What can RFID do for retail?

April 16, 2018 Industry news

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In this our second article taken from our report Measuring the Impact of RFID in Retailing, we look at the KPIs used to measure of success by the 10 retailers who participated the study.

By definition, a KPI is a metric to measure how effective a company is performing against set goals. However, how these retailers measured the impact of RFID on their business, varied considerably. Some created KPIs as a way of measuring the performance of RFID itself e.g. tag reliability, read rates and audit accuracy. Here, we look at the 6 main KPI metrics were identified:

Increase in sales

RFID

Seven of the ten case studies shared data showing a sales improvement in the range of 1.5% to 5.5%. In fact, one respondent was prepared to say: “For every 3% improvement in stock accuracy they had experienced a 1% uplift in sales”.

For SKUs identified as being out of stock by RFID systems, the growth was even higher – one company reported an uplift in sales of 8%. Based on this data, the ten companies taking part in the study may have realised an RFID-driven sales uplift of between €1.4 and €5.2 billion.
One of the key enablers of improved sales was better inventory accuracy. Through RFID the case study companies realised an improvement in inventory accuracy from 65%-75% to 93%-99%. This shift correlates with numerous other RFID studies.

Reduced stock holding

The second most popular KPI was perceived as freeing up working capital and reducing business borrowing, as well as reducing storage space required, handling costs and the risk of stored product damage/write off. It was also considered a way of avoiding the need to hold ‘buffer’ stock to guard against possible inventory error as omnichannel grows. Half of the case study companies reported a stock reduction of between 2% and 13%.

RFID

Reduced shrinkage

Only two companies suggested that this was an active KPI, in line with a general view that RFID offers little to tackle stock loss. One nevertheless suggested that their shrinkage losses had been reduced by 15%, supported by the deterrence factor of a system that instantly alerted store guards with images of unpaid-for items.

Fewer mark downs

Although this impact was highlighted by half of all case study companies – reflecting its clear importance to them – none were prepared to share data on this for reasons of confidentiality.

Reduced staff costs

One studied company had measured RFID performance in terms of anticipated savings in staff costs however, others recognised it could free up more time to help customers and drive sales. The same respondent highlighted a saving equivalent to 4% of their store staffing costs, which, if rolled out across the case-study companies, would be in the region of €378 million.

Reduced audit costs

There was clearly interest in RFID’s potential for reducing the traditionally high costs of manual audit as confidence in the technology grows. However, just one respondent put a figure on this, suggesting RFID had enabled it to reduce auditing from a monthly to yearly activity, saving 75% of budgeted staff audit costs.

Read the full findings of the research