RFID in Retail [Updated for 2023]

RFID in Retail Sees Rapid Growth

Since the start of 2022 major retailers have begun issuing RFID tag mandates. Target, Macy’s, Nordstrom, and Walmart have all handed down RFID mandates to their respective partners and vendors. So, why is RFID in retail seeing such a boon?

RFID has many uses for retailers. It can improve inventory visibility and reduce cycle count times by 96%. RFID-enabled inventory counts can be performed more than once a week. With this technology, retailers can learn more about their customers and products. For example, a company like Macy’s can use RFID to list products for sale only when there is only one left. This data can be invaluable in the event of a disaster in the retail industry.

With RFID, retailers see inventory accuracy raise from 63% to 95%. RFID improves labor productivity by 96%, reduces cycle count time by 96%, and cuts out-of-stocks by as much as 50%. (Source: GS1 US)

Accurate inventory information is crucial for efficient supply chains. Traditional inventory count methods require intensive labor and are often inaccurate. RFID has improved inventory accuracy significantly by processing a wide range of data in just a few minutes. It eliminates the need for manual scanning of barcodes on individual objects and eliminating the need for touch-counting every object. RFID is the future of inventory tracking. Its many uses in retail are only limited by the imagination of their users.

RFID has many other uses for retailers. It can help increase transparency on the sales floor. For example, RFID helps stores reduce labor costs. It reduces cycle count time and allows staff to focus on customer service. It can help reduce labor costs by automating reorders at safe-stock levels. Furthermore, retailers can use RFID technology to automate replenishment and inventory processes. This technology allows retailers to monitor stock levels more efficiently and increase productivity.

How Does RFID Work in Retail?

Retailers such as Macy’s, Target, Walmart, Kohls, Nordstrom and several more are currently relying on RFID technology to ensure end-to-end supply chain efficiency. But, how exactly do retailers use RFID? In some cases, retailers apply RFID tags to their merchandise at the item-level. This means that certain products have RFID directly affixed to themselves.

Retailers often affix RFID tags directly to the following kinds of inventory:

• Jewelry
• Handbags
• Makeup kits
• Luxury brand shoes

RFID is commonly deployed in retail supply chains to improve inventory accuracy. From initial inbound shipments all the way to final sale, retailers can track their goods thanks to RFID. This allows for optimal inventory visibility which makes modern retailing easier. With more accurate inventory, retailers can cater to popular shopping trends such as BOPIS (buy online, pickup in store). Major retailers may require vendors to tag their own goods and shipments as well. This is known as a RFID tag mandate. Retailers provide vendors with guidelines and expectations for tagging merchandise. Vendors and manufacturers will then be expected to adhere to the mandate. Failure to tag items according to the retailer’s mandate can often lead to financial penalties, chargebacks on merchandise, or a dissolution of the vendor/retailer partnership altogether.

To learn more about what exactly RFID is, read our glossary article.

What are the Use Cases for RFID in Retail

From inventory visibility improvement to reducing theft, there are numerous use cases for RFID in a retail environment.

1. Simplified Cycle Counting – RFID can make a hugely beneficial impact on a retailer’s inventory management efforts. Retail employees and inventory teams can run cycle counts quickly and without the headaches of checking inventory on off hours or shutting down departments. Unlike barcodes, RFID can be batched scanned. In a matter of seconds, inventory numbers can be accurately calculated with RFID tagged retail inventory.
2. Reducing Shoplifting – Retailers often use RFID technology to improve their loss prevention efforts. With RFID, retailers can receive alerts when items are taken out of secure zones, or moved without authorization. RFID can provide retailers with other important information for item recovery such as SKU numbers, color, size, etc. RFID also works with sensors at store exits to alert retail workers of any attempted theft.
3. BOPIS and Omnichannel Retailing – Modern retail operations such as BOPIS (buy online pick up in store) and other ecommerce initiatives require retailers to fulfill orders faster than ever. RFID can help retail fulfillment teams keep track of where inventory is located throughout the store, stockroom, and beyond.
4. Improving In-store Traffic Patterns – Retailers can receive information from RFID that shows how shoppers move about their store. With this information, retailers can move items around to maximize sale probability. Other advantages include reducing cart/item  abandonment, and reviewing traffic movement based on day and time.
5. RFID Can Speed Up Checkout Process – With RFID, retailers can make their checkout process more frictionless than ever before. With the right combination of RFID tags and sensors, shoppers can simply grab the items they need and walk out without waiting in line or checking out. Amazon Go, a pioneer of such technology, allows their customers a seamless customer experience that improves the shopping experience.

What is an RFID Tag Mandate?

When a retailer has decided to deploy RFID into their supply chain, they will need to notify its vendors and manufacturing partners. Most major retailers source merchandise from hundreds of brands and suppliers. In order to ensure consistency through their supply chain, the retailer will announce how and when they expect their suppliers to add RFID tags to their merchandise.

There are numerous moving parts and fine details that go into a RFID mandate. Some mandates may require vendors to tag goods at the item level. This is typically reserved for high value items such as designer bags and jewelry. For consumer goods and apparel, it is generally expected that retail vendors and suppliers tag goods via shipped pallets and bulk packages. Once these pallets or packages are tagged, suppliers can send them to their retail partner for inbound reception. Retailers will likely have a system set up where shipments are reviewed and tags automatically scanned as they enter their facility. If merchandise is not tagged to the specifications of the retailer’s mandate, the supplier may get penalized or even have their entire order nullified. This is known as a chargeback, and it can cost suppliers and distributors millions of dollars. This is why it is absolutely vital for a retail vendor to make sure their RFID tagging operations are in compliance with its retailers.

What Are the Advantages of RFID Tagging in Retail?

RFID tags are often compared to barcodes since the tags will replace barcode scanning during inventory counting and inbound/outbound shipping and receiving. When comparing RFID to barcodes, RFID offers several major advantages for both retailers and suppliers.

1. Faster Item Counting – In a matter of seconds, entire sections of RFID tagged inventory can be scanned. This is far more efficient and accurate than having to scan barcodes one at a time.
2. Larger Data Storage – Standard 1D barcodes can store 85 characters. RFID tags on the other hand can store much more data. Alien’s Higgs 3 chip, for example, has a memory of 512 bits.
3. Data Variety – Unlike barcodes, RFID tags can be built with sensors that can capture specific information. RFID tags with sensors can sense movement, temperature, humidity, or sudden falls.
4. Durability – Barcodes have a tendency to disintegrate or peel off depending on how they are created and handled. RFID tags on the other hand can be ruggedized in order to handle harsh environments.

What types of products can you use RFID for?

RFID tags are typically applied on shipping pallets or bulk packages. However, there may be a sensible reason to tag individual items such as luxury .goods or high value inventory. As long as the goods are stored in an area where they can be scanned, there aren’t many limitations as to what kinds of products you can tag with RFID. In retail, equipment may be affixed with RFID tags.

With that said, RFID tags can struggle to read effectively when they are affixed to liquid materials such as liquor bottles or metals. This is because liquid and metals reflect radio waves, thus making it very hard for the tags to be read.

How does RFID help in apparel inventory management?

RFID and apparel are a perfect fit for many reasons. The biggest way RFID can help is by ensuring the most accurate apparel inventory numbers. In today’s omnichannel retail environment, it is vital for retailers to have accurate inventory data. Using RFID, retail employees can quickly scan inventory with a RFID reader and get highly accurate inventory counts in seconds. With more accurate inventory information, retailers can know when stock levels are low in a timely manner. That way, retailers can know when to order more inventory and avoid items going out-of-stock.

For higher value, apparel RFID can assist in loss prevention as well. Once inventory is tagged, employees or loss prevention specialists can be alerted when unauthorized movement of inventory occurs.

In some environments, simply locating inventory can be a challenge. Wedding dress shops, for example, have unique inventory needs that can be addressed with RFID. The location of a specific dress can be identified with an RFID reader that has a built-in geiger counter that can alert the employee when they are in close proximity. An RFID software application can also be used that can display the dress’ location via a floor map.

How does RFID help in replenishing proper stock levels at each store?

As we’ve discussed, maintaining accurate inventory numbers is a hugely important element to succeeding in the world of ecommerce. There are numerous ways RFID can help retailers manage inventory stock levels. RFID antennas can be carefully placed along shipping dock doors in order to ensure inventory is accurately accounted for as soon as it reaches the retail store. With this strategy, RFID can help retailers set their inventory accuracy levels to nearly 100% as soon as items enter the facility.

When items are brought to the shopping floor, employees can simply scan the goods in a batch to verify inventory counts. RFID software systems can alert managers when inventory is running low to avoid out-of-stock items.

How can businesses get started with RFID?

Retailers usually start with a RFID project or pilot test. Early on there is a lot of work and logistics that need to be squared away well before RFID is introduced into a retailers supply chain. The environment, required solutions, and overall expectations all play a role in how RFID will be utilized.

Organizations will then need to select their hardware and software. The hardware (RFID tags, antennas, readers, printers, etc.) will depend on the scope of the project. The software will depend on what you want to get out of your RFID investment. Some organizations may just want to run occasional cycle counts and receive basic inventory reports. On the other hand, some retailers may want a more robust tracking system to prevent theft or lost items. Regardless of the software you choose, the product should allow you to adequately track inventory, locate items, and update inventory data.

Once a cost prohibitive solution, RFID is a lot more affordable than ever before. And, organizations can start small. An initial RFID project can be done in a single stock room or department. Even a small RFID deployment can yield higher inventory numbers, improved employee efficiency, and a reduction in lost inventory.