RFID in retail - everything you need to know

The synergy between technology and retail has never been greater than it is right now, and for good reason. As retailers grapple with the rise of eCommerce, a trend that has been accelerated enormously by COVID, and attempt to combine digital with their traditional brick and mortar offerings, technology is rapidly evolving to help meet this challenge. Omnichannel retail is the retail of the future, and with it comes new expectations from both businesses and customers for how the two previously distinct worlds of commerce and eCommerce intertwine.

One technology which is experiencing a surging degree of interest amongst retailers is RFID. In this post, we’ll explore precisely what RFID is, how it is being commonly implemented within a retail context, what it costs, some existing use cases, how the technology itself works, and how RFID can correspond with technology such as indoor mapping to help retailers improve the experience of both their customers and their staff, as well as expanding their revenues.

What is RFID?

RFID stands for ‘radio frequency identification technology’. It typically takes the form of inexpensive tags which can be affixed to different items. These tags can then be ‘scanned’ using an RFID reader. The two communicate via radio waves.

How does RFID technology work?

RFID technology consists of two core aspects - tags, and readers. 

Tags are small and inexpensive, and can be affixed to everything from an aisle in a warehouse to every individual piece of stock within that warehouse. The tags don’t require an external power source, and are able to transmit small amounts of rudimentary, fixed data via an antenna. Tags are generally grouped into two types, active and passive. Active tags have an internal power source, while passive tags don’t have a power source and instead rely on electromagnetism from the reader. The major difference between the two tag types is the range from which they can be scanned - passive tags have a range of around 25m, while active tags can be scanned from up to 100m away. Active tags are also capable of holding more complex data.

Readers are - you guessed it - used to pick up the signals that are beamed from the tags to the antennas. They take this data and render it in a user-friendly manner, either directly on the reader or by beaming it to a database which can then be viewed on a computer.

As with tags, there are two main types of RFID readers to be aware of. The first are mobile scanners. These are handheld devices which can be carried by staff members, and are ideal for scanning individual items, checking stock levels and other similar tasks. Fixed scanners are placed in certain strategic places within a retail store, often on the roof, and are used to monitor the movement of stock in and out of a certain rage - for example, tracking the movement of stock through the checkout area and thus alerting staff to when a particular product is likely to be running low on stock.

Learn how retailers are delivering world class experiences for their customers with Pointr's guide to Store Mode.

Get the Guide

How does RFID work in retail environments?

RFID’s most common application within retail is tracking individual items or pieces of stock. Individual RFID tags are applied to products, and the products are then scanned, either manually by a staff member, by a fixed reader, or by a combination of both. While there are dozens - or maybe even hundreds - of different ways that RFID can be applied within a retail context, the fundamental idea that almost every use case is built upon is that RFID enables products - on both a SKU and individual level - to be tracked.

Why has RFID become so popular in retail?

For many retailers, the growth in RFID technology has been manna from heaven, as it solves a number of long-time issues in a way that is still cost effective. Accurately tracking stock levels - both in a warehouse or in a consumer-facing store - has long been an issue for retailers. Knowing what is selling well, what isn’t, what needs replenishing (from a storeroom or warehouse) and what needs re-ordering has long been a holy grail for retailers, and the ability to anticipate and accurately track these fluctuating levels has often been the difference between success and failure for many retailers.

However, tracking stock levels accurately is much easier said than done. In times gone by, retailers relied almost solely upon employees to count, track, and log stock levels, along with some more rudimentary technology, such as barcode scanners. 

In a warehouse, all it can take is one mis-labeled or misspotted product and the whole system would be at risk of collapse. If one set of products or bin is incorrectly identified, it can set off a chain reaction that leaves stock numbers in disarray and sale opportunities missed. Meanwhile, on the shop floor, relying upon staff to spot and have the time to rectify sold out items can create a significant lag time, meaning the warehouse is slow to replenish the store, the ordering system is slow to replenish the warehouse, and all the while vital sales opportunities (for a product that was popular enough to be sold out in the first place) are squandered. 

While we’ll outline plenty of specific use cases below, one of the main uses of RFID has been to counteract the scenario laid out above. With RFID tags affixed directly to products (or boxes or bins of products), and scanning not requiring the same proximity as it does with older technology such as bar codes, warehouse staff are able to take fast, efficient, and most crucially accurate stock level readings. Studies suggest that using an RFID-based system for stock takes increases accuracy from between 70 and 80% to 99%. When polled, 55% of retail workers say they feel technology is making their day-to-day job easier, and systems such as RFID stock management are a leading reason why.

On the shop floor, a combination of manual scanning and fixed readers (such as at checkouts) can detect products as they’re moved or sold. Combined with the accurate stock data from the warehouse, this in-store data can let retailers see which products are selling in real time, and enable them to anticipate when shelves will need replenishing and, if the warehouse is running low, more stock will need ordering. 

What’s more, all of this can be achieved for a relatively minimal outlay. While there are both time and cost considerations, particularly in the initial adoption of an RFID system, once in place, it represents a clear improvement on past systems. More on this below.

How much does it cost to implement RFID in a retail environment?

As stated above, one of the key benefits to an RFID system is that once in place and incorporated into a retailer’s wider systems (such as its stock system, PIM tool, or in-app maps), it’s relatively inexpensive to maintain. This is critically important, with some big box retailers dealing with stores big enough to house tens of thousands of items of stock at any one time, meaning that even inexpensive pieces of technology can quickly snowball into huge costs.

So how much does an RFID system cost? Well, that of course depends on the size of the system, most importantly how many readers (both fixed and mobile) are needed, and how many items there are to be tagged.

However, for a retailer to begin working out the cost of an RFID system, they need a basic price. In terms of readers, both handheld scanner style readers and fixed readers tend to start from around $500 to $750. The prices do vary depending on whether the tags the reader is required to interact with are passive or active; active readers tend to cost less, though the trade-off there is the higher price of active tags.

In terms of tags, active tags tend to start at a price of around $20, and can double or triple that number if they’re fitted with additional features, such as long life batteries. Passive tags, meanwhile, are far cheaper, tending to cost around $.10 for the most basic version. It is for this reason why passive systems are favored by retailers, as the low cost of the tags means they can be used across a huge range of items at a relatively low cost, and can be factored into the margin of each product sold.

What are the primary use cases of RFID technology in retail?

As covered above, RFID has two basic use cases which are its most common. The first is the ability to accurately measure stock levels in a warehouse context, helping to eliminate human error and some of the most time consuming aspects of stock takes. Accuracy and reactive speed in this context helps to keep the entire retail organization’s wheels well-oiled.

On the shop floor, RFID can help staff to identify which products are at risk of running out of stock before it happens. Identifying which products are selling fastest and thus need replenishing quickly enables retailers to maximize revenues from the most in-demand product.

Beyond these two use cases, certain retailers have begun to experiment with new use cases for RFID. 

Lowe’s have recently implemented a system which combines RFID tags with blockchain technology, to attempt to combat retail theft. RFID tags are affixed to high ticket items such as power tools. A combination of RFID and IoT sensors are used to effectively ‘lock’ these products and prevent them from working without having been scanned at the point of sale. In addition to this, public blockchain information can be used by those looking to buy power tools second hand or privately to double check if the item they’re buying is listed as having been sold legitimately from a Lowe’s store.

Uniqlo are using RFID to power their self-checkout services. For retailers looking for a completely cashless checkout, where the customer is able to leave the store and is then charged automatically, RFID makes this a reality thanks to the accuracy of its tags. Uniqlo are leveraging this checkout data to glean better insights from their brick and mortar operations, and are looking at enabling RFID scanning to help customers learn details about items as they browse.

Meanwhile, Walmart have begun to mandate that certain suppliers use RFID tags on their products. As well as using them for stock monitoring, Walmart have also found further operational uses, such as using scanners to detect when products have been incorrectly placed on the shop floor.

How can RFID correspond with retail mapping?

As you’ll see from the use cases listed above, in particular the basic use case of tracking and monitoring stock levels, all that is required are the tags, the scanners (or fixed scanning system, if automated), and a central database through which the data is collated, stored and displayed.

However, for more advanced use cases, another piece of technology becomes absolutely imperative in order to make the most from RFID infrastructure; indoor maps. 

Once an RFID system has been implemented, an indoor mapping system is a natural next step for both staff and shoppers. An RFID system can enable the ability to pinpoint where every piece of stock is located in both a warehouse and on a shop floor, but it doesn’t have the ability to display this information in a clear, comprehensible manner. 

While, for staff, a system that can tell them the aisle and bin location of a product may suffice, for customers, such a rudimentary approach is unlikely to pass muster in 2023 and beyond. As we’ve written many times before, mapping and navigation systems are now ubiquitous in our everyday lives thanks to apps such as Google Maps. While indoor mapping is still in its relative infancy compared to outdoor systems, consumers already have similar levels of expectation for the user-friendliness and sophistication of these indoor systems. Any retailers who aren’t already delivering an indoor mapping and navigation system risk being left behind.

Those retailers that already have mapping and navigation capabilities in place, however, can combine these with RFID systems for highly accurate results. Knowing the precise location of a product means more precise and direct wayfinding functionality, which is particularly important when a retail app offers the ability to navigate to multiple products in order. 

RFID can also take into account products that have moved from their usual spot in store, which can then be factored into mapping and navigation. Two scenarios where this could be hugely beneficial are when a particular product is subject to a promotion, and so the stock has been moved from its usual place in store to give it more prominence. Another is when stock of a particular item is running low, and one of the few remaining pieces of stock has been picked up and then put down somewhere else by another customer. An in-app stock checker would tell another customer that the item was still in stock, but without RFID and an in-app map, they would have little hope in finding it.