supply chains, allowing brands to be seen as authentic and reliable by their customers.

Defining an RFID roadmap

RFID is a technology that can introduce a huge shift in an organisations’ procedures, but its benefits are widely proven in the industry. However, some retailers delay RFID implementation.

While RFID can get complex, it’s essential to start small, take a pragmatic approach, and scale smartly over time. Once brands have the basics of an accurate stock file as a foundation, they can map out what the RFID road map and phases look like. RFID is a strategic choice, allowing retailers to leverage other investments to provide further insights.

Starting with a basic, simplistic, and focused approach, a retailer can deploy RFID with a lightweight team led by a project manager. With the support of the right RFID partner, a business plan can then be built that lays out the blueprint for the future.

Proving the value of RFID is a numbers game

When considering investment in RFID systems, retailers need to consider their goals. The main benefit of introducing the system is improved stock accuracy. Better accuracy leads to better product availability and this, in turn, leads to an increase in sales. As retailers gain much better control over the range available across all represented styles, the business will see an uplift in sales.

Maintaining stock file accuracy is a real challenge for retailers not using RFID. Inaccuracies accumulate from theft, inaccurate deliveries to and from the DC, processual mistakes, and incorrect labelling. Retailers who don’t use RFID typically have their worst stock file accuracy when they need their best (peak trading). This is often then immediately amended after the audit in the new year and when consumer spending often may drop off.

Additionally, never-out-of-stock items have a much bigger impact on sales when they are replenished more frequently using RFID. Retailers using RFID through peak trading can quickly adjust discrepancies, providing customers with a full product offering at the most important times.

Inaccurate inventory costs twice (at least)

The cost of inaccurate stock data accumulates over time, with the increase in stockouts and order cancellations. Ultimately, this leads to missed sales, but more importantly, it can also cause disappointed customers. Retailers who use RFID for their stock management report that a 3-4% increase in stock file accuracy correlates to a 1% increase in sales. If you pair this with retailers not using RFID during peak trading, these accuracy differences cost even more in lost sales potential.

RFID and omnichannel readiness

RFID is the enabler for omnichannel services, and better stock visibility is the foundation for rolling them out in the form of Click & Collect, Click & Reserve, or Ship from Store. There is a direct relationship between the adoption of RFID and how retailers see the technology impacting their omnichannel strategies, and not implementing RFID would mean that retailers miss out on:

  • Lower thresholds for safety stock (more available stock to sell online)
  • BOPIS (Buy Online Pick Up in Store) versus Ship to Store
  • Slow Moving Inventory First

Eventually, brands can also use RFID upstream, which benefits the DC as the RFID labels allow for efficient inbound and outbound scans of goods. These outbound goods, especially wholesale, to franchisers and other partners can then be tracked. In short, retailers can trace back an EPC in an unapproved location to the party it was sold to. But even better, brands can go upstream even more and ensure manufacturers make direct shipments to the wholesales channel, cutting out logistic costs so they come to their DC first.

Customers also benefit from broader supply chain data. With provenance checks, they can pick up a product and check its sourcing, authenticity, materials, and its entire lifecycle based on RFID tracking data.

Boosting customer loyalty by making products available

RFID allows retailers to have full visibility of their supply chain and know exactly what products they have in stock and which location they are in. This means they can make sure all sizes are represented on the sales floor for their customers to purchase.

Without RFID, retailers will continue working with inaccurate stock files. These are only the starting losses for not using the technology, and as RFID becomes embedded into an organisation, further operational gains can be opened quickly. This could be through the supply chain or by providing additional services with confidence to the customer. RFID technology is fast becoming mainstream in today’s post-COVID world, and as it continues to advance, those who choose not to utilise its benefits will be left behind. 

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