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8 lessons learnt from rolling out RFID

The results of a report investigating the impact of RFID in retail has found 100% of the retailers surveyed seeing a positive return on investment (ROI) after implementing the technology which leads to accurate retail inventory.

The report, commission by industry standards organisation GS1, featured retailer case studies from 10 brands, which between them have rolled out 1.9 billion tags across their businesses. It found that retailers could boost sales by 5.5% through the deployment of RFID tags.

RFID is not a new technology to retail, and in the past its stock accuracy benefits have been dampened by concerns over cost and privacy. But in recent years, the cost of the tags have significantly dropped, meaning retailers like M&S, John Lewis, River Island and Jack Wills have been able to conduct trials to understand the benefits of this technology, and roll it out to the wider business.

Following a panel discussion with these four retailers, Essential Retail, shares eight lessons they have learnt after rolling out RFID.

1. The impact on sales is actually quite hard to measure

While the report suggested a 5.5% sales increase for retailers who roll out RFID, Richard Jenkins, head of loss prevention & RFID at M&S, said he doesn’t subscribe to sales as a KPI for RFID implementation.

“There’s this expectation of flicking on the switch and instantly seeing a massive sales uplift,” he said. “But to be able to isolate the bit that RFID has delivered – I don’t buy that.”

Jenkins said accurate inventory delivered by RFID helps to get the right products to the right place before they go out of season and are marked down. But sales numbers are also impacted by other factors like the weather and buying volume.

Martin Speed, safety and loss programs manager at River Island, said the only time where a sales increase was clearly caused by RFID was during the roll out when some stores had the technology and others didn’t.

“We could compare and we saw that [the stores with RFID] outperformed the ones without by 3.5% – which was well over our ROI.”

2. It’s not just about numbers – RFID improves customer experience

Sham Ahmad, stock audit & compliance manager and Jack Wills described how the retailer’s roll out was based on improving customer experience. She said that before the deployment, web orders that were fulfilled from stores were being cancelled 25% of the time due to lack of stock visibility. But after introducing RFID, inventory accuracy improved from 59% to 95% in a mere six weeks, bringing online order cancellations down to 5%.   

Jenkins agreed that making inventory levels more accurate had a direct knock-on effect on customer experience.

He said: “Customers are less loyal today and less likely to come back if you disappoint them. They’re not brand affiliate anymore and they go where they think there will be high probability of getting something – disappoint them at your peril.”

3. You need to manage expectations within your business

Rob Mitchell, manager, stock management operations at John Lewis, warned that the rest of the business can get very excited when they hear about an RFID roll out, and they don’t understand it takes time to deploy.

He said the project managers work really hard to make it look seamless, but this leads to various departments thinking it’s just the “flick of a switch” and all the different assortments can be RFID tagged immediately.

Ahmad, agreed that other parts of the business start suggesting the retailer should look at the wider opportunities, such as featuring magic mirrors in store.

“We had to keep telling people we had a goal, but further down the line, we absolutely will do,” she said

4. Don’t ask if RFID will replace the barcode

GS1’s CEO, Gary Lynch, said the most common question he is asked in relation to RFID is whether the technology will replace the barcode.

“They are there to do different things,” he said. “You need to understand the requirement you’re trying to fix, but the important thing is to remember that you don’t have to throw away all your investment in barcodes.”

5. Prioritise certain products when rolling out RFID

When rolling out a new technology like RFID, it is impossible to tag your entire stock in one go – don’t forget ten retailers deployed 1.9 billion tags across their businesses – you must start by choosing which assortments would benefit from the technology the most.

Jenkins from M&S advised retailers to “start high”. He said high-value products, SKUs arriving in ones or twos and items which are not seasonal, should all be on the “top of the list for deployment”.

“Then you get to the lower-value where the impact is less,” he said.

6. Tag at source

Jenkins also said the only way to deploy RFID is to tag at source. “It’s very different in a store – you really can’t be sure people are putting the right tags on the right things and you can end up potentially causing more problems than you fix.”

John Lewis’ Mitchell said the retailer realised very quickly that it was not appropriate to tag in store because it slows down the speed to sale and is very expensive. “We tag our products a mixture of 80% by suppliers and 20% by a third party – but that’s further up the supply chain.”

7. Next step – returns

Once retailers have accurate visibility of inventory – which took as little as six weeks for Jack Wills – they can then begin using the technology beyond the store remit, including tracking the supply chain and returns.

Ahmad believes returns will be a “big win” for Jack Wills. She described how after a small trial a process to scan returned items back into the retailer’s warehouse facility normally took eight hours, but with an RFID scanner opposed to an individual label scanner, this was reduced to between six and ten minutes.

8. RFID doesn’t work quite as well in food

Jenkins said M&S has trialled RFID for its food products, with not a lot of success. “The benefits on the table aren’t the same.”

He said M&S clothing consists of between 250,000 and 300,000 SKUs, while food is never more than 6,000. Additionally, food products tend to already have supply chain accuracy because it is imperative the items don’t go out of date before being sold to customers.

“You also don’t get things delivered in ones or twos, so if even one or two get nicked or dropped on the floor – you still have something to sell to the customer,” added Jenkins. “The problem we’re trying to solve is not quite the same – it’s more of an efficiency issue. Our turnover is 50/50 clothes and food, but we move five times as much volume in food. So it’s five times the price for less of the benefit.”

Jenkins explained M&S could use the technology to tag the trays, cages and milk dollies used to transport the food through the supply chain to improve accuracy and maintain visibility of equipment.

“If we saw the tag costs come down in price, that could be quite a game changer, but there are all sorts of things to consider tagging that you would not in today’s world.”