High street shops are eager to adopt RFID electronic tagging

Retailers are looking to IT to help reduce crime and increase profits. Daniel Thomas reports

Retailers are looking to IT to help reduce crime and increase profits. Daniel Thomas reports

The annual Retail Automation Conference, one of the largest established retail IT events in the UK took place last week. A number of issues were debated at the Café Royal in London but the biggest theme that emerged was radio frequency identification (RFID) tagging.

RFID tags, which allow goods to be tracked along the supply chain, have long been touted as a solution to retail crime, stock shrinkage and long checkout queues, but the cost of the tags has been prohibitive.

Nevertheless, when asked which technology would have the most impact on the retail sector in the next few years, the IT directors who spoke at the conference's executive debate agreed that RFID could be increasingly important - if a number of hurdles can be overcome.

Tony Godwin, systems director at Woolworths, which is trialling RFID tags, hopes the technology can help the high street retailer to cut crime-related stock losses. "We see it as being about cutting fraud rather than improving customer service," he said. "It has not been as easy as we would like but we are starting to see benefits across the supply chain."

The project has the backing of the Home Office, which has been vital, said Godwin. "The costs are still very high," he said. "If it had not been for the government backing we would not have done it."

Mark Leckie, business systems manager at newsagent chain WHSmith, agreed that the prohibitive cost of the tags, estimated to be 20p-30p each, is the major barrier. "The day I can put an RFID tag on a 25p pencil is the day I can begin to get benefit from them," he said.

As well as the high cost of tags, a lack of standards is inhibiting progress, said Dan Bernard, formerly chief information officer at retail group Kingfisher.

"The number of standards that are floating about is very frustrating," said Bernard, who now works as a consultant. "Without one RFID standard it will never get off the ground."

Although Woolworths is one of the few UK retailers to have introduced RFID into the supply chain, parts of the US retail industry are further down the road.

Neco Can, IT director at fashion retailer Gap's US operation, which recently carried out an extensive RFID trial, said companies should focus on the benefit rather than the cost of the technology.

"The big problem for any retailer is the lack of data accuracy because there are so many hands on goods along the supply chain," he said. "RFID gave us 99.7% data accuracy, which means that almost all stock is accounted for."

These high levels of accuracy mean that receiving and shipping goods is more efficient, supplier audits are more accurate and store inventory levels are improved, Can said.

In addition, there are customer service and loss prevention benefits, Can said, because tagging each product is viable. "RFID is a proven technology, already in your mobile phones and smart credit cards," he said. "Do not worry about the cost - focus on the benefits, which spread right across the supply chain."

Tony Hart, managing analyst at research firm Datamonitor, said other retailers will follow the likes of Woolworths and Gap when RFID technology becomes cheaper and more reliable.

"The amount of money that is lost to the black market and how this can impact on the bottom line is well known," he said.

"The initial cost of installing such a system may be high, but over time this security mechanism will prove cost-effective in terms of the number of items tagged and the reduction in stolen stock."

Although various systems, such as enterprise resource planning software, will have to be integrated with the logistics system before product tagging becomes truly effective, RFID tags can bring other early benefits, Hart said.

"There will be other cost savings that can be achieved, such as reducing staffing levels in the warehouse, as the tagging system could highlight packages that are missing, without warehouse staff counting them manually," he explained.

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