By Doug Todd
RFID systems have been tested and refined by vertical retail giants like H&M, Zara and Uniqlo since the mid 2010’s. More recently, department and big box wholesalers like Walmart have also adopted the technology, beginning the process of making RFID tags mandatory on their suppliers’ products.
How can New Zealand businesses learn from their experience? Is it time for local retailers to start building their RFID capability? And should we be taking a fresh look at the technology dubbed “essential in today’s rapidly changing marketplace”?
Here we review the global expansion of RFID systems and pose the question – are New Zealand businesses missing out on the future of retail?
Game Changing – Experiencing Retail RFID First-Hand
There are few customer experiences these days that truly surprise us – that is until you have your first encounter with RFID in a retail store.
Shopping at peak hour in Uniqlo’s Bondi Junction (Sydney) store, I did a double take as I put my (rather full) shopping bag of items into the self-checkout container. The screen in front of me instantly displayed my full basket contents, I tapped my phone to pay, picked up my bag and out I walked. A bit shell-shocked, to be frank!
There was no waiting, no queues anywhere, no human at a counter – yet staff all around the store had made me feel welcome. Every item I’d interacted with had a full size-range on shelf, and despite the store being extremely busy all shelves and tables were neat and well maintained. It was fast retail at its best, and I couldn’t fault the experience.
Uniqlo, the popular Japanese clothing brand, is yet to open an outlet in New Zealand but has almost 2,400 stores across 25 markets worldwide. The brand is owned by parent company Fast Retailing and in 2022 delivered a turnover of over $7bn USD and profit in excess of $1bn USD.
In 2017, Uniqlo began implementing its RFID inventory management system – inserting RFID chips into its price tags, followed by a rollout of RFID-enabled self-checkouts in 2019. The RFID program is proving to be a game-changer for the company, which plans to progressively roll the technology out to all its stores.
Uniqlo are only one of the major retailers actively rolling out their RFID programs. H&M, Zara, Lululemon, Walmart, Nordstrom and Superdry are among the many global names making the shift to RFID.
How Does RFID Work?
RFID technology involves using small chips inserted into RFID tags on items to track products in real-time. This delivers two primary benefits – seamless customer experience, and accurate inventory management.
Boosting Inventory Accuracy
Accurate inventory data is a boon for product management, allowing items to be restocked as soon as they run low. Retailers can accurately manage lead times and order cycles, reducing the incidence of out-of-stock items. Margin improvement is also significant, with more accurate ordering minimizing the need to mark down excess inventory.
At a store level, managers credit RFID with eliminating stock-taking headaches. Stores can be cycle-counted every night by RFID enabled robot scanners. This not only eliminates labour costs associated with stock taking, but also enables inventory discrepancies to be managed daily at a granular level by individual stores before they become insurmountable.
Returns are also able to be handled quickly and efficiently, with returned items able to be quickly scanned and instantly added into the pool of saleable inventory, minimising the cost of returned items which would otherwise be lost in the supply chain.
A proof-point for RFID’s efficiency is the experience of Decathlon in its 1600 global stores. In 2021, the French sports equipment retailer had implemented RFID tagging across 85% of stock items. Decathlon credited RFID inventory management with a 3x increase in labour productivity, a reduction in out-of-stock items, and a revenue increase of 2.5%.
Enhanced Customer Experience
Speaking to the Wall Street Journal, Fast Retailing’s CIO, Takahiro Tambara spoke of the speed and efficiency of RFID for customers, with wait times decreasing by 50% on average. At fully automated self-checkouts, customers simply place their items in a checkout container which reads their tags together at once, initiates POS, and deactivates the tags once the payment is complete. Just one checkout in each store is staffed, for customers who prefer the human touch.
The benefits for customers are tangible, with the reduction in manpower at POS freeing associates to concentrate on customer service around stores. In-store teams spend their time assisting customers, merchandising and replenishing shelves, ensuring that more items are available, more of the time.
Reducing Retail Shrinkage
In addition, RFID can help retailers reduce losses from theft – either by shoplifters or by internal staff. With RFID tags on individual items, retailers can track stock throughout the store. If an item is moved without being scanned at the register, the system can alert the store associates to a potential theft.
Daily stocktaking closes the loop on missing inventory, making the system particularly effective and simple for store managers.
The Global Experience
Uniqlo’s experiences with RFID are mirrored by other retail heavyweights, progressively rolling out their own RFID systems. Inditex, parent company of fast fashion retailer Zara were among the first, beginning their rollout across their stores and supply chain in 2014.5 H&M followed close behind – making them two of the earliest adopters to invest in the technology.
H&M began their RFID journey shortly after Inditex. After a significant testing program, the group began to roll out the technology to 1,800 stores across 12 markets in 2018.
In addition to improving inventory management, H&M have reported improvements in customer experience, full-priced sales and a reduction in end-of-season markdowns which they attribute to their RFID systems.
RFID enabled “Smart Mirrors” in changing rooms are one of the unique retail technologies that H&M are pioneering in their US based COS stores and H&M concept store.
Smart mirrors have the capability to transform customer experiences. Combining RFID data with mirrored screen technology, these smart devices use RFID sensors to detect the items a customer brings into the changing room. The mirrors will suggest complementary garments, and assist with alternative colours and sizes based on item availability in that store. Not only do smart mirrors help to increase average basket sizes, but they also provide security and help to deter shoplifting.
RFID & Sustainability
Sustainability is also high on the RFID agenda for major retailers. Accurate inventory tracking enables merchandise teams to manage products at an item level throughout the supply chain. Environmental footprints for items can be minimised by optimising transport routes and reducing excess inventory.
RFID’s benefits for product managers and customers are clear, along with the impact it has on an organisations bottom line. As markets become ever more competitive, RFID is proving a key element in creating a competitive advantage for global retailers.
The Time is Right For New Zealand Retailers
In New Zealand, retail businesses are just now starting to turn their attention to RFID. You could argue our timing is perfect, as we begin to invest in this future capability at a point where significant learning has already taken place.
RFID suppliers have had almost a decade honing their tools and technology alongside global retail businesses. Implementation costs for RFID systems have never been lower, with tag prices coming down from their previous highs, and payback periods for systems also now at accessible levels.
There’s never been a better time to start your business’ RFID journey.
At Vitag, we partner with the companies at the forefront of RFID technology worldwide. Their skill together with our experience and service, delivers the inventory management systems that New Zealand retailers need to transform their businesses with RFID.
- McKinsey: RFID’s Renaissance in Retail.
- GS1: How H&M have transformed customer experience using global retail standards
- H&M Group: Taking steps to grow the customer experience through tech
- H&M Group: H&M Group explores tech-enabled shopping experience in US stores
- Inditex: Inditex deploys RFID technology in it’s stores
- Forbes: Walmart to use RFID to improve ‘store level’ inventory accuracy in home goods, consumer electronics