While RFID has been around for decades, its value in the retail industry has grown notably in the past several years. Once considered too expensive for widespread adoption, the cost of tags has fallen significantly, leading big retailers to release mandates and rollouts spurring adoption. At the same time, improvements in computer vision and data analysis have opened the doors for new use cases.
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Radio-frequency identification is highly effective in helping retailers attain inventory tracking rates of 99%, compressing cycle counts and reducing stockouts. However, many retailers find the real value lies in operational agility and transforming the customer experience.
RFID lets associates spend more time helping customers and find products wherever they are in the store. It improves everything from buy online, pick up in store services to frictionless checkouts and smart fitting rooms. And, when combined with computer vision and AI, retailers say RFID is becoming a foundational infrastructure to power the future of retail innovation.
Modern RFID technologies date back to the 1970s, but there has been a wave of more adoption in the retail industry in the past few years. RFID uses tags, readers and wireless connectivity to gather and process data about inventory and products. Increasing affordability has been a primary driver in adoption in recent years, says Robert Carroll, senior vice president of business development for American Eagle.
“The math really works now, and it’s more economically feasible,” Carroll says. “When it was 25 cents per tag on a $15 shirt, those costs would add up over millions of units, but they’ve now come down to less than a nickel for each tag.”
Greg Buzek, founder, president and principal analyst of IHL Group, notes RFID is now scalable in a way that previously wasn’t possible. The lower costs of RFID tags, combined with better connectivity and growing use cases, offer new opportunities in automation and efficiency.
While RFID conversations of the past focused on tracking and loss prevention, accuracy is now one of the primary value drivers, Buzek says. Inventory is no longer just about operations, but informs sales, marketing, customer interactions and even AI forecasting.
Accuracy is especially critical in apparel where each product also has size, color, seasonality and other complex layers. The accurate inventory enabled by RFID is the “ground truth” that separates digital transformation successes and failures, he says.
“The primary thing is to have your inventory accurate."
“The primary thing is to have your inventory accurate. How much time do you waste when an associate is running around the store trying to find stuff? There is a huge opportunity to improve the experience when the customer comes to the store and interacts with the associate,” Buzek says.
The latest RFID readers now have greater sensitivity, faster read rates and better connectivity through Wi-Fi and cellular connections. This enables them to read tags without line of sight and in bulk inventory applications. Unconstrained by the limitations of a decade ago, retailers can now use RFID to reach inventory accuracy rates of over 98%, compressing cycle counts, improving replenishment and reducing out-of-stock occurrences in the process.
A survey by Business Research Insights notes the retail industry is the largest RFID customer and that the RFID market is poised to grow nearly 9% between 2024 and 2033.
Retail adoption has grown remarkably in recent years. In 2022, Walmart made it mandatory for suppliers in specific categories to tag their products with RFID tags. Many other retailers, including Zara, Target, Dick’s Sporting Goods, Macy’s and Nike, have expanded their RFID adoption in recent years.
Michael Gilhooly, senior manager, North America, public relations for Zebra Technologies, says that once RFID is in place, it paves the way for many features that support the customer experience. RFID amplifies efficiencies in BOPIS, curbside pickup and personalized store experiences. It also reduces stockouts and facilitates replenishment without disrupting customers.
“The initial deployment is a long-term investment in multiple use cases that improves the retail operation overall,” Gilhooly says. “The infrastructure required for RFID is foundational for so many other retail use cases like connected fitting rooms, smart checkouts and store mapping.”
Carroll says that every item in more than 500 American Eagle stores now has RFID sensors integrated into the tags. The company initiated this process nearly two years ago, coinciding with the installation of the RADAR system, which provides near real-time location data. During that time, AEO’s accuracy improved from 95% to 99%. Associates can use mobile apps to locate exact product positions and find items of specific sizes, colors and options anywhere in the store, from the back stockroom to the front, even if they’re on a mannequin or left in a fitting room.
“They can pinpoint exactly where anything is. Products are easily discovered for customers, and as they look to replenish the front of house, they know exactly what is in the back,” Carroll says.
This improved visibility enables a notable benefit in customer service. Associates can save sales by reducing customer hassle in finding items. Knowing where things are at all times can reduce many bottlenecks and pain points in the omnichannel experience.
Connected fitting rooms can use RFID to identify items brought into the room and offer customers options with different sizes, colors or styles. RFID-enabled smart checkouts can also reduce friction by enabling customers to scan a group of items without manual barcode scanning, Gilhooly says.
“RFID is really good at helping people know where things are and that supports all kinds of cool applications for customers,” he says. “It is the basis for so many other applications.”
RFID also handles many manual counting tasks, freeing up more time for associates to help customers. In one example, Gilhooly noted associates at a major home improvement store used to spend 40% of their time with customers and 60% of their time dealing with back-office tasks.
“Through RFID and other implementations, they flipped that, so they now have 60% of their time out on the floor and only 40% of their time dealing with back-off of store tasks,” he says. “There are fewer inventory counts and less time trying to locate products.”
Over the past decade, RFID has become the backbone of inventory management and omni-fulfillment strategy at Lululemon, says Carl Barker, vice president of global omni at Lululemon. RFID has enabled the company to create a seamless shopping experience in-store and online, and real-time visibility enables teams to connect guests to products faster to offer more choices.
“It has also made product fulfillment options like buy online, pick up in store services possible, which many of our guests utilize,” Barker says. “Looking ahead, we are applying advanced analytics to RFID data to unlock even more insights to stay agile and continually elevate our guest experience.”
Retailers will continually find new ways to use RFID. Some are now using it to support lifecycle initiatives, such as sustainability certification and authentication for resale or second-life retail. Some of the most exciting opportunities of the future will be combining RFID with artificial intelligence and computer vision to create new retail applications.
AI supports intelligent automation, while computer vision technology can help understand in-store behavior and asset tracking. Gilhooly calls RFID the “fuel” for AI analytics, forecasting and decision-making, and a critical enabler of automation.
“These technologies combined [RFID, AI, and computer vision] offer all kinds of capabilities when working together that can make interactions faster, more natural and more accurate,” Gilhooly says.
Caroll says RFID has been one of the few technologies that paid for itself with efficiencies and offers many other opportunities in customer experience innovations. AEO is now exploring how the technology can unlock new “cool experiences for customers” and anticipates unveiling new applications in the next 12 to 18 months.
Some retailers report that the effect of RFID on inventory efficiency can also help in the era of tariffs. As many items now have higher embedded costs, it’s more imperative for retailers to avoid stockouts, misplaced merchandise and lost sales.
“By the time it reaches the sales floor, all things equal, it is more expensive for that unit,” Carroll says. “It makes it that much more important for inventory to be in the right place at the right time, as the cost is now higher.”
