Retail Revolution   /   January 14, 2020

After years of hype, RFID is still struggling to catch on in retail

This is the second part in a series by Modern Retail about the technologies that were going to change retail — and where they are now. See our first story, about the future of robotics, here.

Going shopping at Rebecca Minkoff’s SoHo store a few years ago meant being hit with what the future of retailtech would look like.

The flagship, opened in 2014, was replete with smart mirrors. RFID tags were embedded in all store products, while an RFID reader was embedded in dressing room mirrors. That way, when a customer brought items into a dressing room, the mirror would automatically present information about those items, including what other colors and sizes it was offered in, as well as what they looked like when styled with other pieces of clothing. Co-founder Uri Minkoff said at the time that the RFID-equipped store was designed to”take away the pain points of shopping.”

Shortly after launch, the brand said that smart mirrors helped triple its expected clothing sales. A year later, Ralph Lauren also installed RFID-enabled smart mirrors in its Fifth Avenue flagship store.

Fast forward to 2020, and Rebecca Minkoff no longer uses RFID technology in its stores. The company declined to provide comment for this story on why. Ralph Lauren ended up closing its Fifth Avenue flagship in 2017 to cut costs, and it’s unclear if the brand still uses RFID tech in stores. Ralph Lauren also did not respond to a request for comment.

Name a generic retail challenge, and a retail analyst or executive has likely claimed within the last decade that radio frequency identification, or RFID tech would could solve it. RFID would help a retailer save money, increase sales, deter theft, personalize the in-store experience, and lead to happier customers all because it would allow retailers to know where their inventory was at all times, better than traditional barcodes. But like other instances of retail tech, such as robotics in retail, the real use cases are far less consumer oriented — and far more useful.

The first reason is expense. Although the prices of RFID tags have dropped considerably over the last decade, it still remains expensive for retailers to implement, particularly if they want to install multiple RFID readers in store. That’s the biggest deterrent to RFID gaining more widespread adoption, analysts say.

Additionally, for big-box retailers who sell tens of thousands of SKUs from hundreds of different suppliers, it can take years to get all of its manufacturers to agree to insert RFID tags into its products. Macy’s first started piloting RFID in one of its Bloomingdale’s stores in 2009, but it took the company about eight more years to add RFID tags to all of its merchandise. According to a report from research firm IDTechEX, apparel is the most popular item for RFID tagging, but just 10% of the addressable apparel market had RFID tags as of 2019.

Today, the most popular use case for RFID is proving to be the least sexy. For retailers with smaller stores and more expensive goods, who don’t need as many RFID readers, RFID can help them count inventory much more quickly, and in a still cost-effective way.  However, newer tech like computer vision also threatens to overtake RFID as a more popular solution for inventory checks.

“It just seems like RFID may never catch on as a mainstream, item-level inventory tracking technology,” said Jason Goldberg, chief commerce officer at Publicis.

What is RFID?
In layman’s terms, RFID refers to the use of radio waves to read and capture information. It’s generally a two-part system: retailers need both an RFID tag, which is typically embedded into product or price tags, as well as an RFID reader.

Traditionally, whenever retail employees needed to count all of the inventory in store, or count all of the inventory in a new shipment, they either needed to count by hand or use a barcode scanner. The problem with barcode scanners is that it requires an employee to line the scanner exactly up with the barcode, a process that might take a few seconds to get right. That might not seem like a lot, but it adds up when employees are having to count thousands of items.

With RFID scanners, an employee doesn’t have to point the scanner directly at the tag in order for the scanner to pick up information from that tag. Therefore, it allows employees to count inventory much more quickly and from further away. They can also store more information about the product than a standard bar code, like shipment or expiration date. And, RFID scanners can tell an employee exactly where an item is in the store — if it’s in the dressing room, or was accidentally placed on the incorrect shelf.

Activewear brand Outdoor Voices first started using RFID in stores in November 2018. Nate Peterson, the company’s vp of supply chain said in an email that it used to take multiple store employees hours to do a once a week full inventory check. Since the brand has starting using RFID, it now takes one person less than an hour to do a full inventory count.

“The pressure of having really accurate inventory down to the unit in the store becomes both a revenue factor for the retailer, but also a customer service factor,” said Jane Cannon, chief product officer of NewStore, an iPhone-based retail management platform that integrates with any RFID provider for inventory management. She argues that by spending less time on inventory checks, RFID enables employees to interact with customers on the floor more. NewStore customers include Outdoor Voices, as well as DTC menswear brand UntuckIt.

The drawbacks
Retailers may be able to save on labor costs by integrating RFID in store, but that doesn’t make the technology cheap.

Goldberg said that while RFID tags used to cost one or two dollars, they now generally cost under 10 cents. However, barcodes may cost under half a cent. As such, the more expensive the product, the easier it is for a retailer to allocate money for RFID tags.

Then there’s the issue of RFID readers, which can cost thousands of dollars. A retailer can save some costs if they are willing to only allocate one or two RFID readers for every store. But if they want to install RFID readers in every dressing room, like Rebecca Minkoff did, or install multiple RFID readers in the ceiling to ensure that they always know exactly how much inventory is in store, that can add up to tens of thousands of dollars.

Meanwhile, other retailers are finding that computer vision is doing a better job of fulfilling the most hyped use case of RFID: using it to know exactly how much inventory is in a store at any given time. While it was rumored that Amazon Go stores used RFID tech when they first opened, the e-commerce giant has instead said that the convenience stores mostly rely on computer vision to know when customers take an item.

Not every retailer is swearing off RFID in store, particularly those who want to garner press with a few high-tech stores. Puma’s new North American flagship store, which opened in Manhattan last August, has RFID-enabled mirrors, that like Rebecca Minkoff’s smart mirrors, bring up product information and suggest other clothing items that are similar in style to the ones the customer brought in the room.

Goldberg thinks that RFID tags make the most sense when a retailer applies them to pallets of product, not the individual item themselves, in order to save more money, but also be able to unload inventory more quickly.

“I think we will continue to see more of those deployments,” he said.

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