The role of RFID in new retail supply chains

3 min read
A man checking an RFID-tagged sneaker at The Retail Lab while the nearby screen displays product details (Image credit: TechNode/Emma Lee)

The onset of new retail trends in China and globally continues to gather pace. While the sector is driving the development of cutting-edge technologies as e-commerce players look to expand offline, it is also helping with more innovative applications of matured technologies like RFID tags.

RFID, or radio-frequency identification, refers to a technology whereby digital data is encoded in RFID tags or smart labels. The data is captured by a reader via radio waves. RFID, which has been around in its current form for the past two decades, didn’t start to make serious inroads into retail initially due to cost concerns, a lack of global standards for adoption, and risk aversion at management level.

But the identification methods and technical characteristics of RFID is making it a better fit for the demands of the new retail sector as the accuracy of data and inventory planning are increasingly important in omnichannel retailing and the improvement of customer experiences.

“Retail is a powerful engine driving the rapid growth of the RFID industry in the past few years, representing around 10% of the 15 billion ultra-high frequency RFID tags globally last year,” said Anna Liu, CTO of RFID manufacturer and solution provider Laxcen Technology, last week at an event celebrating the establishment of The Retail Lab in Shanghai. The lab is co-created by RFID maker Avery Dennison and Explorium (full disclosure: TechNode is strategic partners with Exlporium), the research arm of Hong Kong-based supply chain and logistics conglomerate Fung Group.

By simulating an in-store experience, the newly established lab demonstrates an interactive digital product showcase using RFID technology. After taking the products from shelves, users can get details of the item and enjoy automated checkout. By using RFID and big data analysis tools, the solution can also optimize distribution and sales procedures.

While users are shopping online, e-commerce sites analyze their purchasing preferences and then generate meaningful insights for new products or give targeted shopping recommendations. However, such data is often absent during offline purchases.

“With each item uniquely tagged, the technology is merging the physical reality of the store with digital functionality and capability of the online and doing it all in-store,” said Francisco Melo, vice president and general manager of Global RFID at Avery Dennison.

A machine checking the inventory automatically (Image credit: TechNode/Emma Lee)

The increasing diversity of ways to shop raises requirements for supply chains. Some of the challenges we see in the retail supply chain are linked to visibility and accuracy. Efficiency and accuracy are the fundamental backbones that help supply chain automation, according to Melo.

At the same time, providing detailed and trackable information addresses the needs of millennials and the younger generations who value knowing where their products come from. “RFID is one of the key technologies that can tell you exactly where the product has been, the full provenance and everything else, which are increasingly important for the younger demographic,” Melo added.

Image credit: TechNode/ Emma Lee

QR codes and other forms of visual ID are often seen as alternatives to RFID technology. These have their place, but they require line of sight, meaning you need to see the code one by one no matter whether it’s inside a box or stacked on a shelf.

However, the two technologies are not exclusive. “QR codes are now ubiquitous in China where users are accustomed to it,” Melo said. “So you can have the RFID for supply chain optimization, and then you can have QR to interact with the consumers, who can actually connect the unique item that’s on the RFID with a QR code.”

“For AI to work, you to feed AI with right and accurate data,” said Dominic Gates, president of LF Logistics Group. “Then you can have fancy algorithms that tell you what people are likely to buy based on different factors. But if you don’t have the right data, then you start from the wrong place. And I think that’s that mindset about accurate data to allow me to have predictive analytics and use AI algorithms to help me with my strategies.”

The cost of RFID tags is still the foremost concern for brands and retailers when adopting the technology. But the price is dropping with its wider application to a level that’s acceptable to the users, says Anna Liu. The cost of RFID tags attached to items displayed at The Retail Lab is between RMB0.4 ($0.06) and 0.5 per item, an employee from Avery Dennison told TechNode. Staff training and data privacy are also issues to be tapped to help wider application of the technology.

In addition to retail, the technology is also finding applications in the smart home industry, hospitals, and even education (where parents track school attendance of their kids) as an extension of the Internet of Things trend.