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What advantages does RFID technology bring to the retail industry?

What advantages does RFID technology bring to the retail industry?

Aug 1,2023
RFID (Radio Frequency Identification) is actually not a new thing. It has been widely used for many years. Many American retailers including Macy's, ZARA, and Decathlon Sports are using this technology.
Its working principle is very simple, that is, each product has a radio frequency ID tag, and the tag has its own unique magnetic signature. This signature is extracted by the recipient or RFID reader and is not only unique but also reveals the location of the tagged product.

RFID is also used in credit cards with QuickPass functionality.
 
Because tags are read magnetically, it is more efficient than typical visual scanning systems, and tags and readers don't require cluttered communication lines. Therefore, the immediate benefit of the RFID system is that retailers can reduce the time to obtain inventory data by 90%. In other words, RFID only takes 45 minutes to obtain the inventory data that originally took three days.
 
RFID also greatly improves accuracy. The actual inventory through manual scanning has an error of about 4%, and this value will be superimposed every year, so the cycle count of the entire sales year may have an error of more than 60% during the peak sales season. In contrast, the RFID error is usually only 0.5%, which means that the inventory will be much more accurate throughout the year.
 
Many good managers have recognized the advantages of RFID in the timing and accuracy of physical inventory. RFID has many functions, but there will be more functions in the future.
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1. Adhere to the main commodity planning


Most chain retail stores have a plan for where the goods in the store will be displayed, especially for fashion retail, because there are usually multiple displays in the store, and these display fees are often paid by their brands. However, the more stores a retail chain operates, the more difficult it becomes for each store to accurately execute centralized buyer merchandise planning.
 
By placing some readers in some important areas of the store, the location information of most commodities can be obtained in a small range. That is to say, the central buyer can get a report of the wrong product information in each store.
 
This means that if a women's sporting item is misplaced on a boot, the problem will show up in the report immediately, giving the store the opportunity to take immediate action to correct the error. In addition, products that should be displayed in the store are often placed in the warehouse. Through a well-run RFID system, managers can determine whether there are some unsalable products in the warehouse.
 

2. Inventory Accuracy – Improves click-through and pickup rates

Most merchants will adopt an "omni-channel retail strategy", meaning that customers can buy online and then pick up the goods themselves at the physical store. Of course, this click-and-pickup rate strategy depends on the accuracy of each store's inventory counts. In other words, if the system shows that there are two units of an item in stock at a certain store, but the fact is that there is no stock in the store, it will be embarrassing when the customer shows up to pick up the order, and the customer will be left with one unit. Very bad experience. The excellent accuracy of RFID will also allow merchants to be more confident about the location of in-store products displayed by the system.


3. Understand the hot spots in the store


Another advantage of RFID is that it can record the location of the goods displayed in the store. This record can be combined with the sales data to find out which displays and areas in the store have the best sales.
 
Of course, different areas in the store may have an impact on the sales of different products. Combining reference inventory types, store types and display areas, RFID technology can give the best possible solution.
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4. Add customers


One of the key metrics in fashion retailing is understanding customers' fitting room habits. Whether the customer actually wears a certain piece of clothing in the fitting room is a very valuable piece of information. Some merchants will place RFID readers at the entrance of the fitting room, which will collect some information including size and color. Useful information. From this we can learn some interesting data points:
 
The first question is whether the dress has never been tried on at all. That is to say, the customer has absolutely no interest in the dress. The reason may be that the clothing is displayed incorrectly, or in a place where the visual effect is not good, or where it does not attract the attention of customers at all.
 
However, if the customer tried on the clothes but didn't buy them, that's a whole different issue. Possibly because of the clothes themselves: what size clothes are not being asked? Which colors are particularly favoured? These are all things bulk buyers need to know to gain a better understanding of why certain items sell well and others don't meet expectations.

 

5. Fast and accurate checkout


One of the most popular examples of RFID is that it can pay much faster than before. After using RFID, the cashier can check out with the help of the system without even taking the product out of the customer's shopping cart. . Being able to skip the manual scanning process can make a fundamental difference in wait times, especially during peak hours. In addition, RFID's performance at checkout greatly reduces cash reconciliation errors at the cash register.


6. Helps reduce theft


Many merchants will embed the RFID tag on the security device of each item, and some will embed it on a separate tag, or even embed the RFID on the product itself.
 
In addition, the RFID tags on the security tags have two functions: First, even if the beeping alarm sounds when the customer passes through the detection door, the clerk can do little, or there are not enough people in the store to guard the door. specific entrances and exits. With RFID, it is much more convenient, and the clerk will even know where the product is-as long as it is within the range of the reader, the system will know whether the product has been taken to a place that is not allowed. Second, the RFID system helps keep insiders at bay. Many employees hide an item or two somewhere in the store, waiting to go home when they get off work. RFID will greatly prevent this from happening.
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7. Temperature measuring instrument


For food and beverages, knowing the temperature records of perishable products is critical to maintaining their freshness and quality. Thin Film Electronics has produced an RFID tag with a built-in micro-thermometer, which can record the temperature of an item, so that stores with this item and even customers will have a more intuitive and accurate climate record to prevent potential loss.


8. Distinguish the authenticity of the goods


Regular manufacturers of products can embed RFID tags in relatively hidden places, and dealers can identify authenticity by scanning the tags, but the problem is:
 
The RFID tag itself is quite cheap, about 10 cents (7 cents in RMB). The question is how to add it to the product, and the most cost-effective way is to embed it in the production process. For clothing, consider sewing the label onto the garment, or having a sewn-on label for the garment.
 
Many retailers can use purchasing power to force suppliers to embed RFID tags in their products. For merchants with their own brands such as Decathlon Sports and ZARA, it may be relatively simple. However, for most dealers who resell brands, it is not easy to persuade big brands to add RFID tags to their products, especially for those brands that have not yet adopted RFID systems.
 
However, compared to RFID tags, readers are much more expensive. According to its sensitivity, the price range is roughly 500-2000 USD/piece, the higher the sensitivity, the more expensive the price. Stationary devices are more expensive than handheld devices.
 
A reader is very important if you want to more accurately locate the floor where the product is located. Combining the use of readers, it is also possible to triangulate the merchandise.
 
Many large retailers use handheld readers to reduce costs, and can also add RFID to the bottom of the barcode through additional equipment to achieve RFIDization of goods.
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