RFID Technology: The Future of Retail

We have previously discussed in class the Metro “future store” concept located in Rheinberg, Germany and it is my personal conviction that the technology used in the future store will soon spread to virtually every type of retail selling consumer goods within the next ten years. In fact, Metro AG announced on March 4, 2008 that it plans to implement the RFID technology in 200 more stores. By adapting RFID tags, retailers can significantly enhance key aspects of the RVP: selection and customer experience.

For selection, the consumer will benefit because retailers’ inventory levels can be better managed with RFID technology and thus stock-outs are reduced. Wal-Mart already utilizes this technology to better manage inventory levels as the handling of incoming goods is accelerated and the entire supply chain becomes transparent. A critical factor in spreading the adoption of RFID technology is to get manufacturers on board in order to have the RFID tags on each individual product. The Metro stores have had strong support already from major CPG firms such as Kraft and Procter and Gamble as they see the mutual benefits of the technology. They CPGs state that they are very interested in the ability to address consumers individually at the shelf. The amount of data that can be gathered by CPGs with the RFID chips with regards to consumer behaviour at the shelf is invaluable to further advancing category management and optimizing shelf facings by each individual store and each individual aisle.

The consumer will also reap benefits from an enhanced shopping experience. As seen with the Metro grocery stores, the shopper can be addressed individually from their shopping carts and depending on what products are already in the cart and the shopper’s location in the store complementary products can be recommended to the consumer. However, this type of experience enhancement is not limited to grocery stores. The department store Galleria Kaufhof in Essen, Germany has already experimented with RFID technology by fitting 30 000 SKUs in their men’s fashion department with the technology. Instead of being assisted by a sales person when looking for clothes, men can utilize “smart dressing rooms” where all the shopper needs to do is bring one item of clothing into the dressing room. The RFID tag then sends a signal to a screen where the shopper is automatically shown the price of the item, all available sizes and colours in the store, and suggested complementary clothing items. Thus, the entire shopping experience can be done from inside a dressing room!

There is also the possibility that retailers can use RFID technology in order to implement dynamic pricing based on in-store stock levels. Although highly beneficial for the store, there would most likely be extreme consumer backlash particularly for necessity items such as groceries. The Metro stores in Germany have already had some public backlash for the current use of RFID technology but I believe that eventually consumers will realize that RFID tags make shopping easier and thus as more stores adapt the technology, RFID tags will become ubiquitous.

http://www.spychips.com/metro/overview.html

http://www.future-store.org/servlet/PB/menu/1007148_l2_yno/index.html