Keep it simple !
SML, a global company that specialises in retail, brings the industry's broadest set of experience and RFID offerings from high performance RFID tags and global network of encoding solutions to enterprise class RFID software applications for retail stores and distribution centers. Global presence is the key to efficient and fast delivery of tags and labels to customers who require them for production – whether coded or un-coded.
In an interview with RFID & Wireless IoT Global, Dean Frew, CTO & SVP RFID Solutions, SML Group, discusses what the future of retail could look like. From his point of view, there is a lack of specialised consulting companies. This results in fashion and retail companies being overwhelmed with offers the extent of which vastly exceeds their requirements. This reduces ROI.
There, Dean Frew’s message is the following: RFID implementation in shops needs to be kept as simple as possible because a solution like this will benefit the retailer immensely.
Increasing inventory accuracy to 95 percent is the best way to attract interest
Currently, there is some restructuring going on in the retail sector regarding the automated identification of items. Dean Frew says: “We can observe increasing realisation of the fact that new customer service models – especially in the retail sector – cannot continue without changes if we want to keep our customers satisfied. The best and easiest way to achieve this is to establish accuracy and transparency of inventory as it is introduced to stores.”
At the moment in retail – without the use of RFID – the level of accuracy is between 65 and 75 percent. Item-level RFID would increase accuracy to 98 percent. “This improvement and simultaneous increase in supply chain flexibility is the fundamental element in omnichannel fulfilment – and, as such, provides better service to customers and maximises profit for the retail companies,” Dean Frew points out.
Simple implementation leads to large benefits
According to SML, whose experience stems from numerous RFID retail projects all over the world, retailers in different regions have very different expectations of and approaches to RFID tagging. Dean Frew summarises: “In Europe, retailers are very practical when it comes to this topic. They are ahead of their competitors, in a way, because they start with simple technology solutions. From what it looks like, we think that the US will follow this example.”
In the Unites States, retailers often request complex solutions, leading to overwhelming technology installations in stores and too many aspects to consider. “Retailers in the regions of Japan and China, however, look at this issue differently. They realise that if they do not change everything right away but instead only introduce handhelds to their stores, this can already have a large impact on inventory accuracy and revenue.”
Current handheld models are multifunctional and enable inventory control, transfers, replenishment requests, omnichannel initiations, and customer information. They can be used by personnel after a brief training. This way, retailers can gain an advantage over their competitors who are not yet equipped with RFID, with a simple solution and minimal effort.
“It is rather detrimental for the retail market when technology and solution providers offer more complex solutions than are necessary to realize strong ROI,” Dean Frew criticises the market developments. “SML’s message is therefore: Keep it simple! 95 percent of global RFID use cases in the trade sector are limited to the use of handhelds – because this is generally the best business strategy.”
ROI is not dependent on the size of the company
The first challenge for retailers when implementing RFID is generally how the tag will be applied to the product. The complexity of the answer, according to Dean Frew, differs from user to user: “Retailers who control their own supply chains – in other words, their own brand. For them, it is easy to apply the tags to the products and generate benefits this way.” However, the size of the company does not necessarily play a role in ROI: “The best business case we were able to carry out in the retail sector revolved around a retailer with only 17 stores and a vertical hierarchy. ROI was achieved within two months. However, we supprort retailers of all sizes with good ROI results.”
In general, Dean Frew does not observe a correlation between the size of the retailer and the business case results being a slow or fast ROI. This is rather dependent on the brand portfolio, out-of-stock situations, circulation of productions, and the structure of the omnichannel strategy.
“Therefore, the first thing we tackle in our projects with customers is asking them how the tag will be applied to the product. If product identification needs to occur in a distribution centre, because the retailer is not operating vertically, there are additional challenges that have to be considered in the solution. If the tags are delivered directly to the production companies, there is no additional effort. The production companies receive a label that will be sewn in or applied in any case – whether with inlay or without.”
Service bureaus in the direct vicinity of the customers
According to Dean Frew, SML’s current positioning is due to its distributive character: “We have noticed we need a distributive model rather than a China-centred model. With 20 locations, we have the largest number of service bureaus in the world, compared to other providers.” SML’s distributive model was introduced seven years ago and service bureaus opened on-site where production plants were built.
“There are two initial reasons for this development: On the one hand, production was outsourced from China to regions like Bangladesh, Cambodia, and Vietnam. On the other hand, the lead times of production and collection changes have been reduced drastically.” Delivery times of up to three weeks belong to the past. SML’s customers receive their required tags within one week delivered directly to the production plant, where they will be attached to the clothing.
“European retailers are ahead of their competitors, in a way, because they start with simple RFID technology solutions. Retailers in the regions of Japan and China, however, look at this issue in almost the same way. They realise that if they do not change everything right away but instead only introduce handhelds to their stores, this can already have a large impact on inventory accuracy and revenue. From what it looks like, we think that the US will follow this example.” – Dean Frew
Not enough consulting companies that specialise in retail
SML’s service bureaus are specialised in printing, coding, and delivering tags. However, Dean Frew observes a lack in the market that limits RFID rollouts: “There are only a handful of independent consulting companies on the market that specialise in retail, compared with fashion companies. Therefore, those companies do not receive adequate professional service. As a technology company, we are convinced that the entire industry would profit from the existence of more consulting companies that professionally manage the necessary changes in terms of item-level tagging.”
That is why SML is currently in an investigative phase – including business cases, pilot and proof of concept, and preparation of the final implementation – in the headquarters of professional service teams in Europe, the US, China, and Japan.
Marketing strategy: professional retail experience
Dean Frew estimates that tagging of items is not something that is nice to have but is rather a requirement. “The companies are not able to deliver adequate customer care, especially within the budget set by customers and shareholders of retail companies, without substantial restructuring.”
Yet, this still has not been put into practice on a larger scale. “If we communicate this milestone in training seminar, the retailers do not take the topic seriously enough. It would be more effective to have leading retailers talk about their implementation and share their success stories.” Dean Frew assumes this would lead to a snowball effect. “Realistically, it looks like this: Two retailers, who meet over coffee or at an event, talk about what they are currently doing – and automatically advance digitisation in the retail sector.”