RFID Faces Adoption Challenges In Retail Environments

May 1, 2006 12:00 PM

TECHNOLOGY FOCUS

RFID systems spending for retail in-store applications reached nearly $88 million globally in 2005, according to a report by Venture Development Corp. (VDC), which forecasts growth of more than 35 percent per year in retailer spending on RFID for in-store point-of-sale (POS) applications through 2010, when the market is expected to reach nearly $400 million.

Technical approaches and application priorities for retailers using RFID are divergent, but their goals are fairly consistent. Surveys of retailers reveal a common vision for RFID retail POS applications that include: accurate and efficient inventory control; consequent cost reductions related to better inventory management; optimal stock levels based on real-time customer activity/demand; reduction of out-of-stocks; lower warehousing costs via automated processes and improved tracking efficiencies; and improved margins.

The key to RFID for retail in-store applications is the cost-effectiveness, reliability and ease-of-use of item-level tagging solutions. Without item-level tagging, VDC believes that most value propositions, revenue enhancement goals and margin improvement objectives will not be attainable. Some of the most significant challenges to item-level solution development, deployment and operation include:

• Software coding and proper systems integration: Conversion code needs to be written to convert all existing databases so that a retailer can cart Electronic Product Code (EPC) information;

• Unsynchronized adoption across the supply chain: Retailers are concerned that their IT suppliers and distributors may not be quick to implement RFID. Retailers and manufacturers need to collaborate on RFID efforts to receive the full benefit, including the positioning of RFID transponders onto products or into packages;

• Extensive training requirements of new systems: Retail personnel must be trained on how to use the new systems and to learn new job functions; and

• Cost of technology replacement: In addition to the costs of system components and business process changes, there is also the potential expense of replacing existing scanners in stores with new devices that are bar-code, magnetic stripe and RFID enabled.

“Item-level tagging will be rolled out slowly, over time,” says Michael J. Liard, director of VDC's RFID Annual Research Service. “Deployment will be determined as much by the value of items merchandised, as by the volume of units sold. Current implementation costs, particularly tag prices, are simply too high for widespread adoption.”

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© 2012 Penton Media Inc.

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