RFID in Retail: A Frustrating Disconnection

While major players set mandates, others struggle to understand potential benefits of radio frequency technologies, ABI says

While major players set mandates, others struggle to understand potential benefits of radio frequency technologies, ABI says

Oyster Bay, NY  March 16, 2005  Radio frequency identification (RFID) mandates launched by a few big retailers such as Wal-Mart and Target are now well documented and understood, but many other retailers are finding problems and frustration when they try to apply RFID in the same way.

Why? Because, says ABI Research analyst Sara Shah, "There's no cookie-cutter approach to RFID."

In a new study, the research firm finds a disconnection: RFID manufacturers  many of them relatively new companies  don't understand retail; and many retailers don't understand how RFID can benefit them. This leaves them frustrated and slows down market adoption, the study concludes.

ABI's new report, "The RFID Retail Market" examines how retailers are adopting RFID and the ways they will realize a return on investment (ROI), as well as the possible business process changes it will entail.

"Wal-Mart's approach is creative," says Shah. "It's very worthwhile for them, which is why they're pushing forward on schedule. Other retailers follow, thinking that Wal-Mart's business case will apply just as well to them. But it may not work, because every business and every supply chain is different."

For this reason, many retailers turn to their usual consulting companies  often one of the largest half-dozen. But big consultants are rarely early adopters of new technologies; they're often content to let ideas mature before getting involved, and they are often less creative and imaginative, ABI asserts.

Beyond supply chain management, nobody knows how many ways RFID can be used; known applications include security and "backdoor theft" prevention, contactless payments, advertising and promotions. Shah advises retailers to consider smaller consulting firms, where they'll find people who can identify new ways to use RFID. Unfortunately, she adds, many of those small creative integrators lack the resources to execute system-wide rollouts for large clients.

For their part, RFID vendors need to educate themselves about retailing, and to develop solutions to retailers' problems, not just one-size-fits-all products, ABI believes.

Additional Articles of Interest

The focus in the retail sector has shifted from managing the movement of goods to managing the information about goods. Read more in "Ramping Up the Retail Supply Chain," in the February/March 2005 issue of Supply & Demand Chain Executive.

For more information on trends relating to radio frequency identification, follow this link for an extensive listing of SDCExec.com articles, featuring the latest research findings on the RFID, including adoption, return on investment and barriers to implementation.

For a contrary view of the future of the RFID market, see the article "The O'RFID Factor: A 'No Spin' Look at Where Radio Frequency Identification Is Headed," in the October/November 2004 issue of Supply & Demand Chain Executive.