RFID: Revolutionizing the Retail Experience from Inventory to Innovation

Just before the end of World War II, Averill Harriman, the US ambassador to the Soviet Union, received a gift from the Young Pioneers, a Soviet youth organization. Their “gesture of friendship” was a beautifully carved wood replica of the state seal of the United States, and it was promptly hung in the study of the ambassador’s residence in Moscow. What the Americans didn’t know was that it contained a listening device, which the Soviets used to monitor conversations for several years.

The genius of the Soviets’ device was that it was entirely passive, relying on electromagnetic signals from an external source to be activated. When sound waves, such as those produced by a person speaking, reached a tiny membrane in the device, they were converted to radio waves that were then transmitted to a receiver on the Soviet side. The device’s passive design allowed it to be very small, lightweight, and nearly impossible to detect. It was a pioneering achievement in the use of transponders, which would lead in a few decades to the radio frequency identification (RFID) technology of today.

RFID Technology Takes Off

The idea of a passive device that responded to radio waves held obvious potential for all kinds of uses. By the 1960s, electronic article surveillance (EAS) equipment was being developed to help retailers reduce merchandise theft. This simple version of RFID used a one-bit tag, which was either on or off depending on whether the item had been paid for or not. Other RFID research exploded in the ’70s, with important advances coming from companies such as Raytheon and RCA, as well as academic institutions such as the Los Alamos Scientific Laboratory, Northwestern University, and the Microwave Institute Foundation. In these early stages, RFID technology was used primarily for tracking vehicles, tagging animals, and collecting tolls on bridges, highways, and railroads.

The introduction of low-voltage complementary metal-oxide semiconductor (CMOS) circuits enabled RFID tags to be smaller and less expensive. Eventually, an RFID tag could be as inconspicuous as a small sticky tag attached to a car windshield or other object. Multiple use RFID tags also became available; a consumer might use a single tag to pay a highway toll, access a business parking lot, and enter a gated community. The technology began to be applied to a wider range of uses. Car owners could use RFID-enabled electronic keys to open their car doors remotely. Microwave ovens were equipped with RFID readers that could respond to tags on microwavable meals.

These innovations in RFID marked a notable improvement on the earlier barcode technology. Barcodes require a line of sight between the components to function; because RFID uses radio waves, no line of sight is needed. As long as a tag is within the range of the reader, it is scannable. This one feature vastly expanded the versatility of the new scanning technology. RFID tags could be hidden within an object or under surface layers. And whereas barcodes must be scanned one at a time, an RFID reader can process hundreds of items at once. Today’s RFID readers have the impressive capability to scan over a thousand tags per second.

The development of ultra-high frequency (UHF) RFID in the early 1990s vastly extended the potential range of readers while allowing for faster data transfer. And the introduction of writeable tags further enhanced the versatility of the technology. Initially, RFID tags were read-only; once the information was embedded it could not be changed. Making tags writeable allowed users to amend the data on them to adapt to changing needs.

Also in the ‘90s, two professors at the Massachusetts Institute of Technology (MIT), David Brock and Sanjay Sarma, hatched the idea of connecting RFID tags to the internet. The tags would be equipped with an identifying number which would link them to a database with more extensive information. This development opened up a wealth of new possibilities: items could be tracked remotely from their inception through their entire lifecycle. And the amount of data associated with an item was potentially limitless. Instead of being used as a standalone data storehouse, the RFID tag was now a component in a vast networking system that was accessible to multiple users.

These developments made RFID especially attractive to manufacturers, who could now monitor individual products through the manufacturing process and their entire journey through the supply chain. Small, inexpensive tags could be attached to large numbers of items, and each one could be tracked with accuracy in near real time.

In retrospect, RFID would seem a natural fit for the retail industry, but a number of factors made its adoption by retailers a relatively slow process. One was cost; initially, the software and, especially, the readers, were more expensive than they are today. Larger retail stores typically needed multiple readers, which increased the cost dramatically. To be most effective, an RFID system should be applied to a store’s inventory. This requires collaboration with suppliers to equip products with RFID tags. Additionally, employee training is essential for the successful implementation of the system, which is an investment in time. Initially, many companies found the projected return on investment to be unattractive. However, today’s RFID technology is more cost-effective, quicker to deploy, and offers a wider range of use cases compared to its early versions in the 2000s.

In 2005 Walmart went live with its RFID systems, enlisting more than 100 suppliers and partners in the effort. Before long the number of those participants had tripled. The retail giant found that the technology allowed it to replenish out-of-stock items three times faster than before. As the world’s largest retailer, Walmart has the capacity to shift entire industry trends. And while Walmart paused their RFID program, many other retailers moved forward including Amazon, Target, Macy’s, Zara, Kohl’s, Decathlon, lululemon, adidas, Nike, Best Buy, Gap, H&M, Urban Outfitters, Nordstrom, Burberry, Gap Inc., and too many more to list.

Although its potential uses in retail were just beginning to be explored, it was clear that RFID technology was here to stay.

Fast forward to the 2020s in a post-COVID-19 world where Walmart has announced a mandate requiring suppliers to utilize RFID tags on certain product categories like electronics, toys, soft home, and automotive by 2024. This policy expansion builds on an initial requirement set in 2019 for apparel, signaling a pivotal shift in how inventory is tracked and managed. Retailers see benefits not only in streamlined inventory management and significantly reduced labor costs, but also enhanced supply chain robustness and product tracking.

RFID in Retail Today

Now, retailers routinely use RFID to track inventory from the point of origin to the sale, and beyond. Here are some of the obvious benefits:

• Stores can know when items they’ve ordered leave the manufacturer or distributor, where they are in the shipping process, and when they can be expected to arrive.
• When the items do arrive, entire pallets can be scanned at once, greatly reducing onboarding time versus blind receiving or only inspecting 10 percent or less of items.
• Retailers can pinpoint the exact location of items in the store, as well as their price, color, the date of delivery, and any special features. When a customer orders an item online, it can be located immediately and prepared for delivery or pickup. Employees spend less time looking for items.
• The store can know in real time when an item is out of stock or inventory is low.
• For retail chains with multiple stores, shifting inventory between stores becomes much more efficient.
• When items are subject to a manufacturer’s recall, stores can locate them quickly and remove them from the shelves.
• RFID technology can be employed for anti-theft and investigative purposes, such as monitoring exits, bathrooms, and high-theft areas. Asset protection teams can use this technology to track items and receive real-time notifications, along with linked video footage, for forensic investigations.
• RFID technology enhances EAS systems, allowing retailers to modernize their anti-theft measures with contemporary overhead RFID readers. These advancements provide a more effective means to deter and detect shoplifting, a concept previously considered unachievable.

“The integration of RFID technology in retail asset protection has effectively reduced bias and empowered data-driven decision making, ultimately yielding improved results,” said Macy’s VP of Asset Protection Joe Coll. “As RFID begins to unravel the who, what, when, and where of retail theft, it’s one of the most significant advancements in asset protection strategy I’ve observed over the past twenty-five years.”

Emerging technologies, including RFID, continually evolve, bringing significant advantages as they mature. While the implementation of RFID’s full suite of features may currently challenge some users, the benefits it offers are substantial. For one, the adoption of RFID technology can streamline operations and enhance efficiency, simplifying procedures for employees once they are familiar with the new system.

Despite common misconceptions about the security of RFID tags, they are generally secure. While skilled cybercriminals could exploit vulnerabilities to manipulate tag information, such incidents are very rare due to ongoing improvements in encryption and security protocols. Hacking an RFID is akin to reprinting a barcode. For retailers, adopting RFID technology offers significant improvements in inventory management and reductions in shoplifting losses, outweighing the perception of security threats.

Furthermore, there is a misconception that RFID can track a consumer’s actions even after purchase, raising privacy concerns. However, this concern is often exaggerated and misunderstood, and the majority of RFID tags today are removable as part of the price tag. Aside from these concerns, the benefits of RFID in tracking inventory would by themselves make it a worthwhile investment for most retailers. But its potential to revolutionize the shopping experience for consumers has opened vast new realms of possibility.

Enhancing engagement with online customers became a more urgent priority with the arrival of the COVID-19 pandemic, which permanently changed shopping behavior. Stores had to quickly accommodate more online purchases for shipping—and devise pickup systems that didn’t require customers to enter the store. Since retail marketing has always relied heavily on the shopper’s in‑store experience, that called for the development of new marketing tools. RFID technology was a perfect vehicle for meeting that challenge.

“Many brands and retailers who are not using RFID do so because they have old and erroneous information about RFID: cost, performance, outdated information about Walmart,” said Jonathan Aitken, chair of the RAIN RFID Alliance and director of RFID partnerships for Avery Dennison. “It is too bad that brands and retailers who have adopted RFID are not more public about the benefits that they are getting, such as inventory accuracy, inventory visibility, labor savings, improved omnichannel experiences, loss detection, and customer experience.”

Here are some of the ways retailers are using RFID to make the shopping experience more efficient and consumer-friendly:

• Smart fitting rooms. When shoppers take their clothing choices into a fitting room, RFID can be used to connect them with similar items, alternatives, and compatible accessories. The same technology can be used to expand choices for online customers based on their known preferences.
• Cellphone checkout. Some retailers allow shoppers to scan items with their cellphones, avoiding checkout lines altogether. RFID when paired with a QR code with the EPC embedded can make this a reality.
• Automatic checkout. Certain retail outlets allow customers with valid store accounts to be charged for purchases automatically as they leave the store, again avoiding checkout lines.
• Food monitoring. Food items can be fitted with temperature-sensitive tags to avoid spoilage and food-borne sicknesses. New standards for RFID also allow for embedding of expiration dates into the RFID tag.
• Automated inventory replenishment. Advanced RFID systems can reorder products automatically when inventory runs low, ensuring that shelves are never empty and reducing the need for manual inventory checks. Today, RFID robots have the capability to autonomously conduct inventory counts in stores, whether during the day or at night
• Interactive product displays. Products equipped with RFID tags can trigger interactive displays when customers pick them up, providing detailed information, reviews, and even virtual try-on options for clothes or accessories, using augmented reality technology.

As far-reaching as these newer applications of RFID are, some visionaries are pushing even further to enhance the shopping experience for consumers—and increase sales in the process. The future uses of this technology for the retail industry are limited only by imagination.

RFID and the Future of Retail

The RFID technology now in the hands of retailers contains a wealth of potential applications. Here are some of the innovations to expect in the future:

• Smart shopping carts and baskets. RFID readers attached to shopping carts and baskets could automatically scan and tally items as customers add them, eliminating the need for traditional checkout lines. The technology could also suggest products based on the items in the cart, further enhancing the shopping experience.
• Personalized in-store marketing. RFID tags on products can interact with customers’ smartphones or store-provided devices to offer personalized deals, product information, and recommendations based on the customer’s shopping history and preferences.
• Enhanced product authentication and traceability. RFID tags can be linked to detailed information about a product’s origin, manufacturing process, and journey through the supply chain, allowing customers to verify the authenticity of high-value items like luxury goods, and helping retailers combat counterfeiting.
• Integrated omnichannel experiences. RFID can link online and offline shopping by allowing customers to access their online wish lists or shopping carts in-store, find those items quickly, and check out seamlessly, bridging the gap between digital and physical retail environments.
• Smart packaging. RFID tags embedded in product packaging could interact with smart home devices, enabling automatic reordering of everyday items like groceries or toiletries when they run low, and providing consumers with detailed product information and usage tips through their smart devices.
• Augmented reality shopping. Combining RFID with augmented reality (AR) technology, customers could point their smartphones at products in-store to see additional information, reviews, and even visualize how the product would look in their home or on them.
• Biometric payment integration. RFID wristbands or smart devices could be linked to biometric data, such as fingerprints or facial recognition, allowing customers to pay for their purchases with a simple gesture or glance, enhancing security and convenience.
• Smart shelves with dynamic pricing. RFID-equipped shelves could dynamically adjust prices based on demand, inventory levels, or expiration dates, providing real-time discounts for items nearing their sell-by date or special promotions for high-demand products.
• Virtual try-on for online shoppers. Integrating RFID with virtual try-on technology, online shoppers could see how clothes or accessories would look on them without physically trying them on, reducing the rate of returns and enhancing the online shopping experience.
• Smart waste management. RFID tags on products could help retailers and waste management companies track and sort recyclable materials more efficiently, contributing to a circular economy and reducing environmental impact.
• Customer behavior analytics. Advanced RFID systems could collect data on customer movements and interactions within the store, providing valuable insights into shopping behavior, product placement effectiveness, and store layout optimization.
• Automated personal shopping assistants. RFID-enabled robots or drones could assist customers in finding items, carrying their shopping, or even providing personalized recommendations based on their shopping history and preferences.
• Experiential retail environments. RFID technology could be used to create immersive and interactive retail environments, where products come to life through augmented reality, interactive displays, and personalized content, turning shopping into an engaging and entertaining experience.

These futuristic use cases of RFID in retail aim not only to enhance the customer experience but also to streamline operations, improve inventory management, and contribute to sustainability efforts. As RFID technology continues to advance, its integration with other cutting-edge technologies like artificial intelligence (AI), machine learning, and the Internet of Things (IoT) is set to further revolutionize the retail landscape. By harnessing the power of AI, RFID systems can become even more intelligent, providing retailers with predictive analytics and real-time insights into consumer behavior, inventory needs, and supply chain dynamics. This enhanced intelligence enables more informed decision making, leading to increased operational efficiency and a more personalized shopping experience.

Meanwhile, the convergence of RFID with IoT devices can create a seamless, interconnected retail ecosystem where every product, shelf, and shopping cart is part of a larger network. This integration enables unprecedented levels of automation and personalization, from smart shelves that dynamically adjust pricing to smart carts that guide shoppers to their desired products. As these technologies converge, the retail industry is poised to enter a new era of efficiency, customer engagement, and data-driven decision making, further solidifying the role of RFID as a cornerstone of modern retail innovation.

The ongoing collaboration among researchers, technologists, and retailers plays a vital role in demystifying and mitigating perceived vulnerabilities in RFID technology, such as security and privacy issues, which are often more misunderstood than real. As these misconceptions are clarified, confidence in and utilization of RFID technology is set to soar. Researchers, with their steadfast dedication, have already significantly broadened the utility of RFID, proving many concerns to be unfounded. With each technological stride, the future applications of RFID in retail promise to revolutionize shopping experiences, enhance customer engagement, reduce loss, streamline inventory control, and transform retail operations, ushering in a new era of innovation.