Retail is evolving. Eliminating the need for queues and checkouts, Amazon’s automated, cashier-less stores in the US are widely regarded as a significant milestone. In Shanghai, e-commerce giant Alibaba recently opened its own smart store. Entirely powered by mobile, it blurs the lines between on - and offline retail, allowing customers to scan barcodes to access detailed product information, make a purchase, or receive further recommendations, or to remotely request the store’s employees to provide the requested information.
But as exciting as these developments are, the future of retail isn’t just about showrooming or reducing the need to queue with grab-and-go automation. The proposition could be significantly more compelling for retailers and consumers alike if the physical retail space is part of an end-to-end smart supply chain, using digital technology to combine the benefits of convenience, security, and transparency.
This concept need not be the reserve of the retail elite or some futurist’s pipe dream. While Amazon’s entry on to the high street is being widely heralded as the next step in retail’s evolution, the store of the future may actually be taking a very different – and more scalable – shape in the form of intelligent labelling.
Taggable and trackable Radio Frequency Identification (RFID) is already well on its way to mass adoption, particularly in fashion and apparel retail, but also increasingly in food and beverage, and beauty and pharma. Unlike barcodes, which must be in direct line-of-sight to be scanned, the unique product identifier contained in an RFID tag can be automatically read and tracked using electromagnetic waves, the efficiency benefits are considerable.
The degree of traceability this affords, for example, enables physical stores to become that all-important link in the supply chain – with products tracked from manufacture to distribution and, by integrating RFID with consumer-scannable codes such as QR, from point-of-sale to use and beyond. RFID also helps retailers reduce waste– in the grocery sector, for example, by increasing visibility of use-by dates to enable more efficient shelf-stocking and implement dynamic discounting of items approaching end-of-life.
Across all sectors, the more accurate inventory insight provided by RFID can help drive a leaner supply chain, enabling retailers to more precisely determine what stock needs to be (re)ordered so that they never have too much more than they will realistically sell.
This is especially important for perishable goods such as fresh food and for seasonal items such as apparel, where overstocking can lead to retailers having to make margin-reducing markdowns or unsold garments having to be destroyed - contributing to improved supply chain sustainability. Fundamentally, though, RFID-powered automation represents greater convenience, simplicity, and efficiency over traditional inventory management processes.
Recent breakthrough innovations in RFID technology have significantly expanded the potential breadth of its application, allowing the tagging of an entire range of products that would once have been impossible. Recent innovations have led to the development of RFID product tags that can be used on microwaveable products’ packaging, while others have been optimised for performance when applied to products and packaging containing metal, foil, and liquids.
Inventions such as these have boosted confidence in the technology’s ability to transform the industry. The Japanese government, for example, recently announced an initiative to promote the automation of retail – and mitigate the impact on the sector of the country’s ageing workforce – through the use of RFID, with five major convenience store chains to use RFID tags on all their products by 2025. The specific implementation for each store isn’t prescribed, but by enabling the automating of in-store processes such as self-checkout in this way, the intention is to enhance the customer experience by reducing queuing times and friction, in addition to reducing labour costs.
S/Mart, a “store of the future” concept created by Finnish technology company Nordic ID, is a working demonstration of how RFID can deliver a frictionless checkout experience. Every item on sale in the store is labelled with an RFID tag. Rather than relying on a customer having to scan each item individually at checkout, an RFID-reading bagging area automatically identifies every product in a basket and presents the customer with the total cost. Once paid for, the items are added to the store’s “bought list”. Should the customer then attempt to leave the store without paying for everything in their basket, they’ll find that the doors won’t open, making shoplifting virtually impossible. Meanwhile, the “bought list” also enables more accurate real-time in-store inventory management, as staff know instantly what shelves need to be refilled and what items need to be reordered.
Looking to the future
The overall aim of RFID-based automation is to provide speed and as much flexibility as possible. The degree of traceability this technology offers means that, in time, customers will be able to leave a store without having to stop at the checkout. By walking past an RFID reader, any items purchased would be identified, and payment automatically triggered via an app to a payment card linked to an account the customer had authorized.
Both Amazon and Alibaba have arguably already achieved something similar in their respective stores, but there are key differences. All kinds of retailers can scale RFID tags to a degree Amazon would find hard to achieve with its elaborate sensor arrays and customer-tracking camera rigs, for example, and unlike the barcodes deployed throughout Alibaba’s Hema store, they require no action on the part of the customer.
RFID in itself is nothing new. Fashion retailers have long been aware of the convenience and supply chain transparency it offers. But the technology is readily available for use by retailers of all stripes – and at a surprisingly low cost. Whether it’s used to reduce friction, improve sustainability, or to cut costs, RFID is set to have a significant impact on the retail store of the future.
Francisco Melo is VP and GM Global RFID at Avery Dennison.