Retailers in continental Europe and the US are striding ahead with RFID. What are their UK counterparts missing?
France, Switzerland, Slovenia and Turkey are just a handful of the countries to have seen deployments of RFID within retail since the start of the year. Add to this the ongoing work of RFID pioneers Metro Group in Germany and Wal-Mart in the US and what you get is an expanding list in which the UK’s absence is notable.
Since Retail Week last wrote in depth about retailers’ use of RFID just over a year ago, there have been big developments and new projects announced. However, none of these have involved a major UK retailer. While Marks & Spencer soldiers quietly on with its proprietary RFID tagging scheme, the grocers have largely shelved plans for investment in this area and even technology vendors admit that larger roll-outs in the UK in the next 12 months are unlikely.
One glimmer of RFID hope in the UK comes from the Co-op. In late June, it admitted that it has trialled RFID at two of its distribution centres and the technology worked well in relation to high-security items in tote storage boxes. However, it says that there is no point rolling out the technology until it can be used at all of its distribution centres and this will have to wait until it has completed the implementation of its Manhattan Warehouse management system across its entire estate.
But there is much more activity in the rest of Europe and the US, perhaps partly because retailers have waited until the technology and standards are more mature before embarking on trials. Here, we highlight some of the projects under way around the world.
One of the most interesting is at US fashion retailer American Apparel, which also has a growing presence in the UK. It is one of the first US retailers to roll out RFID at item level and has two stores that have gone live, one in New York and another in southern California.
Stephanie Brush, director for RFID business development in the fashion market at Motorola – which has been involved with the American Apparel project – explains that, once American Apparel gets source tagging arranged, a further 18 stores in the New York metropolitan area will go live and the retailer is already thinking about the next 40 stores.
She adds that the company has seen a return on investment within months because of its merchandising model of having one item of every size, style and colour available on the sales floor. RFID has improved replenishment activity and sales floor stock availability has hit 99 per cent.
Twice a week, staff take an inventory of the 40,000 units in every store. Using the Motorola handheld device with an RFID reader, they have dramatically reduced the time that this takes. Previously, it took 32 man hours to complete an inventory; it now takes just four hours.
So, in every store it is deployed in, RFID frees up staff to serve customers on the shopfloor. But American Apparel expects to benefit from it even further as multiple stores in the same area adopt the system, when it will have real-time visibility of stock at nearby stores and be able to sharpen its overall inventory management.
In the US, another retailer to take part in item-level tagging is shoe retailer Nine West, owned by Jones Apparel Group. In August, Nine West announced that it had begun a pilot to determine what benefits it could gain in productivity, customer service and inventory accuracy with RFID.
And, closer to home, there is also significant activity going on within retailing in Europe. Swiss retailer Manor is introducing RFID at case level at its two distribution centres and department stores in Switzerland, as well as tagging transport assets. The system is being used for both apparel and general merchandise to make sure that the right stock is loaded onto trucks at the distribution centre bound for stores. Goods are also checked in using RFID at each store.
The roll-out followed trials that allowed Manor to build a business case for the investment. The retailer expects to see improved inventory accuracy, better staff efficiency and shorter replenishment cycles as a result.
GAINING NEW GROUND
The deployment is notable because Manor claims to have overcome some of the technology hurdles that have stalled other retailers’ trials. It is using appliances from Reva to manage RFID reader devices provided by Sirit. Manor’s distribution centres aren’t particularly conducive to an easy deployment of the radio frequency technology, but it has been able to overcome accuracy problems. The Reva appliances interpret the data from the RFID readers to determine tag movement and direction.
Turkish apparel retailer LC Waikiki has also run a trial of item-level RFID combined with electronic article surveillance (EAS). In the initial trial at the retailer’s Istanbul flagship, 24,000 items of men’s, women’s and children’s clothing were tagged. The results have been so impressive that the retailer is planning to roll out the technology to all of its near-200 stores, including the deployment of the technology to 50 stores within the next six months.
The RFID part of the tag allows the retailer to track stock through processes such as stock receipts, sales floor replenishment, customer returns, stocktaking and store transfers. LC Waikiki says that there has been a 60 per cent reduction in the time it takes to do a stocktake and a 70 per cent reduction in the time it takes to transfer stock from the storeroom to the sales area. It claims to have turned these efficiency benefits into cost savings.
Checkpoint Systems vice-president and general manager for Northern, Central and Eastern Europe Neil Matthews says that another retailer, Swiss company Charles Vögele, is running a pilot of RFID at its Slovenian business. According to Matthews, it has also combined RFID and EAS tags, which are being applied by suppliers in the Far East. The RFID test started at the beginning of this year’s spring/summer season and is scheduled to last until the end of the year.
The early adopters of RFID, Metro Group and Wal-Mart, continue to expand the technology’s use within their businesses. Stephane Pique, European head of the EPCglobal project, which supports the development of RFID, at supply chain standards body GS1, says that Wal-Mart-owned warehouse chain Sam’s Club has launched an initiative that will see more than 900 suppliers asked to supply RFID-tagged products. In the first year of the project, this will be at pallet level, in year two it will be at case level and by year three, tagging will be at item level.
Matthews adds that, following its roll-out of about 90 of its RFID portals to Real stores in Germany last year, Metro Group retailer Real recently ordered a further 200 for its distribution centres and back of stores.
Metro Group has also announced an RFID project for its Metro Cash & Carry stores in France. Working with its logistics partner DHL, it will tag all pallets in distribution centres before they are shipped to stores. The retailer estimates 1.3 million pallets will be tagged each year and that the project will speed up the delivery process and help it better understand its shipping flows.
Matthews says that UK retailers are still waiting to see results of deployments such as Metro’s before committing to projects themselves. However, he adds that the advances in RFID aren’t stopping UK retailers pushing ahead with projects to get EAS security tags attached to products at source. He explains: “They are still pushing ahead because it is a straightforward payback and retailers will have to have RFID tags attached at source anyway, so they might as well get involved with their suppliers.”
One further issue that could be delaying investment in RFID in the UK is the outcome of a consultation on RFID undertaken by the European Union, the results of which it says will be available in the next few weeks.
Pique says that his organisation is trying to make sure that RFID isn’t restricted by laws that reduce the competitive advantage of Europe compared with the rest of the world. However, he does not expect the EU to recommend anything that would hinder adoption when it publishes its review on the consultation.
Motorola Europe Middle East and Africa retail spokesperson Alex Price admits that the tough economic climate, particularly in the UK, is making it even harder to justify investment in RFID. He explains that retailers are looking at RFID, mostly at case level, for the 10 to 20 per cent of products that they need 100 per cent availability for and the ability to track through the supply chain.
However, he adds: “It is going to be a difficult 12 to 18 months for projects where the return on investment is not understood completely and the benefits have to be felt pretty quickly.”
UK retailers may have plenty on their plates right now without having to worry about implementing new technology such as RFID. However, at the very least, keeping an eye on the success of projects such as these should be on their To Do lists.