One of the more intriguing new tools to grab the attention of the retail industry in recent years has been Radio Frequency Identification (RFID). Originally seen as a means of controlling backroom inventory, it is increasingly being enlisted to enhance the customer experience in the front of the store.
Simply put, RFID is a unique way of remotely identifying an object as large as a railroad car or as small as a postage stamp by means of a radio signal transmitted from an imbedded silicon microchip. The microchip broadcasts an Electronic Product Code (EPC), a unique number that identifies the specific item to which it is attached. The identification number is then connected to a database that can begin to unleash the power of that RFID chip. The database can reference additional information, search a history, record new information, or even trigger specific actions with other devices, such as activating a video, playing an audio clip, and so on.
With proper planning, including setting clear objectives, the technology can be extremely powerful. New off-the-shelf software packages are being developed almost daily. For example, one package enables a shopper to select a product from a shelf and, simply by picking it up, have specific information about that product instantly displayed on a video screen. The information displayed can be text, pictures or diagrams, an audio or video clip, or any combination of these. Shoppers can also interact with the screen to drill down for additional information or to send a request to the retailer.
Using an RFID antenna attached to a store shelf and individual RFID transmitters, or tags, attached to the individual products on the shelf, this software interprets the signal to determine exactly which product has been selected. It then displays the appropriate information on the screen. The system is user friendly and completely automatic. There are no buttons to be pushed and nothing to be activated. As soon as the shopper picks up an item, information about it automatically appears on the screen.
What else can RFID do for the retailer? Since RFID technology is tied to a database system, valuable information can be recorded, analyzed, and used to improve many aspects of the retail system. In the scenario described before, the system can report the number of times a specific piece of merchandise has been picked up, and the retailer can easily coordinate this information with sales data to calculate a conversion rate. If different promotions are used in different stores, conversion rates for each can be calculated to measure their relative effectiveness. Probably most exciting for retailers is the unique approach to using RFID technology for a customer-facing application, in addition to the stockroom benefits. With the information and customization that is now available with RFID, there is the ability to have more relevant data about the shopping process, and this can be directly measured and compared to the point-of-sale data, creating a very complete picture for the retailer.
Best Buy, the electronics superstore, is testing RFID to enhance the customer experience in a number of unique ways. One current test: Customers will receive a card with an embedded RFID transmitter. Then, from home, the customer can begin his shopping experience by browsing the Best Buy Web site for information on the products in which he is interested. This information is entered onto the transmitter so store management knows exactly who he is and what he is interested in the moment he enters the store. The customer can add information on whether he wants help from a personal shopping assistant when he enters the store, whether he wants to be left to shop on his own, or whether he wants the customer service representative to give him some time to browse before offering to help. This allows the customer to tailor the shopping experience to exactly his likes and dislikes. The information on the chip also allows Best Buy to offer instant rebates and validate warranty information on the spot without the customer having to fill out reams of paperwork.
Marks & Spencer, the largest retailer in the U.K., has installed 53 million RFID tags in 53 of its men's clothing stores. When a customer takes a suit to a kiosk, for example, a transmitter triggers a video that suggests shirts and ties that best complement it. Using this technology, the retailer has provided a tremendous amount of value to the consumer, and has enabled them to buy with confidence. This has been so successful, that this retailer's image has been transformed from dull and stuffy to cool and hip.
The company estimates that RFID technology has not only increased sales by 2 to 7 percent, but has also reduced theft considerably. Individual items cannot be taken out the front of the store because the chips activate alarms at the doors if not removed from the items carrying them. Shipping cartons cannot be taken out the back for the same reason.
As an ancillary benefit, RFID has also shortened the time required to take inventory dramatically because store management now knows precisely what has come into the store, down to exact size and color, and what has been sold. This also translates into an enhanced customer shopping experience because store clerks can now spend more time servicing customers rather than rummaging around through stock to find something that may not even be in the store. (Marks & Spencer also uses RFID technology in its grocery business to monitor produce for freshness. Sandwiches with RFID chips, for example, make available a history of their exposure to various temperatures to make sure that they were kept refrigerated.)
A well-known shoe retailer that will remain anonymous, on the other hand, failed to plan properly before becoming enamored with RFID, and wound up with a system that transmits only over very short distances. As a result, employees have to stand very close to each piece of merchandise in order to read its RFID chip. Inventory takes hours instead of the ten minutes or so required by Marks & Spencer.
Maier, a big box general merchandise retailer based in Michigan, embeds RFID chips on its shopping carts so it always knows the exact location of each one. When too many are in the parking lot and not enough in the store, it sends an attendant to gather them up. When more than two or three are in line at the checkout counter, it opens additional lanes. As an added benefit, it helps prevent the carts from being removed from the parking lot.
Stop and Shop supermarkets, owned by the Dutch conglomerate Royal Ahold, are testing what they call a "Buddy Card." Customers pick up RFID-activated monitors and attach them to the handles of their shopping carts. They not only provide games to keep young children amused, but also tell shoppers what items are on special and point them in the right direction to find it.
Customers can even place orders with the deli counter directly from the Buddy Card, and it will tell them when it's ready to eliminate waiting in lines. In pilot tests, customers have overwhelmingly approved of this system, but because of its heavy capital investment and supermarkets' traditional low margins, it is being rolled out very slowly across the country.
COMBINING AND INTEGRATING TECHNOLOGIES
RFID by itself will not really help any retailer with the "store wars." The technology by itself is neutral. The key thing to remember is that the technology must be used to drive a specific business goal. Therefore, if we begin to think of RFID technology as one tool in our toolbox, we can start to plan out a more holistic program that will allow us to use that tool in concert with other tools to create an experience for our customers that will make them shop with confidence.
With proper planning, RFID can be combined with other technologies such as video systems, interactive kiosks, motion sensors, scent distribution, and so on. Each of these devices can play together to deliver a more targeted and relevant experience for each of our customers.
In B. Joseph Pine and James Gilmore's book, The Experience Economy, the authors speak of mass customization. "Mass customization means efficiently serving customers, uniquely, combining the co-equal imperatives for both low cost and individual customization present in today's highly turbulent, competitive environment."
What does this mean? It means that we can use technology to provide a unique experience for each and every customer based on his or her preferences — and RFID technology is an enabling force in this quest. If we are able to capture data about our customers as they navigate our stores and see what products they are interested in, we can begin to build a unique customer profile about them and deliver personalized relevant content to them.
One possible way to do this is to provide smaller screens in our retail stores that are targeted to each shopper, versus the large, ceiling-mounted screens that some retailers are using for their in-store media network. Imagine that the customer is walking down an aisle, and picks up a product that has an RFID chip embedded in it, and a small localized screen now plays product information about that item. The customer is more likely to pay attention, as they actually care about it, versus seeing random product information that the retailer decided to show everyone.
Further, imagine if the customer also had an RFID chip embedded in their frequent shopper card, they could add this product to their favorites, and then they could receive coupons or discounts on this item at checkout. Even further, they could have a special targeted set of coupons sent to them via e-mail, the next time one of their favorite products was on sale.
If the retailer wanted to take this to the next level, they could introduce interactive kiosks at the entrance that each customer could stop at, print out their shopping list sorted by aisle (so they can get through the store faster), see any coupon programs, and actually add the coupons to their customer card, eliminating the need for all of those tiny clippings. The retailers could immediately see the impact of these discounts and coupons, and begin to get more and more customized messages to each consumer, showing customers that they are in tune to their needs.
Technology such as RFID cannot, by itself, enable shoppers to select the product best suited to their needs, improve profitability, or enhance the shopping experience. Used as part of a carefully planned strategy and properly implemented, however, it can be of tremendous benefit to forward-looking retailers.
"Most technologies are good at doing only what they were originally designed to do," says Pete Abell, Program Director of Retail and RFID for the analyst firm IDC Manufacturing Insights. He continues: "RFID, however, can be adapted to handle a variety of tasks." At some Best Buy stores, for example, employees have RFID chips embedded in their name tags, which they use as keys to open display cases containing small but expensive merchandise like cell phones or cameras, for example. The technology allows them to know exactly how long the case was open and exactly what was removed and replaced.
With proper planning, because of its versatility and adaptability, RFID can easily become the master communications system for talking to everything and everyone in the store, from employees and customers to merchandise, displays, and checkout counters.