This week, Target inked a deal to deploy RFID (radio frequency identification) technology in Target’s 1,600 stores. According to RFID provider Avery Dennison, the rollout will be the largest RFID partnership in retail.
The purpose of the partnership is to help Target better manage its inventory, from supply chain to the store level, on a mass scale. As other brands and retailers, from Zara to Rebecca Minkoff, roll out RFID technology to improve the customer experience and shed light on where their items are throughout the production and purchase processes, here’s an explainer on every implication RFID has for retail.
Let’s start with the basics: How does RFID technology work in retail?
RFID uses radio frequency to track items that are tagged with chip sensors that can be read by electronic scanners. The tags, attached during manufacturing, store information that reflects an individual item’s serial number, price, and production and purchase history. For retailers, this insight provides a visibility of the supply chain, allowing them to improve efficiency and speed up the production process.
On the distribution level, RFID tags allow retailers to remove the silos of inventory management by allowing them to see where items are located — for instance, on a sales floor or in a warehouse. That information can be used to fulfill customer orders and manage returns more efficiently.
“Omnichannel is a buzzword in retail,” said Julie Vargas, director of digital solutions at Avery Dennison. “This solves how we can communicate across channels, from e-commerce to warehouse, to sales floor, to in-store display. Right now, it’s quite siloed.”
What makes this different than a barcode?
Barcodes only identify a product class, which groups together every item, like a pair of shoes. RFID, on the other hand, tags each pair of shoes with its own unique serial number, which — when scanned — lays out the individual item’s history. RFID history can tell a retailer how long one item has been sitting in a warehouse or on the sales floor, how many times it has been tried on in a fitting room and put back, and if it was ever purchased and returned.
RFID tags also don’t need to be scanned one at a time, like barcodes. The technology, therefore, plays a role in checkout-free stores, the kind piloted by Amazon Go and briefly tested in Target’s “store of the future” initiative. With RFID technology, customers can just pick out what they want and leave in the checkout-less store format, as the RFID tags can register the transaction without the added step of individually scanning items.
Sounds a little futuristic. What does it mean for shoppers now?
For shoppers, RFID enables retailers to roll out initiatives like browse online, find in-store; buy online, pick up in-store; reserve online, buy in store; and buy online, return in store. It can also reduce shipping times, as RFID lets retailers figure out what fulfillment center (which could be a store location) fulfills online orders the fastest.
These e-commerce features aren’t always exciting to talk about, but they’re slowly becoming table stakes for retailers who want to stay competitive. Those with vast store fleets, like Target and Kohl’s, are facing a daunting mass of inventory that’s nearly impossible to overhaul without a helping hand from technology like RFID.
“Retailers competing with Amazon need to figure out how to use their existing stores to their advantage,” said Claude de Jocas, retail analyst at L2. “Free shipping, for most, can’t scale. Offers like buy online, pick up in-store are the first step to adapting.”
How else can retailers use information stored in RFID tags?
Brands with much smaller store fleets than Target are using RFID to offer new in-store experiences to customers. At the Burberry flagship store in London, RFID tags on items are detected when clothing is brought into fitting rooms. In response to an item, a video will play across the fitting room mirror showing that piece on the runway. Similarly, Rebecca Minkoff uses fitting room recognition in order to pull up suggested items and alternative colors and sizes on its smart mirrors.
These gimmicky use-cases can also provide valuable information. Uri Minkoff, CEO of Rebecca Minkoff, said the brand closely monitors what’s being taken into the fitting room and failing to convert in order to make changes to its product line. If an item is sold, that information is stored in a customer’s profile. Rebecca Minkoff can then make suggestions to customers based on items they’ve purchased and — importantly — haven’t returned.
“When we know what’s moving in and out of the fitting room, that informs our design team,” said Uri Minkoff. “We’ve had conversations based on what did and didn’t convert, and then our design studio makes decisions based on this. It has revolutionized our whole business. The stylist has a glimpse into what the customer wants, without guessing.”
