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RFID – The New Future of Retail

The future of retail and changes being driven into the retail market by technology have been topics of discussion amongst business leaders and technology visionaries for years.

A July 1998 article in Wired titled The Future of Retail authored by Nicholas Negroponte explored how the digital age was changing retail landscape, empowering consumers, and ultimately forcing brick and mortar retail stores to improve the shopping experience. More than 10 years later, Bloomberg Businessweek published an article titled – you guessed it – The Future of Retail, highlighting how tech-savvy Generation Y would cause a dramatic change in consumer demand and spending habits. The article quoted a PricewaterhouseCoopers and TNS Retail Forward report, stating: “Retailing will become an industry that realizes, more and more, that it must tailor its offerings to select customers, as opposed to the mass appeal approach of the 1980s, in order to win over customers and foster greater customer loyalty.”

The use of RFID to enhance the shopping experience and streamline retail operations has been a near decade long discussion itself. In 2004, Wal-Mart issued its now famous mandate, requiring its top 100 suppliers to apply RFID tags to shipping crates and pallets to drive efficiencies into its supply chain. Wal-Mart and others proposed that this technology would ultimately find its way to the retail floor to provide item-level inventory accuracy and real-time visibility into inventory levels and purchase patterns. While Wal-Mart’s supply chain RFID initiative did not pan out on its initial time table, it kicked off a high level of interest in RFID technology from retailers and retail industry suppliers.

So here we are on January 30th, 2011. What’s new? Well, quite a bit actually.

RFID continues to be explored for a variety of uses within the retail market. Top among them, according to a report recently published by the Aberdeen Group, include process efficiency, product and demand visibility, shrink management, and increasing profits. While these may not be new goals for many retailers, one very important point Aberdeen makes is: “The RFID industry finally has a portfolio of solutions (including tags and readers) with a form-factor that is broad enough, stable, and standards-compliant such that it applies to and satisfies the diverse needs of the retail environment.” This statement can’t be ignored. It is clearly stated by Aberdeen that the technology itself is no longer a barrier to entry.

A second area of interest is the rate of adoption within the retail market. According to a recent blog post from VDC Research, the retail market will account for only 6-7% of the total global revenues in 2011 – out of a £4.2 billion market. Yes, a small percentage of the entire market, but for RFID vendors this should be viewed as an opportunity to innovate!

So where will this innovation come from? Will Wal-Mart’s recent announcement to use RFID to track jeans and underwear to improve its inventory be a tipping point for retail industry adoption of the technology? Will smart signs and smart shelves become commonplace in retail stores? What will the magic mirror tell us the next time we stand in front of it?

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