Rapid technological advances have made radio frequency identification (RFID) an increasingly powerful tool when it comes to loss prevention and inventory management.
While RFID was first used during WWII to identify and track ships and aircraft, it wasn’t until the 1990s that retailers began to adopt the technology. But like other emerging innovations at the time such as cell phones, early versions of RFID were clunky and costly, and the nascent industry failed to gain widespread traction.
“The technology just wasn’t mature enough,” said Tom Meehan, president of CONTROLTEK, which specializes in tamper‑evident packaging, retail asset protection, and RFID solutions. “Fast forward to today, costs have come down, microchips are smaller and faster, and you have a solution that’s scalable.”
Not surprisingly, big retailers like Walmart, Target, and Macy’s were some of the first to use RFID to help track their massive inventories. And then, the rise of Amazon and e-commerce changed everything.
“Department stores suddenly had an urgent problem they had to address,” said Ned McCauley Jr., director of sales, IoT, and smart sensors at Sensormatic Retail Solutions. “They were losing market share to the e-comm players. They knew that if they didn’t know what they owned, and where it was, they couldn’t compete. And that’s where RFID really started.”
COVID-19 further accelerated this trend, with RFID helping retailers fulfill and track the sudden spike in online orders. An Accenture study conducted during the pandemic indicated that 47 percent of responding North American retailers were in full RFID adoption, 37 percent in implementation stages, and 10 percent were piloting RFID in 2020.
In 2022 Walmart mandated its suppliers tag all home goods, sporting goods, electronics, and toys with RFID. The corporation indicated it plans to extend the RFID requirement to more categories in the coming years. As developers and manufacturers continue to refine RFID technology, it’s becoming a more viable option for a growing number of other retailers, both big and small.
Randy Dunn, director of customer success at Zebra Technologies, said RFID’s growing presence reminds him of when retailers were first questioning whether they needed an e-commerce website to compete in the future.
“RFID adoption, I believe, is a similar type of decision,” he said. “It’s obvious that the world’s best retailers have embraced RFID and received the benefits of inventory accuracy, loss detection, and supply chain efficiency. It’s hard to imagine a 2030 world‑class retailer that hasn’t reaped the benefits of what RFID provides across a range of use cases that are critical to better serving their customers.”
As these seismic shifts continue to impact the landscape, here’s a closer look at what’s new with RFID technology and how it’s changing the way retailers operate.
Software and Hardware
Dunn said he’s seen incredible technological advances with both RFID readers and RFID tag sensitivity during his 20-plus-year career in the industry. Tag innovations are especially impressive, he said, as they’ve gotten smaller, yet also more robust, equipped with powerful microchips. Today, with just the sweep of a hand, you can scan upward of 1,000 tags a second from some twenty-five feet away. And some tags are manufactured for use with products made of metal or that contain liquid, which previously could not be scanned by a reader.
“The industry is on its seventh generation of endpoint RFID tag chips and RFID readers are on their third generation of reader engines improvement,” Dunn said. “That combination of advancements has made RFID a much more manageable technology from a physics perspective, a deployment perspective, and a problem-solving perspective.”
One big problem RFID addresses is inventory management. Dunn said that having accurate data about shortages and planning for those shortages is critical to maintaining an efficient and profitable operation.
Sensormatic’s McCauley said that RFID is a critical tool when it comes to inventory distortion, which totaled $1.993 trillion worldwide in 2022, according to IHL Group. That distortion typically starts at the store level.
“When inventory hits the back of the store, that’s when the chaos starts,” McCauley said. “That’s when you’re breaking open boxes, putting items on the shelf or in the back room, and things are getting damaged, stolen, and mis-scanned. Before you know it, you have this gigantic gap between what the system of record thinks you have versus reality.”
Meehan with CONTROLTEK stressed that today’s mobile RFID readers are far different from similar handheld devices from the past when an employee had to scan each item individually. “Today, you can inventory a store in minutes versus manually counting for days,” he said. “And with RFID, you can do that multiple times a month, where before, you’d usually have to close the store to take inventory.”
Meehan added that RFID technology not only makes the inventory process faster but also more accurate. Typically, retailers that don’t employ RFID have a 65 to 70 percent inventory accuracy rate, compared to about a 98 percent accuracy for retailers that do use RFID technology.
“The original purpose of RFID, inventory management, is still the most important, and where you’ll have the highest return on investment,” Meehan said. “It helps you increase sales because you know when you’re out of something in almost real- time, so you can replenish it. That’s the real advantage.”
In addition to inventory management, RFID is an increasingly viable option for loss prevention. Frank Panebianco is vice president of sales and marketing at Checkpoint Systems, which develops, manufactures, installs, and supports RFID solutions. He said Checkpoint develops RFID technology for both loss prevention and inventory management.
With loss prevention, RFID tags can trigger audible or visual notifications when someone exits the store without paying for an item, similar to electronic article surveillance (EAS). The main difference is RFID tags can also identify exactly which item is being taken from the store.
“With RFID, you get item-level information, the quantity, and the time that it’s going out the door,” Panebianco said. “And if the retailer has already implemented an inventory management program with RFID software, they use those data points to see what’s potentially being stolen and then update their inventory based on that.”
Fixed and Mobile Readers
McCauley said most retailers who employ RFID typically start with a mobile reader, which is as simple as connecting a small reader to a mobile phone or using an in- store mobile device. Mobile readers are mature and working at scale, and they’re relatively low-cost.
Fixed readers, on the other hand, are usually used to cover choke points, like loading docks, store exits, fitting rooms, or points of sale. “When you get into a fixed reader infrastructure, it’s a completely different animal, and where most advancements are taking place,” McCauley said. “Fixed readers are for specific use cases that require super-high levels of accuracy in order to be effective.”
Dunn with Zebra Technologies said that as recently as ten years ago, virtually all RFID projects, particularly in the retail industry, utilized mobile RFID readers to scan tags in support of the “beachhead” use case of inventory management. Today, many industries, such as transportation, logistics, and aerospace, have realized that using fixed RFID readers to capture the RFID data is their best approach.
“That approach does create new needs from RFID software,” said Dunn. “Creating accurate RFID events coming from RFID fixed readers is putting more pressure on RFID software to make sense of the vast amounts of data. And it has required software providers to add more functionality in this area.”
In addition, RFID’s expanding capabilities, including storing data in the cloud, have helped bring about the practice of “sensor fusion,” a process of combining sensor data derived from various sources to help create fuller and more accurate information.
“Retailers now have camera footage, video analytics, customer conversion data, and all of these inventory data points,” Meehan said. “They’re putting all this sensory information together to paint a fuller picture about the customer journey, without any privacy concerns.”
Cost and ROI
Meehan stresses that like with most technology adoption, there’s an associated cost with implementing RFID. “Once you start using it, you absolutely can see the benefit and ROI, not to mention the labor savings of inventory. And really, just having cleaner data is more important than anything.”
McCauley said RFID costs have dropped dramatically over the past fifteen years, with the cost of the tags decreasing some 200 percent since 2018. “And that’s driven by scale, and with scale comes efficiencies, including improved performance, with smaller chips that have more memory,” he said.
Panebianco estimates the average price for RFID labels is in the 6-cent range, which is way down from where it was even five years ago. “You go back a little further, and the cost was $.50 to a $1 a label, which was not sustainable,” he said. “But as technology has improved, there’s more ROI for retailers, and that’s a monumental step. As a retailer, you want to deliver the right product at the right time, whether that’s in the store or online. And RFID is the engine that can get you there.”