Over and over, retail executives speaking at NRF’s Big Show touted the benefits of RFID, or radio frequency identification, for understanding how merchandise moves throughout their stores and how it plays into retail shrink and retail theft.
RFID uses electromagnetic waves to identify and track tags attached to objects. It is not new technology — its origins go back to World War II — but RFID has become a bigger tool in retailers’ toolboxes when it comes to merchandise visibility, executives said during various panels on Sunday, Monday and Tuesday. All said they use RFID to see where items are located, to check stock levels, to replenish products on the floor and to carry out digital fulfillment. Importantly, NRF speakers said, it has become a tried-and-true way to understand loss in stores. And vendors say they are seeing more interest from retailers about the technology than ever before.
How major retailers are using RFID
For retailers concerned about shrink, RFID has become critical, Joe Coll, Macy’s vp of asset protection operations & strategy, said during a panel on Monday. “In the past seven to eight years, it is definitively the biggest innovation change that we’ve had inside of Macy’s,” he said.
When it began using RFID, Macy’s got insights on retail loss and theft every 30 days or so, he said. Now, these insights come every day. Installing RFID readers at exits and entrances, among other locations, “unlocked a level of data that we never thought was possible,” Coll said. “You’re not just getting an Excel file [of theft insights] — you’re getting video timestamped of every individual that took product out of your building without paying for it.”
Levi’s installed RFID about six years ago, Kirsten L’Orange, vp of global DTC omnichannel productivity at Levi’s, said at a panel on Tuesday. At the time, the technology was more expensive and stores needed to change the physical infrastructure of their stores to accommodate RFID, she said. Now, L’Orange said, the cost of RFID has come down “astronomically” from about 10 or 11 cents per tag to four, five or six cents.
“The inventory accuracy is unparalleled,” she said. “I can’t imagine executing omnichannel successfully without RFID.”
According to Accenture,93% of North American retailers use RFID in some capacity, and those that have fully adopted RFID reported some 10% ROI in 2021 compared to 9.2% two years prior. Many retailers today use RFID to understand their retail shrink, a problem that covers theft, as well as accounting errors and vendor fraud.
Nikki Baird, vice president of strategy at Aptos, told Modern Retail that RFID is becoming so ubiquitous that many multi-brand retailers are finding that products come to their stores with RFID built in. In fact, she said, Snipes, a footwear retailer online, found that some 70% of items on its site were already tagged via RFID.
As Levi’s L’Orange described it, theft was often a taboo subject among retailers. “Nobody would admit they had a problem with it, and finally, we’re all talking about it,” she said. “I work for a denim retailer, [and] it’s really hard to figure out what’s missing in a stack of black jeans,” she explained.
New technology, however, is changing this. “[RFID] is giving us the insight to say, ‘Okay, we know what’s been pulled from our floor. Our stylists can’t do anything about that, or, we’re asking them to not engage, but then how do we set the floor back up for the consumer so that they’re not missing out on the product?'” said L’Orange.
Pacsun has used RFID for less than a year but has already seen the benefits, Shirley Gao, chief digital and information officer at Pacsun, said during a panel on Tuesday. “RFID is not going to stop your merchandise leaving the door without being checked out,” she said. “That’s the fact that we all have to accept. But, on the other side, RFID gives us a bigger visibility to understand what’s happening in the store.”
“This technology will unlock the opportunities for us to improve the management, to allocate resources at the right time and to talk to the shipping companies about where their problems are,” she said. “The potential is still very high.”
Going beyond theft
At NRF, many vendors championed their RFID technology. These included SML, AsReader, Avery Dennison and Nedap. NRF also held various panels on RFID, and although the technology has been around for decades, “I think we are seeing it more,” Kelly Pedersen, retail leader at PwCU.S., told Modern Retail.
Radar is a hardware and software platform that uses RFID and computer vision to locate in-store inventory. Its technology is used in stores across the U.S., including 500 American Eagle locations by sometime this year. In July, Radar secured $30 million in a Series A funding round led by Align Ventures.
Radar’s hardware attaches to the ceiling and tracks the movement of people and items below. A typical American Eagle may have 20 to 30 of these, depending on the size of the store and the ceiling height, Spencer Hewett, founder and CEO of Radar, told Modern Retail. The sensors have 99% accuracy, he said.
RFID can help with detecting the theft of a singular object, but its benefits go far beyond one item, Hewett said.
“If someone steals something from the store today and it’s the last one of its kind [and] they don’t know it’s missing, they will not send more inventory to that store for that item,” he said. “And then that item sits not selling for weeks, months, until they do their next physical count. So you miss months of sales for one item that could have been selling the entire time, which is the true damage impact of that.”
When Hewett founded his company in 2017, RFID was not as widely-used in retail as it is today, he explained. Now, many retailers — including Nike, H&M and Lululemon — are already incorporating RFID into the manufacturing process.
For retailers, “having the location accuracy, having the ability to understand where people are, what they’re interacting with and picking up, is a huge differentiator,” he said. “We’ve seen a ton of interest [from retailers], especially last year.”
